On January 1, 2020, a new authority, the Agency for the Financial Market Regulation and Development, began work. The Agency management has reached out to the insurance market representatives in the very first working month.
The first meeting was held under the chairmanship of Madina Abylkasymova, the head of the Agency, dedicated to consumer rights protection, further development of the insurance payment guarantee system, the fight against insurance fraud and new areas of the insurance business. The particular attention at this meeting was focused on the insurance market development.
The market representatives were very pleased with the meeting outcome. As a Board Chairman of JSC LIC Nomad Life Kairat Chegebayev notes: “The market has been heard by the regulator, and we have come to consensus regarding the need and directions for the insurance sector development expanding its potential.”
Last year, general insurance companies collected 311 billion tenge of premiums. This is 21% more than in 2018. However, the payments in this sector have increased by 150% over 12 months. According to financial experts, the most popular type of insurance, the legal liability of vehicle possessors, causes the most damage to the market. “For example, an annual policy in Almaty costs 17 thousand tenge in average, in Shymkent - 6-7 thousand, knowing that the maximum payments for the road traffic accident risk are estimated at 1.5 million tenge and there are no regional limits and restrictions on payments throughout the country. This is an incomparability of the amount, but we are interested in each client, therefore, we are not looking for tricks to refuse, but insurance should be adequate. The last time the tariffs on legal liability of vehicle owners were changed in 2008. Having shown the loss statistics to the regulator, we got a response. Hopefully, the tariffs will be revised,” says Dauren Imanzhanov, the Board Chairman of JSC NOMAD Insurance, giving the details of the meeting.
In foreign countries, the legal liability insurance of owners of institutions, shopping malls, organizers of concerts, cinemas, clubs or other places associated with mass people gathering applies to their owners. “This type of insurance is common in neighboring Russia, but not in Kazakhstan. There are only a few cases of voluntary insurance of one’s liability with business owners who understand the risks. The cost of such policies is low, but the business will have a guarantee of payments if something happens. You must admit that in case of emergency not all entrepreneurs will be able fulfill their obligations (many have bank loans, etc.), and insurers are able to cope with payments to the population. This is the usual and correct approach when insurance companies take responsibility and make payments,” says Dauren Imanzhanov.
The life insurance sector showed a sharp increase in collecting premiums, the number of new customers, and payments last year. The LIC premiums as of 2019 have increased by 56% and reached 197 billion tenge. Annuity insurance became a market driver with premiums of 71 billion tenge (an increase of 107%), including the premium upturn in the retirement annuity segment of 132% (to 65 billion tenge). The volume of life insurance premiums reached 77 billion tenge, an increase of 41% compared to 2018. In addition, the number of market players has grown. However, the list of instruments is small; therefore, insurers have proposed the introduction of a number of new tools. For instance, domestic legislation still does not allow LICs to offer Unit linked to their customers. “In fact, this tool is a symbiosis of two products, risk life insurance and investment. The advantage of the hybrid product allows customers to cope with unforeseen events and accumulate at the expense of consistently high interest. This product allows people to choose investment strategies. The agency is developing standards for introducing this type of insurance now,” said Aiman Mukhtybayeva, First Deputy Chairman of the Board of Freedom Finance Life.
The Agency for the Financial Market Regulation and Development together with insurers is developing an option for a spousal retirement annuity. According to statistics, life expectancy of women exceeds life expectancy of men. However, the ladies take a break in their careers because of childcare. “The product, we are offering, will allow combine the pension savings of both spouses and redistribute income in favor of the woman,” said the Nomad Life executive.
Insurers also suggested considering the possibility of expanding the LIC participation through the introduction of deferred retirement annuities. “To make provision for citizen’s right to conclude a retirement annuity agreement before reaching the age of 50 and 55 years, provided that pension savings are sufficient,” the source said.
Kairat Chegebayev is confident that the introduction of the deferred retirement annuity tool will help reduce the social obligations on the state: “Most of issues raised by life insurance companies are socially oriented. This direction is very familiar to the Agency leadership, which has experience both in the private sector and government,” said the speaker.
“Now we have the most important thing, mutual understanding, with the regulator. Our common goal is to bring improvement to the market. Ultimately, all Kazakhstanis will benefit from this,” Aiman Mukhtybayeva summarized.
“It is very important that we begin joint work, to which the Financial Institutions’ Association of Kazakhstan will also be involved. We are ready for changes,” concluded Dauren Imanzhanov.