The policyholder can choose his own investment strategy. “He can conclude the agreement for 5, 10, 15 and more years. It is assumed that the funds are invested in certain financial instruments by the insurer,” Gulzhan Dzhaksimbetova, the Board Chairman of LIC Centras Kommesk Life, told the Kapital.kz correspondent.
The client can receive the accumulated amount at the end of the insurance contract, she explained. Besides, he has right to terminate the contract, and the redemption amount will be paid to him, i.e. the value of assets in his investment insurance account on the date of agreement termination.
“If the insured dies, the heirs will receive the accumulated amount,” said the Board Chairman of LIC Centras Kommesk Life.
It is still unknown how much the product will cost. It is not planned to apply any strict restrictions to the unit-linked buyer.
“Policyholders can be both legal entities and individuals. People over 18 years of age can purchase this product,” said Yelena Taytugoleva, the Managing Director of Nomad Life Insurance Company.
It is assumed that the client makes regular contributions to the LIC, some of which will be sent to cover insurance risk, other – on investments. However, he will be able to invest only in those financial instruments that the insurance company selects for him. The insurer will also choose a risk-return ratio for his money and form an investment portfolio from the proposed tools.
“The insurance company will automatically execute on this investment strategy, make investments, earn return, and add it on to the client’s capital. The insured is only required to make contributions monthly and determine his investment strategy, which the insurance company is to strictly implement,” explained Vitaliy Lyubimov, the managing director of LIC Halyk-Life.
The insurance market players specified that when developing a product, the financial regulator actively interacted with them and the securities market participants.
“Almost all the suggestions were taken into consideration. The market offered to simplify the mechanism of the product previously aimed at mutual investment funds only. This approach would complicate the product administration processing and make it more expensive. As an alternative, it was proposed to use the experience of pension funds on investment portfolio management, based on which, the requirements for managing the funds of the insured were revised,” explained Yelena Taytugoleva, the Managing Director of Nomad Life Insurance Company.
Azamat Yerdessov, the Freedom Finance Life executive, noted that some proposals were not accepted.
“It was proposed not to establish a minimum guarantee fund for LICs on this product. This is due to the fact that the insurer bears unit-linked investment risks. Life insurance companies do not bear additional risks, but the death risk is included in solvency margin calculations (the risk part of the premium) along with other products of the company. The authorized body decided to establish a minimum size of the guarantee fund, for example, 100 thousand MCI when transferring assets under investment control to an investment portfolio manager which is not an insurance company. The companies that decide to offer unit-linked may need additional capitalization,” our interviewee noted.
Insurers clarify that unit-linked is widespread in foreign countries. Basically, insurance cover includes such risks as surviving of the insured until the end of the insurance period, death for any reason, and death as a result of an accident.
“Foreign insurance companies usually develop investment strategies and offer ready-made solutions to customers. Foreign insurers can offer investments in such high-tech companies as Tesla, Alphabet, NVIDIA, Electronic Arts, etc. You can also invest in stocks of enterprises of the military-industrial complex, pharmaceutical companies developing scientific research on new generations of medications and drugs, or food manufacturers,” said Vitaliy Lyubimov.
Centras Kommesk Life stated that unit-linked was operating in Western markets for several decades. “According to some experts, this type of insurance accounts for up to 60% of life insurance contracts in the USA, and 30-70% in European countries. The return on conservative programs in foreign organizations is 3-5%, on risk programs it reaches 7-15% per annum,” the company noted.
Like any investment product, unit-linked has its risks. “There is always a risk of a decrease in the value of assets, in which the insured's capital is invested. However, insurers have programs with a small but guaranteed return for that,” said the Centras Kommesk Life executive.
According to insurers, the limits on investing the funds of the insured in securities are still unknown. They hope these regulations will be optimal.
Source: https://kapital.kz/finance/87977/kak-kazakhstantsy-mogut-zarabatyvat-na-strakhovke.html
Photos are from open sources.
