- As it is well known, as of July 15, 2018 the Law of the Republic of Kazakhstan "On Amendments and additions to some legislative acts of the Republic of Kazakhstan on insurance and insurance activity, and securities market" came into force. How, in particular, should these changes affect the development of the life insurance market?
- The Law of the Republic of Kazakhstan No. 166-VI "On Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan on Insurance and Insurance Activities, the Securities Market" (hereinafter - the Law of 02.07.2018) as of 02.07.2018 entered into force on 15th of July, 2018.
This law is aimed at improving the current situation of the insurance market and ensuring its dynamic growth and competitive development, strengthening the stability and reliability of the national insurance industry and increasing the insurance culture of the population.
Within the framework of the Law as of 02.07.2018 the amendments aimed at the development of the life insurance industry, were also adopted, they are as follows:
- The guarantee system of insurance payments includes socially significant life insurance products, such as pension annuities and annuities of the affected employees;
- Life insurance companies are given the opportunity to independently manage their investment portfolio in order to develop insurance products with the participation of the insured in investments;
- Joint retirement annuities have been introduced.
The adopted measures will create an effective mechanism for ensuring the protection of the rights and interests of consumers of financial services, and will also contribute to the confidence increasing of citizens in providing insurance services and expanding products of voluntary life insurance.
- The new Law also refers to a new product introduction known abroad as unit linked. This is a universal life insurance with the opportunity to participate in the investment management of assets and receiving premiums. How much, in your opinion, will this product be competitive and demanded by Kazakhstani people?
- In the CIS countries, the unit-linked insurance product is considered to be an investment product of a new generation, and in Europe, Asia and the USA this tool has existed for more than 60 years, since they represent a successful symbiosis of insurance and investment services.
In the United States, up to 60% of life insurance contracts are concluded on the insurance product "unit-linked". In Europe, this product accounts for 30 to 70%. In the Russian Federation, the first "unit-linked" products began to appear in 2007.
However, in Kazakhstan "unit-linked" insurance products remain non-demanded.
In order to improve legislation and develop insurance products with the policyholder participation in investments, the National Bank made the necessary amendments to the legislation within the framework of the Law as of 02.07.2018. This law introduced a system of separate accounting of the policyholder assets from the insurance organization assets, and life insurance companies is given the opportunity to independently manage the investment portfolio.
The main advantages of the "unit-linked" insurance product are:
- The possibility of obtaining the insurance coverage and investment income simultaneously;
- The insured at his discretion can choose a fund formed by the insurer for investing in certain financial instruments, depending on their profitability and riskiness.
In this regard, we believe that this product has a growth potential in Kazakhstan.
- Will the online insurance development lead to elimination of such a profession as an insurance agent? Or such specialists will still be needed?
- The legislative amendments concerning online insurance and fixing the legitimacy of the insurance policy in electronic form have been made by the law of 02.07.2018.
As of January 1, 2019, insurance organization customers will be able to conclude insurance contracts in electronic form using Internet resources and formalize the insurance policy in electronic form.
To stimulate individuals and business to enter into insurance contracts in electronic form, insurance organizations have a right to provide a discount of up to 10% from the insurance premium when entering into an insurance contract through the Internet resource under contracts of compulsory insurance of civil liability of vehicle owners and compulsory insurance contracts of civil liability of the carrier to passengers.
The introduction of online insurance will reduce the cost of insurance for individuals and business; make it possible to conclude contracts directly through Internet resources of insurance organizations without visiting the office or intermediary participation, and speed up the receipt of insurance payments.
Considering that sales of voluntary insurance products significantly depends on the sales channels of insurance agents, the need for insurance agents will remain and the introduction of online insurance will not lead to the disappearance of agents in the insurance market.
- How much do you think the demand for retirement annuities in Kazakhstan will increase with the introduction of guarantees for insurance payments on pension annuities and the possibility for the insurer to conclude additional agreements in the current pension annuity contract?
- Security of pension savings and guarantee of pension payments are the most important issues for people of retirement and pre-retirement age.
Insurance payments from insurance organizations are an alternative to pension annuities from the SAPF.
Continuity and timeliness of insurance payments under pension annuity agreements are important components of the entire pension system of the Republic of Kazakhstan, as these payments are the only income for citizens at retirement age.
The implementation of retirement annuity contracts into the guarantee system will increase the level of public trust and can have a significant impact on the life insurance development as a whole.
- What dynamics in the life insurance market development in Kazakhstan can be traced for the last year? What measures need to be taken to develop people’s interest in life insurance?
- The total amount of insurance premiums received by insurance organizations for life insurance products in 2017 totals 66.2 billion tenge. This indicator compared to the results of 2016 increased by KZT10.5 billion or by 18.8%.
The amount of insurance premiums for life insurance products per capita by the end of 2017 was 3,646.2 tenge, which increased by 17.2% compared to the same index as of 2016 (3 110.7 tenge).
To develop interest of Kazakhstani people in life insurance products, it is necessary to take measures aimed at increasing the attractiveness and competitiveness of insurance products, such as:
- Tax legislation improvement of by easing taxation on life insurance products;
- Expansion and creation of various types of life insurance products taking into based on foreign experience and the needs of the local population;
- Provision of information to people and employers about the benefits of life insurance products to form an insurance culture and a civilized attitude to life insurance, as a universal means of accumulation and protection against risks.
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