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The need for life insurance in Kazakhstan and abroad

According to statistics of developed countries, there are almost twice as many people who deposit money with insurance companies than those who deposit it with credit institutions. US citizens, for example, have an average of about 15 insurance policies. Life insurance is even called “building a nation” there; insurance premiums in developed countries amount to several thousand dollars per person a year. In comparison with such figures Kazakhstani indicators are very modest. We will tell you here for whom life insurance products are designed in our country and abroad.
The need for life insurance in Kazakhstan and abroad

According to Halyk-Life, the popularity of life insurance in developed countries is largely due to the fact that the economy there is based mainly on small and medium-sized businesses. Besides, household income allows, without prejudice to the family budget, make at least little savings and buy insurance. “Western insurers have a different mentality and the level of financial literacy of the population is higher. People care about their health, and therefore consciously approach the problem of life insurance. Almost all their children are insured, and if unfavorable events happen to their parents (death or disability), the insurance company will make the remaining contributions, which means that the children will be financially secured,” says Vitaly Lyubimov, the Managing Director of LIC Halyk-Life.

The Board Chairman of LIC Centras Kommesk Life connects the needs for life insurance with the clients’ age. Thus, the main target audience for life insurance companies is the middle class, over 30 years old. “However, economically active young people with a good education and high level of mobility are also interesting to insurers from the point of view of promising potential clients. When segmenting the client base, insurers focus on qualitative analysis related to lifestyle, interests, risk exposure, value orientations, although such obvious criteria as average income, age, profession, gender, education level are still taken into account”, believes Gulzhan Dzhaksymbetova, the Centras Kommesk Life executive.

According to Nomad Life, not everything is so simple. For instance, the so-called microinsurance technologies are developed in Latin America, South Africa, India. Such programs include a set of insurance coverage purchased together with a package of mobile services from a telecommunications operator: in addition to minutes of calls, SMS and Internet, the client's tariff includes an option, with which the insurance company, partner of the telecommunications operator, makes payments in case of insurance events (injuries, disability, hospitalization, etc.). “This offer is designed for people with a significantly lower average income. The offer is more than in demand. For example, in India, more than 9% of the population is covered by microinsurance technologies. In other words, it would be wrong to say that life insurance only works for the middle class,” explains Kairat Chegebayev, the Board Chairman of LIC Nomad Life.

The ULI and ILI programs are popular abroad, because, first of all, they allow invest and receive profitability higher than bank deposits but with less risk than when investing in securities. “The rates in banks overseas do not exceed 1-2%, which is not entirely beneficial for those who want not only to save money from inflation, but also increase their investments. People with average and above average income prefer to invest in endowment and investment life insurance for these purposes,” Azamat Yerdessov, the Board Chairman of LIC Freedom Finance Life points out.

Domestic reality

The Kazakhstani middle class are people who have already made savings on a more or less serious scale. Their priorities are preservation of capital, the desire to allocate their funds with maximum benefit. The instruments offered by endowment insurance have exactly these qualities. “The interest rates guaranteed in Nomad Life, are a sequence higher than what STBs can offer today: if the interest rate in a bank does not exceed 1%, it reaches 3.41% in endowment insurance. Add to this insurance coverage, tax reliefs, legal advantages, an option that makes it possible to receive loans on favorable terms,” says the Nomad Life executive.

The insurance programs for different categories of clients have been developed by Nomad Life. Endowment insurance programs ZOLOTO NOMADOV and endowment insurance with the participation of the insured in investments ZOLOTO NOMADOV Invest will be interesting for people who keep their money on deposits with STBs. The Capital program is designed for people who find it more convenient to form their medium and long-term savings with small contributions: from $100 per month approximately.

Despite the growth of the life insurance market, the level of penetration of life insurance products remains low; therefore, LIC Eurasia gives customers the opportunity to pay premiums at a frequency convenient for them. “Some find it more convenient to pay 500 tenge per week than to pay a lump sum annual fee of 26,000 tenge. And we are talking about an accident insurance policy with coverage amount of 10,000,000 tenge. Life and health insurance products are available, and our task is to convey this to everyone,” says Gulmira Ubegaliyeva, the Board Chairman of LIC Eurasia.

The product cost depends on the amount of coverage, the content. Almost all of our products are available to the vast majority of citizens. First of all, these are basic ones, such as accident and life insurance. For example, we recently launched the product of term life and accident insurance Eurasia-Senim. “It is an extended insurance coverage in case of death from any cause, temporary disability, disability confirmation, with a minimum number of exceptions. With the coverage amount of 5,000,000 tenge, the policy cost will be only 250 tenge per day. In fact, it is even less than cost of a cup of coffee. The thing is: people do not think about the need in insuring their lives and health,” emphasizes the LIC Eurasia executive.

The Centras Kommesk Life product line is designed for the middle class. “According to world experts, the middle class includes people whose earnings per day range from $11 to $110, which allows them to buy expensive durable goods, go on vacation and make savings for emergencies. And the life insurance tool allows use savings wisely and for a long time,” explains Gulzhan Dzhaksymbetova.

Vitaly Lyubimov says that Halyk-Life policies are calculated for clients of different ages and different social status. “As for compulsory type of insurance, it is designed for everyone who works in production. In terms of voluntary types of insurance for different target categories, these are people who plan their pension coverage, and those who take care of saving for their children, and just classic insurance in case of illness or accident, etc. in other words, our products are for everyone who wants to provide themselves and their families with financial protection in case of unforeseen life situations.”

Freedom Finance Life develops programs based on customer requests. “In 2021, the specialists of our company conducted a public opinion poll among Kazakhstanis. The results of the study showed that the majority of respondents who entered into an agreement with LIC at least once earned 400-600 thousand tenge per month in average. A quarter of respondents get more than 600 thousand tenge. 12% of respondents earn in the range of 250-400 thousand tenge. And 8% are people with earnings of up to 250 thousand tenge. Among our respondents, 73% named endowment the most effective financial instrument for protecting savings from devaluation. 30% of respondents entered into an agreement with the LIC in order to save up for a large purchase or a higher education for a child,” says the head of the company.

To make life insurance available to people with different incomes, special products different in price have been created. For example, the cost of insurance against coronavirus at Freedom Finance Life is from 4,900 to 25,000 tenge, in accordance with payments - from 100 thousand to 5 million tenge. Individual conditions for endowment programs are also being created. For example, under the Freedom Education program, each client has individual terms for saving for child’s higher education. In this case, the tuition cost of the chosen university affects the size of regular insurance premiums.

Life insurance in Kazakhstan is only developing. More and more people are now ready to purchase term, endowment and investment insurance policies, as well as retirement annuities. Life insurance is a unique financial instrument that provides a reliable financial reserve for any unforeseen event. Besides, it will not be excessive to have additional savings, such as comfortable life in retirement, education for children, purchase of housing or a certain event: wedding, majority, etc.  

A person receives life and health insurance coverage from various risks: injuries, diseases, death, disability and incapacity for work as a result of an accident for the entire period of validity of the contract.

Pros:

- The insured has the right to choose an heir, same as in case with a will.

- The savings cannot be claimed by third parties, for example, creditors, the government (arrest, confiscation) or unwanted heirs.

- The savings are not subject to division upon divorce.

- Preferential taxation is provided under certain conditions, that is, contributions under endowment insurance contracts are not subject to income tax. The insurance benefit is not taxed as well when the term of the contract expires and the person takes his savings.

Photos are from open sources.

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