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A new benchmark in the personal savings market

A law allowing life insurance companies to offer their customers a highly profitable product unit-linked or investment insurance has come into operation in Kazakhstan. While the deposit rates in Europe tend to zero, the average share of unit-linked contributions ranges from 25 to 80%. Alexander Bovtrukevich has been working with investment insurance products in Latvia for 13 years. The foreign actuary advised Nomad Life on launching investment insurance. The expert told us in detail about returns and pitfalls of investment insurance.
A new benchmark in the personal savings market

- What is unit-linked?

- Unit-Linked is a type of insurance contract that combines death risk insurance and investment savings. In such an agreement, the client chooses the investment plan, and contributions that he pays are invested according to the selected plan.

The first advantage of Unit-Linked is the investment process adapted to the client, it gives the ability to easily change the investment strategy during the term of the contract and invest easily in general. The second perk is the exemption of payments under the contract from taxation, in contrast to other investment decisions.

- How is to save up easier?

- The saving process for some is putting money into a coin box or using term deposits, or buying stocks or gold bars. NOMAD Life offers an additional tool to make savings ZOLOTO NOMADOV Invest, an endowment plan with the participation of the insured in investments. The funds in this product are accumulated and invested in reliable financial instruments. Throughout the entire agreement duration the clients' assets are under the multilevel protection of the National Bank and custodian bank. The possibility of earning depends on the investment plan chosen by the client; we, in our turn, try to fill the list of offers with the best tools.

- Is ZOLOTO NOMADOV Invest classified as unit-linked?

- ZOLOTO NOMADOV Invest is undoubtedly unit-linked insurance. Various elements of insurance coverage and options built into the product are offered in different countries. A direct connection between the results of the contract work and financial instrument selected by the client is an important difference between unit-linked and other types of endowment. We have specifically realized this product in Kazakhstan. We are only related to other types of life insurance by high level of insurance coverage of the client that starts from the first day of the agreement effect.

- How high is the demand for this product abroad?

Demand depends on the region and development level of each particular country. UK share of unit linked product is 60% of all life insurance premiums as of 2017. The South Korean share of unit-linked products is 18%, in Singapore - 15%, in Australia - 45%, in Malaysia and Indonesia about 55%. If we take countries with developed economies, their unit-linked share has usually lower percentage than in emerging markets with the only major exception being the UK. It is revealing that the share of contributions to unit linked in Ireland is close to 85%.

- What social class is this product designed for?

- In short, this product is suitable for the middle class and those who want to be middle class. However, if I may, I will answer in more details. Savings products are the tool which people increase their social class with. The savings can grow if part of your resources is directed to the reserve. If the goal is to secure yourself with funds for two weeks, the main point is to prevent them from being easily spent. A couple of months' margin makes you think about how to save these funds. A year margin needs to be invested and grown. A five or more -year margin needs proper structuring. The unit linked product is not always suitable for the initial stage of accumulation, however, if you are thinking of investing or increasing investments, or creating a significant element of security for your family, then I recommend to take a closer look at unit-linked, perhaps this product will satisfy your needs.

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