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Does unit-linked insurance have a future in Kazakhstan?

The opinion of Azamat Yerdessov, the Board Chairman of JSC LIC Freedom Finance Life, was published by kursiv.kz.
Does unit-linked insurance have a future in Kazakhstan?

According to the latest amendments to insurance legislation in 2019, life insurance companies may offer unit-linked insurance (shared life insurance). This type of insurance accounts for up to 60% of life insurance contracts in the USA. Does this product have future in Kazakhstan?

Over the past few years, the Kazakhstani insurance market has shown growth due to several types of insurance, life insurance is among them. There is every reason to believe that by the end of 2019 the trend will continue: LICs will further strengthen their positions and increase their insurance premiums. Insurance with participation in unit-linked investments, in our opinion, will be one of the promising areas.

Over the past years, insurance legislation regarding this type of insurance has been improved, but LICs are not in a hurry to offer this product, as there are currently a number of issues under discussion. Companies' proposals are being considered, and perhaps in the near future we will get a real basis for bringing the product to the market. This is a promising and interesting product for customers. In the USA, it accounts for up to 60% of life insurance contracts, and in Europe - from 30 to 70%.

Unit-linked is an investment product packed into an endowment policy. The policyholder gets the opportunity to invest with a potentially high profitability and be insured from the first day. He can choose a strategy and investment tools. This is one of the key differences from conventional endowment, where the insured does not participate in investments, but only receives a fixed yield at the end of the contract. In other words, a universal life insurance is life insurance with a guaranteed coverage amount. And unit-linked is an investment program with life insurance as an additional feature. The yield on these contracts may be higher: it all depends on the chosen investment instruments and strategy. However, there is no guaranteed profitability, and the policyholder assumes the risks of investing. The introduction of a new type of insurance is always a big job involving changes in related fields, for example, in taxation, legislation and securities. LICs got the opportunity to independently manage the investment portfolio with the participation of the insured in investments. Thanks to this, LIC clients obtained a lot of benefits: the ability to create a diversified portfolio, which may include different classes of assets, as well as a long-term investment tool.

One of the main advantages for customers is a relative simplicity of the product: it is enough to conclude an agreement with a LIC to start investing. There is no need to open brokerage accounts. Thanks to that, the product may become a stepping stone between endowment and investment in the stock market. What is the conclusion? LICs have got a new tool, thanks to which they will be able to strengthen their position. The insurance market has got a product that may become a growth driver in the next 5 years, and the stock market has received a potential flow of additional funds.

But most importantly, clients of LICs were able to diversify their savings, invest in the future and protect themselves from unforeseen situations.

Photos are from open sources.

Source: https://kursiv.kz/news/strakhovanie/2019-08/est-li-u-strakhovaniya-unit-linked-buduschee-v-kazakhstane

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