– Mr. Kurbangaliyev, according to the latest data, the life insurance market has become a growth leader in 2021. What influenced this growth?
– The life insurance industry has actually grown significantly in 2021, by 71%. this is related to several things. Thus, at the beginning of last year, the pension legislation changed. The life insurance companies now have the right to accept money from the pension fund under annuity agreements if the amount received is sufficient to ensure a monthly payment to customers of at least 70% of the living wage (24,012 tenge in 2021). Previously, the payment amount had to be at least the minimum pension (43,272 tenge in 2021). Besides, deferred annuities were introduced as part of changes in pension legislation. The UAPF depositors can now enter into annuity agreements at the age of 40-45 and receive payments from the age 50-55. There was no such form of annuity earlier; an annuity agreement could only be concluded from the age of 50-55. The amendments in legislation led to the expansion of the retirement annuity segment. The creation in 2020 of a legislative framework for the introduction of unit-linked technology in endowment life insurance also had a positive impact. Within this framework, our company has created an insurance product that combines insurance and investment in the stock market. In 2021, this insurance program was actively promoted on the market.
How has the pandemic affected? Have Kazakhstanis started to look into life insurance programs more actively?
– The pandemic has clearly affected life insurance companies. For example, the number of payments related to both the coronavirus itself and the consequences of this infection in our company has increased substantially. We see a greater interest not from the Kazakhstani people but our partner banks that issue loans to the population. A borrower's life insurance policy is a risk management tool for the lender. Due to the pandemic, our partner bankers developed special loan programs for their clients. In some banks you can now get a loan either on regular terms or at a reduced rate on the loan but provided that the person agrees to insure his life. If the borrower passes away or becomes disabled, his debt to the bank will be repaid by the insurance company. This trend, by the way, also influenced the fact that in 2021 the life insurance industry grew faster than in previous years.
– How do you assess the Kazakhstani life insurance market’s condition and its prospects for future development?
The life insurance industry is constantly growing. The growth at the level of 30% per year is considered normal for us. Despite the fact that life insurance has existed in Kazakhstan for 20 years, it has not yet reached the level of market saturation or glut. Out of 19 million people in the country, no more than 16% of all Kazakhstanis have life insurance policies, and the life insurance industry in GDP is not much more than 0.5%. Thus, we have room to grow.
– What are the features of the life insurance market’s current condition?
- Our industry is dynamically developing. We are expecting amendments to the pension legislation regarding the introduction of joint retirement annuities this year. Today retirement annuity is an individual insurance product. The pension savings of two people, a husband and wife, will be combined in a joint annuity. The payments under such an agreement will be made to both. We expect changes in the state educational savings system and plan to actively participate in it by presenting an insurance product with which Kazakhstani people will be able to save up money for higher education of their children. Life and work capacity of the depositor will be covered. If the depositor becomes disabled or passes, the life insurance company will keep sending money to the future student’s account.
– Could you tell us about the key trends emerging in the market?
– A constantly improving legal framework, study and implementation of international experience by insurers are in global trends. As to trends within Nomad Life and our competitors, the key ones are business process automation, digitalization, and introduction of information technologies. For example, when we all survived the lockdown in 2020, it was companies with automated business processes that showed good results. We understand this as the growth trigger. The companies that do not make any efforts are losing the competitive race.
– What are the strengths and weaknesses of the insurance market in your opinion? Where do you see the growth opportunities?
– Competent strong professionals: underwriters, actuaries, sellers, risk managers, managers have grown in our industry during its existence. Some specialists did not even exist 20 years ago. Undoubtedly, this is the life insurance industry’s great achievement and forte. The government’s role cannot be ignored. Supervisory authorities now perform not only control functions, but they also have begun to listen to insurers, proposals initiated by us, such as improvement of tax and insurance legislation, are being actively implemented. It must be admitted though, that so far life insurance is not bought by customers but sold by insurers. Kazakhstani people are still financially undisciplined. Therefore, we see the prospects for further growth in expanding the use of modern information technologies in promoting our services.
– What are the current customer requirements for modern life insurance products?
- Since Kazakhstanis are not yet familiar with life insurance, they do not draw up their requirements. Our task is to help the future client to realize the need for insurance protection. The most time-consuming process when working with future clients is to achieve contact and build a trusting relationship. The benefits and advantages of life insurance in savings generation and increase, investment, protection of their funds, are undeniable, and, as a rule, our offer is very attractive to customers. And, the insurance programs meet the highest standards, so they are able to satisfy even the most serious requirements.
- Could you describe your typical client? Who is he? At what age do Kazakhstanis insure their lives?
- It is a person aged 35+, with an income level allowing purchase an endowment policy. It is advisable to allocate at least $100 per month for endowment insurance. Thus, the family income should be about 400-500 thousand tenge per month. Over the past two years, we have noted that our audience is getting younger. This is partly due to the emergence of an insurance product that allow invest money in international financial instruments. Young people study the trends of the stock market more carefully and assess its potential more adequately. As for the life insurance benefits, they are primarily tax incentives for investment, they ensure the competitiveness of our offer.
- What are the problems in this market and what are the prospects for the Kazakhstani life insurance market in general?
- As I said, one of the problems is the lack of financial literacy. The second is people’s distrust towards insurers. Unfortunately, Kazakhstanis have a negative experience when they come across fraudulent schemes. People do not trust us, because they have previously dealt with financial pyramids and other organizations that made money dishonestly. This problem can be solved. With proper communication, each life insurance company will be able to bring arguments confirming its reliability to the future client. The experience of these communications is increasing from year to year. Given that information about insurance companies is publicly available on the National Bank’s information resources, the supervisory authorities carefully monitor the fulfillment of their obligations by insurers, and the insurers themselves can confirm their reliability by involving foreign companies in evaluating the results of their work (for example, the Nomad Life rating is confirmed by the American company Standard & Poor`s at BB+ on the international scale). I am confident that we will be able to build trusting relationships with potential customers and the industry will continue to grow at a high pace.
