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Halyk-Life executive: Demand for endowment life insurance will grow significantly

Last year for the life insurance market was not easy because of competition. Plus, the growth in premiums on life insurance policies in the market was insignificant, 5.7%. Zhanar Zhubaniyazova, the Board Chairman of LIC Halyk-Life, suggests that this trend is associated with a decrease in the purchasing power of the population and increase in inflationary expectations. However, despite that, she noted that Halyk Life managed to remain the market leader in terms of attracted premiums on this class of insurance, with a 39.2% share. In her interview with a correspondent of the business information center, she spoke about market trends, as well as how Kazakhstanis could save up for their children's education using the new Bilim-Life product.
Halyk-Life executive: Demand for endowment life insurance will grow significantly

- Ms. Zhubaniyazova, the demand for such a product as life insurance is only gaining momentum in Kazakhstan. Why do you think this policy is still underrated?

- First of all, this is due to the low level of insurance culture among Kazakhstanis. According to statistics, only 3% have voluntary insurance policies out of 9 million economically active population. Many still do not realize why they should buy a life insurance policy. With the help of this product, however, Kazakhstanis or their relatives can receive payments from the insurance company in case of loss of life or after receiving a disability. Thus, they can reduce the load on the family's financial budget. You can also earn with the endowment insurance policy.

Another factor hindering the development of insurance in the country is the low solvency of the population. Kazakhstanis spend about 50-60% of their income on food in average. The rest of the budget is spent on no less significant purposes as children’s education, medical services, clothes, and so on. The share of spending on food in the consumer basket does not exceed 10-30% in Europe. Therefore, Europeans can afford to purchase at least three insurance policies thereby reducing certain financial risks.

Also, please note that the insurance market in European countries unlike Kazakhstan is more mature, it has been formed for several decades.

- You are engaged in increasing the insurance culture among Kazakhstanis. Tell us about your projects...

- We have many initiatives in this area, I will tell you about the last one. A large-scale campaign to improve financial literacy in the insurance industry was held in 2022. We managed to organize business meetings with more than 230 regional media journalists, bloggers, trade unions and major clients in every regional center and 18 cities of Kazakhstan. At these meetings, we discussed trends and problems of the life insurance market. One of the projects we have been launching for the second year in a row to popularize insurance services among Kazakhstanis and encourage journalists to cover trends in this market is a national contest for the media. And this year the competition will be held on a larger scale, there will be 18 winners from different regions.

- Previously, many Kazakhstanis purchased a life insurance policy without thinking about its benefits. Banks recommended buying such insurance when lending. Could you give an example of how it helped the borrower to mitigate risk?

- When a borrower applies to a bank for a 20 million tenge loan, for example, mortgage, he is offered to buy a life insurance policy. Borrowers usually believe it to be an additional bank commission and are not ready to purchase it.

They do not even realize, however, that the policy can become a financial cushion for the borrower's family members in the event of his death. Many of us do not think about it there may be various force majeure situations in our life that may occur and cannot be foreseen in advance. Let’s assume, a borrower, having paid back only 1 million tenge, suddenly passes away, and the amount of 19 million tenge remains outstanding. If he did not have a life insurance policy, the bank has every right to apply to his heirs in order to claim from them the outstanding amount of 19 million tenge. The heirs may often lack this amount, and then the bank can bring legal actions to claim it.                                   

If such a borrower had a life insurance policy, the insurance company would reimburse the loan amount to his family, i. e. the family would have money to return it to the bank. In general, a certain part of our insurance portfolio consists of policies acquired when obtaining bank loans. The share of compulsory insurance of employees against accidents is also large. According to the legislation, all companies and individual entrepreneurs who work in Kazakhstan must have such a policy. If an employee of any organization dies in the line of duty, then the insurer will have to make payments to his children and other dependents at the age of 18 and beyond if the children continue to study. One of the advantages of this product is that according to the law, such payments will be indexed to the level of official inflation. This option will help reduce inflationary risks, which is very important. As you know, due to the geopolitical situation of 2022, the official inflation rate in the country has reached 20.3%, that is, we can say that payments from LICs close the huge government social block.

- However, I believe, endowment life insurance has been gaining popularity over the past 2-3 years...

- That's right, the demand for this product is gradually growing. You can both insure your life and accumulate with the help of the policy. The policy can be issued both in tenge and in foreign currency. Payments under this policy can be received after the end of the insurance contract, 5 or 10 years. Insurance event may not occur, but a person will still receive their insurance payments with accumulated compensation. It is important that the insurance company can pay the insurance benefit even if the insured person lost his life a month after the insurance contract conclusion. For example, he signed a contract for 1 million tenge and, according to the schedule, had to transfer 45 thousand monthly for about two years. Suppose a person contributed only 90 thousand tenge and passed away, the beneficiary will receive an amount exceeding 1 million tenge. No one knows what’s in store for hime. Due to a sudden illness or accident, their children, spouse may be left without financial support. By purchasing a life insurance policy, a family breadwinner can cover these risks, as his family will receive insurance payment in the event of his death during the period of the insurance contract.

Few people know that those who have issued endowment insurance policy, can receive deductions on individual income tax (IIT) within the insurance premium limit of 320 MCI per year. To use this advantage, a person just needs to contact the accounting department of the company he works in. Thus, his nominal salary will be 10% higher.

Even doctors, nurses, or teachers, who seem to have small incomes, acquire such a policy in our company. They monthly deduct 10-20 thousand tenge and not only protect their lives from unforeseen situations but also accumulate money.

- One can also purchase a life insurance policy in foreign currency at your LIC. The return on this product exceeds the dollar deposit rate. Tell us more about it.

- That's right, the return on the Halyk-Kazyna product is three times higher than on dollar deposits at the moment. The maximum rate on such deposits on the market does not exceed 1%, the rate under this program reaches 3.52% per annum. Besides, this rate is guaranteed for the entire period of insurance, which can reach 15 years. Not a single bank deposit will give a guaranteed return for such a long period. Thus, by purchasing such a policy, our citizens will be able not only to reduce their currency risks, but also insure their lives in case of unforeseen circumstances. This product is now quite relevant, given the situation on the foreign exchange market. Let me remind you that the accumulated amount with remuneration is paid to the insured at the end of the contract, that is, the payment will be made even if the insurance event has not occurred to the person.

It is also important that the funds under this policy cannot be confiscated in the course of litigation, cannot be divided between spouses during divorce proceedings, since formally insurance premiums are the property of LICs. Besides, insurance payments are not subject to income tax. Therefore, this product is in high demand in our company, mainly due to its investment option.

- Let's move to the market. Is it possible to say that more stringent requirements are applied by the financial regulator to insurers compared to banks?

- Yes, for example, insurance companies must reserve most of their income for a long time, as our relationships with customers are long-term. An insurance agreement is concluded for 5 years at least.

As a result, unlike banks, LICs are the longest-term investments.

- To what extent did your forecasts for the life insurance market as of 2022 come true?

- We were conservatively estimating the market growth as of 2022. And I can say that our expectations have been met. This is due to the fact that the volume of collected retirement annuity premiums in the market dropped by 37.7% last year, due to legislation amendments, namely: investors were given the right to transfer part of their savings from LICs to UAPF for early withdrawal aiming to buy real estate.

The increase in premiums on the life insurance class in the market as a whole was insignificant: 5.7%. I assume this trend is associated with a decrease in the purchasing power of population, growth in inflationary expectations.

Despite the market correction, we continue to develop. Based on the ARDFM data, we are the market leader as of 2022 in terms of insurance premiums raised. Our market share reached 33.2%. Thus, against the background of a decrease in the total market premiums, the volume of collected insurance premiums by our LIC, on the contrary, increased. We signed contracts for 125.3 billion tenge last year. We are also in the top 3 LICs in terms of payments made in 2022. Last year, due to effective risk management and a competent investment policy, we managed to get a net profit of 16.1 billion tenge and became a leader in this area among LICs.

We are also leading in the life insurance class. According to the ARDFM, as of January 1, 2023, our market share in this segment reached 39.2%. We signed life insurance contracts for amount of 73.5 billion tenge in 2022.

As for retirement annuity policy, in terms of amount of premiums collected, we are the second among LICs on this product; our share in this area is 28.7%. The volume of premiums collected on this product in 2022, declined by 34.9%, although the market fell even more, by 37.7%.

In terms of compulsory insurance of employees against accidents, we are also leading by volume of concluded contracts, our share is 29.7%. In 2022, we signed contracts for 21 billion tenge on this type of insurance. Every fourth client in the market chose our company to conclude a contract of compulsory accident insurance.

- How many clients do you have?

- Our client pool is notable, about 1 million 300 thousand Kazakhstanis trust in our company nowadays. We are confident that this figure will be steadily growing. Our company has been operating on the market for 17 years, we have concluded several million insurance contracts during this period.

- Now all insurers have set a course for digitalization. How are you moving in this direction?

- We launched several online products in 2022; they were previously available for purchase through an agent. We also signed partnership agreements with car dealers, including Our intention is to move more actively in the field of automation and IT support. Therefore, we declared 2023 the year of digital transformation in all areas. We will also focus on the development of new interesting products of voluntary endowment insurance.

We have recently offered a new product within the framework of the State Educational Savings System (SESS) “Bilim-Life” to the market. This is an undoubtedly unique insurance product in the insurance market.

We can compare its appearance with a real breakthrough in the field of insurance in our country. Not a single insurance service in Kazakhstan has been rewarded by the state until now.

Given the social significance, thanks to the active work of the insurance community and government institutions, we have a new targeted insurance product within the framework of the State Educational Savings System. We all realize how important it is for parents to provide a solid foundation for their children in the future, give them a good education, and thereby help them confidently enter adulthood. Now, thanks to the Bilim-Life insurance program, which provides for a state bonus of 5%, and for parents with many children - 7% per annum on the amount of savings, anu Kazakhstani will be able to accumulate funds for their children’s education.                                      

Besides, we will continue our work on improvement of the level of people’s financial literacy in 2023.


Photo: Courtesy of

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