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Online breakthrough of the insurance market

Digitalization and fintech are now undoubtedly the areas that largely determine the financial market’s further development, including insurance. The impact of IT technologies on insurers was discussed at the IX Congress of Kazakhstani financiers.
Online breakthrough of the insurance market

In her speech, Madina Abylkassymova, the Chairperson of the Agency of the Republic of Kazakhstan for Regulation and Development of the Financial Market, named the insurance market as the second priority area of ​​the regulator's work: “In the total volume of insurance premiums, the share of voluntary personal insurance increased to 43%. Thus, we are witnessing the growth of endowment life insurance as a savings instrument. The priority task for the insurance market is to transfer the insurance payment process into an electronic format. For this, a complete and reliable statistical database will be created for the purpose of high-quality risk assessment of the policyholder, ensuring the transparency of the entire process from the contract conclusion to receiving payment.”

The insurance sector is demonstrating a stable growth of premiums and high financial stability. The insurance market’s assets have grown by 64% over the past three years and amounted to 1.7 trillion tenge. Since the year beginning alone, the premiums have grown by 37%. The insurance sector’s growth was facilitated by digitalization and the introduction of new technologies. Compulsory types of insurance have been transferred to electronic format today. “To expand the range of insurance products, the conditions for the development of imputed types of insurance were created, new investment and life insurance products were introduced. It is planned to implement a flexible tariffication mechanism in compulsory insurance, taking into account regional statistics,” she informed.

Nomad Life was the first on the market to start concluding Unit-linked, insurance agreements with participation in investments, last year. From January 2021, tax incentives for long-term insurance products in endowment insurance were introduced. “We are witnessing transformation of the financial market’s architecture and reformation of traditional banks and insurance organizations into financial IT companies and ecosystems. Ecosystems are becoming a driver of competition in the market stimulating the growth of innovations in the provision of financial services, changing the customers’ preferences and conditions for doing business in the real sector,” said Yelena Bakhmutova, the Chairman of Financial Institutions’ Association of Kazakhstan.

According to her, despite the pandemic, the insurance companies showed growth, expanded coverage not only for compulsory, but also for voluntary types of insurance last year. Due to lockdowns, the development of online sales has accelerated. Motor insurance policies, travel insurance, and accident insurance are sold remotely most often. Technologies transfer property types of insurance, including those that do not require the property inspection, to the online sale. It is not necessary now to show the car or apartment for inspection to insurer, you can do it yourself by filming a video under the guidance of an insurance company consultant. Sales of more complex insurance products, in particular life insurance, are moving online as well. “We have transferred certain processes online: document flow, payments. We are trying to use digital analytics and Big Data and are working on marketplace creation. Digitalization will make the insurance sector more transparent. This is a cost optimization, and people will be able to buy our services for less money,” says Zhanar Zhubaniyazova, the Board Chairman of LIC Halyk Life.

However, sales are only the beginning of the client's interaction with insurer. How effective the transformation scenarios chosen by insurers are will determine how successful the market and industry as a whole will be. “We know almost everything about our policyholders. However, insurers do not use this data well enough. Therefore, there are few individual offers for clients. For example, information about clients’ social contacts, hobbies, or health status is very important for life insurers. We need to create a risk assessment of policyholders in the near future, - says Oleg Khanin, the Board Chairman of IC Kommesk-Omir. - I would like the regulator to allow us to invest surplus over insurance reserves in IT companies so that we can buy such companies, since it is very difficult to create a good digital product without them.

Insurance is not considered a fast-growing industry. However, this most traditional industry has become very popular for venture capitalists and startup founders in recent years. Investors have plowed more than $20 billion in the industry over the past three years, from digital-centric insurers to AI-powered risk measurement tools and customer-centric SaaS projects. “Technological insurance is actively developing worldwide. For example, global investment in such startups is $24.2 billion, this is in addition to the investments of insurance companies. Therefore, all of us (top managers and shareholders of insurance companies) are challenged: we need to allocate resources to be invested in IT,” says Dmitry Nadirov, the Board Chairman of LIC European Insurance Company.

The digital transformation of Kazkhstani insurance is an inevitable process that will become the main driver of the industry in the coming years. The insurers that offer high-quality digital customer experience, will gradually become first-choice companies and strengthen their leadership as convenience and speed are crucial for the retail client today.

Photos are courtesy of AFC Press Service

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