DISTRIBUTION CHANNEL COST INTENSITY AS AN INDICATOR FOR INSURER REHABILITATION DIAGNOSTICS

Abstract

Introduction. Increasing competition in the insurance market, the transformation of insurance product sales models, and heightened requirements regarding the financial stability of insurers underscore the need to develop new tools for the early detection of crisis phenomena. One such tool is the assessment of distribution channel costs, a factor that directly impacts the profitability of insurance operations, solvency, and the timely implementation of recovery measures.

Objective. The aim of the article is to substantiate the feasibility of using distribution channel costs as an indicator for diagnosing an insurer's financial recovery status and to develop a system of metrics for assessing the risk of a decline in its financial stability.

Methods. The study is based on systemic and comprehensive approaches. Methods of economic analysis, comparison, statistical generalization, indicative assessment, grouping, and graphical data interpretation were employed. Statistical data on the activities of insurers for 2025 served as the information base for the study.

Results. An assessment of commission costs across the main insurance product distribution channels was conducted, revealing significant variation in cost levels depending on the distribution method. A system of interconnected indicators for diagnosing an insurer's financial recovery status was proposed, comprising the distribution cost index, the concentration index of high-cost sales channels, and the share of direct sales. Threshold values ​​have been established to identify the financial status of an insurer as normal, requiring monitoring, or in a pre-rehabilitation state. Practical application of the proposed approach revealed that Ukraine’s insurance market falls within a high-risk zone based on the criterion of distribution channel costs. The study substantiates the advisability of integrating the developed system of indicators into the mechanism of prudential supervision and the early warning system for insurers' financial difficulties.

The article examines the relationship between the structure of distribution channel costs and the formation of preconditions for an insurer's rehabilitation need. Based on the National Bank of Ukraine supervisory statistics for 2025, an analysis of commission burden across ten insurance distribution channels was conducted. It has been established that commission rates vary significantly across channels: from 4.5% in direct sales to 49.7% in retail trade networks, while the banking channel reaches 36.6%. A system of three complementary indicators is proposed: the Distribution Cost Index (DCI), the Expensive Channel Concentration Index (ECCI), and the Direct Sales Share (DSS). Threshold values for three financial condition zones - normal, monitoring, and pre-rehabilitation - are established. Calculations indicate that the Ukrainian market as a whole falls into the elevated-risk monitoring zone. The expediency of incorporating the proposed indicators into the prudential supervision system for the Ukrainian insurance market is substantiated.

Future prospects. Further research should focus on developing an integrated model for the early diagnosis of insurers' need for financial recovery, taking into account the interrelationships between distribution channel costs, solvency and capital adequacy indicators, profitability, the digital transformation of distribution processes, and policyholder behavioral characteristics, as well as on testing the proposed indicators within a risk-based supervision framework.