- Yerlan, how do you assess the level of development of the life insurance market in Kazakhstan today?
- I do not think it is sufficient enough, although life insurance companies improve the social security of citizens, their families, and thereby reduce the social pressure on the state. This is a serious issue. Therefore, we need to stimulate the development of life insurance in the country.
Last year, as well as the past few years in general, we have been seeing a trend towards increasing the share of life insurance, the growth rates are quite impressive compared to other sectors. I am confident that the dynamic development of life insurance companies will continue.
- In Soviet times, almost all citizens insured their lives. Do you think the subsequent fall in demand for life insurance is connected with the collapse of the USSR?
- The popularity of life insurance in the USSR can be explained by the fact that it was profitable: the possibility of accumulation plus insurance protection. Now, same as then, life insurance protects the interests of a person and his family. After the collapse of the Soviet Union, people simply did not have enough money to put in life insurance. Today, according to the new bill, there is also a guarantee in this trade, so it will be competitive with the deposits.
- According to the experts, people in Kazakhstan are used to short terms of investment, whereas in life insurance often the products are assumed the investment of a 10-year period or more. Therefore, our citizens need to explain the advantages of long-term investments...
- As I have said before, in life insurance, apart from the possibility of saving, there is a life insurance factor, so when an insurance event occurs, the client or his family will receive a full insurance coverage regardless of the accumulated amount. And this is more important. It is also more profitable than a deposit. But in general, you are right; the population needs to be informed about the benefits of long-term investment, and universal life insurance. This is the object of life insurance companies together with responsible government agencies.
The bill, which also provides for introduction of a new product, an investment life insurance unit link, has already been approved by the Mazhilis of the Parliament and passed on to the Senate for consideration.
I would like to add that unit link is a good product that will not only help earn money, but also protect customers.
- In the local mentality there is an assurance: "Why should you insure life and predict something bad in the future?" What do you say to that?
- (laughing). It seems to me that the answer to this question lies in the very word "life", it is the most valuable for us; therefore, it is necessary to be responsible both for ourselves and our relatives. Of course, as people say: "God forbid". Yes, everything is in the lap of the Gods, but if something suddenly happens, then a person or his family can face big financial problems. Having insured your life, you do not lose anything, but simply increase your security.
Why do people cross the street on the green light? This is not just a rule, but also a matter of safety. Yes, anything can happen, but you need to protect yourself and your loved ones from possible financial problems with the help of insurance. Abroad, they clearly understand that people are responsible for their own lives, and therefore more consciously approach the issues of insurance.
I usually say aside from your parents, no one else is that interested in your safety as your insurance company.
- What are the main trends in the life insurance market that you observed last year and in the beginning of this year?
- The market is growing quite fast compared to other sectors, with life insurance showing the highest rates, this is good news. I think that with the adoption of the insurance law, which involves development of life insurance as well, we will see even greater rates.
- In your opinion, what is the reason for the increase in premiums incomes of LICs last year?
- Good results are in such products as pension annuity and the compulsory insurance of workers against industrial accidents. In general, the growth in the insurance market amounted to 3% last year; life insurance grew by 20%, and annuity insurance - by 17%, for industrial accident insurance - by 10%. I think this is due to the fact that the population is becoming more interested in annuity insurance; the demand for products related to pensions is increasing, especially since pension annuities guarantee lifetime payments. Banks are also interested in life insurance of their borrowers, so that in case of an accident with the borrower, they should not evict or sue clients, but get insurance compensation from the company.
- What products of life insurance, in your opinion, need to be developed in our country?
- We expect that with the adoption of this year's bill a new product that I mentioned, the investment life insurance unit link, will give a big impulse for the life insurance market. In the West it is one of the most popular products among the population.
- In addition to low financial literacy of the population, what other factors, in your opinion, keep down the development of life insurance companies in Kazakhstan?
- It is necessary to interest the population in life insurance products. In this regard, the state's participation through the bonus part would be a good help; by following the example of "Zhilstroysberbank" or "Financial Center", when those who establish a deposit, receive a premium from the state. This would reduce the social costs of the state budget in the future by channeling part of the funds to these premiums. Such a program would significantly stimulate people's demand for life insurance products.
- What are the FIAK objectives to support this market this year? You took a direct part in the creation and promotion of a new draft law on insurance. How difficult was this work?
- In general, we see the government support in this matter, so there have not been such problems. I believe the state will be even more interested in developing life insurance in future, as it is an opportunity to shift the social burden on business and stimulate the increase security among the citizens, especially if the incentive measures are taken in the form of premiums from the state.
We are now working on the concept of a new bill, which will also bring up the issues of further development of life insurance.
- And what are they?
- So far they are up in the air, but we are thinking about the possibility of tax motivations, state premiums and the guarantee system improvements.
- Yes, in the West, tax motivations, as shown in practice, work very well in increase in demand for products of life insurance companies.
- In any case, there should be a complex approach. There is no guarantee that taxes specifically will have a great effect. It is also important to improve the financial literacy of the population, optimize certain programs. Therefore, we are considering various options for life insurance to be of interest to consumers, the government, and the entire financial sector.
- All financially and economically active population lives in our two capitals, as well as some major cities of the country, while the regions are more passive, or they do not receive relevant information. What measures need to be taken?
- You are bringing up a very serious problem. The issue is not only to convey information, but also make people understand the meaning, so they can compare. One fact should also be taken into account that incomes in the regions are not that high.
By the way, the new bill provides for online insurance development, which will allow, regardless of the availability of an insurance company representative in the region, to purchase insurance products online.
We are interested in active participation of the regions in life insurance; therefore, of course, we will also be bringing necessary information to them. The only question is whether everyone has the opportunity to use this information. That is why, we hope for a certain growth of this insurance segment in the regions, but, obviously not at the same rates as in large cities.
- Yerlan, you also interact with life insurance companies because of your work specifics, there are seven of them in Kazakhstan, you are aware of the situation on the market. What else, do you think, should they pay attention to in addition to working with the population?
- In my opinion, most of these companies are now thoroughly studying the market, including foreign markets, and insurance products, which might be promising. Companies need to promote new technologies in the light of global digitalization. Moreover, we are now creating conditions for companies to raise technological level by outlining the relevant articles in the legislation. Many companies even go ahead of time on this matter by proposing to bring some modifications to the legislation.
In general, life insurance companies are quite active, they realize that the current level of market development is not high enough, and its prospects, including revenue growth, are quite promising. And the market growth will benefit both companies and consumers. As we joined WTO, and foreign companies can come to us, so we need to pay great attention to technological development. On the other hand, our companies should be assisted by our legislation, as we are expecting the introduction of a guarantee system in the field of life insurance.
Yerlan Burabayev has 24 years of experience in the financial system of Kazakhstan. From 1994 to 2003 he worked in the National Bank of the Republic of Kazakhstan. From 2003 to 2009, he held managerial positions in various organizations in the securities market and the pension system. From 2009 to 2014 Yerlan held leading positions in various insurance companies. Since 2014 he has been working in the Financial Institutions’ Association of Kazakhstan as managing director for interaction with insurance and stock markets.