European insurance companies started offering investment policies since the 1950s. Before that, the insured's profit was formed only from the profit received by the insurance company’s activities. Investment policies allowed us to link the size of insurance payments with investment returns of companies. The insurance coverage of such policies is stated not in monetary units, but in the number of conventional units, called Units, unit shares or set using the stock market instruments. In Western Europe, the share of investment policies reached a maximum in 2000 and accounted for almost 45% of all life insurance premiums. Now the level of sales of policies is directly proportional to the growth of stock indices.
The main difference between investment policies and profit policies is that returns on investment policies are related only to one investment direction: a fund of certain shares or bonds, some stock index, a real estate fund, etc. Under agreements with participation in profit, the accrued interest or bonus is determined by the profitability of activity of the entire insurance company.
The investment policies of three main types are currently sold abroad. They are as follows:
1) unit-linked - associated with units in mutual investment funds;
2) index-linked - associated with certain stock indices;
3) equity-linked - associated with the exchange rate of certain shares.
The "unit-linked" system for mixed life insurance has become most widespread in Western Europe. Investment risk lies with the insured, because it is the policyholder who chooses a fund for insurance premium investing.
Please note that life insurance companies in Kazakhstan also find such product as unit-link quite promising. And today the National Bank of the Republic of Kazakhstan is considering the possibility of creating such products of universal life insurance, according to which the policyholder would participate in managing the investment strategy of his savings.
As mentioned earlier in the interview to Life Insurance, the managing director for insurance of "NOMAD LIFE" Life Insurance Company JSC, member of the board Askar Shakenov, this product is absolutely transparent, with full information on the fees charged, possibility of tracking changes in the value of its investment portfolio (set of financial instruments) on a daily basis, which allows us to make correct, and most important, timely decisions. This product is designed for a financially competent consumer, and a substantial investment income can be a good prize.
"This product has a huge potential, its attractiveness is determined by several factors. First, it is an absolute insurance protection in case of unforeseen circumstances related to the client’s life and health; secondly, it is an opportunity to accumulate a certain amount of financial resources for a certain event in life. In addition, the insurance company guarantees a certain income for the insurance period. The value of endowment insurance is to protect the client, his family and loved ones from possible risks in case of emergency. Many people compare this product and the deposit, but the question here is not in the profitability difference between life insurance products and the deposit, but in the value of protecting the client. The attractiveness of this product will undoubtedly grow, according to the world experience”, notes LIC JSC "Standard Life".
Photo per website: losmejoressegurosdelmundo.com, in4-link.net.