bs-preloader__icon
ru kz en

Life insurers offer to expand their capabilities

A few weeks ago, the head of state signed a law on the transfer of funds to children from the National Foundation of the Republic of Kazakhstan. The document identifies the UAPF as an operator of allocated savings accounts. Life insurance companies can manage these funds too. Details are below.
Life insurers offer to expand their capabilities

According to the law, 50% of the annual investment return of the National Foundation of the Republic of Kazakhstan will be allocated to the personal accounts of children, citizens of the Republic of Kazakhstan, opened in the UAPF, until they reach the age of 18, without the right of early withdrawal. When children reach adulthood, they will be able to use these savings to obtain education or improve their living conditions.

“It is worth noting that the UAPF is an operator of allocated savings accounts for this program being the sole manager of all financial transactions. Its task is accounting of purpose requirements (liabilities), target assets, target savings in target savings accounts, and making payments of target savings. However, unclaimed amounts of target savings in the absence of payment claim within 10 years after the recipient reaches the age of majority are subject to transfer to an individual pension account of voluntary pension contributions,” reports the press service of the Agency of the Republic of Kazakhstan for Regulation and Development of the Financial Market (ARDFM).

Along with this, the “National Foundation for Children” program provides for the use of savings within the State Educational Savings System (SESS) framework to obtain education. “This allows young people to supplement their existing savings under an educational savings insurance agreement or the National Foundation funds received upon reaching the age of 18,” the regulator’s representatives believe.

Life insurance companies (LICs), along with UAPF, could become operators of the National Foundation for Children state program. “Our company has previously been the initiator of this approach, citing the following arguments: First, the LIC, within the SESS framework, offers to accumulate funds with their indexation (recalculation) to the US dollar exchange rate, which ensures the safety of funds and their increase. The company has experience in attracting client funds, accumulating them over a long period and earning investment return in foreign currency for the client.

Inclusion of life and work capacity insurance of a parent who saves up for their child’s education, which provides them with additional coverage in case of unfavorable events, in the SESS program from LIC, is a 100% payment regardless of the size and amount of funds contributed by the parent,” the Deputy Chairman of the Board of LIC Nomad Life Yelena Taitugoleva believes.

LIC Halyk-Life naturally supports such an initiative as granting LIC the status of operator of the state program “National Foundation for Children”, as well as the initiative to give to legal representatives of program participants the right to annually transfer the amount of purpose requirements to LIC as insurance premiums to educational savings insurance contracts. “This will require long-term work to amend a number of regulations, the drafts of which are almost ready today; it will be necessary to revise the mechanism for calculating purpose requirements for participants of this state program. For participants of the state program “National Foundation for Children”, the advantages would be the possibility of transferring annual purpose requirements as insurance premiums to educational accumulative insurance contracts and receiving return on investment upon insurance payment. For the state, the benefits would be to encourage the population to start saving money for their children’s education, including by opening endowment agreements,” comments the press service of LIC Halyk-Life.

The ARDFM takes a different view on the situation: “By area of insurance, life insurance companies provide additional insurance coverage, which is an important aspect of financial planning and security. Thus, LICs are participants in the “National Foundation for Children” program as legal entities that are engaged in concluding and implementing educational accumulative insurance agreements within the SESS framework. In this regard, the agency is not considering the issue of including LICs along with the UAPF as operators of the “National Foundation for Children” program.”

It is worth noting that if the government allowed the use of national foundation money for education, savings would be formed by four following sources: parents’ money as payment of insurance premiums, state money as the accrual of state premiums, LIC money as investment return under insurance contracts and the fourth source of savings could be national fund accruals under the “National Foundation for Children” program as additional insurance contributions. Thus, at the exit the savings would be significantly higher.

“For people, these are long-term savings protected from depreciation, as well as life and health insurance of the parent making these savings. For the state, it is a financial support of our children’s education and improvement of financial literacy of the population. For LICs, this is an opportunity to increase the number of clients, improve service delivery, generate income, and ensure the growth of the insurance market,” explains Yelena Taitugoleva.

At the moment, LICs have the appropriate technologies. “This is a classic endowment life insurance product that has been on the international market for several centuries. It has been operating on the Kazakhstan market for more than 20 years. Over the past 5-6 years, LICs have begun to offer it to their clients with protection against depreciation (by linking the amount of savings to changes in foreign currency exchange rates). The product has been tested, refined, improved during this period, and currently it is a mature sought-after market material. Besides, starting from September 2022, the savings within the SESS framework were included in the list of types of insurance guaranteed by the IPGF. It means the client’s savings are fully covered in the event of LIC’s financial insolvency,” emphasizes the Deputy Chairman of the Board of LIC Nomad Life.

“New IT systems and software in the company are implemented and updated as necessary and as new insurance products are created. Introduction of any necessary technologies in this case will not pose any special problems or difficulties for the company. This can be done efficiently and quickly, and Halyk-Life is ready for this,” concluded the company representatives.

Photos are from open sources.

 

Share
read also
Unit-linked products are the new benchmark in the life insurance market
Unit-linked products are the new benchmark in the life insurance market

There is a crying need for an investment-accumulation profile product in the Russian ...

Financial Tips to Retirees
Financial Tips to Retirees

The idea of not having enough money on retirement is terrible for many people. Fall s...

Life insurance for the disabled
Life insurance for the disabled

The main purpose of universal life insurance is to provide for the policyholder’s f...

The most interesting materials of the site you have in the mail! Subscribe to the newsletter.

ASK A QUESTION TO THE EXPERT
ASK A QUESTION TO THE EXPERT
Submit your application