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Life insurance market: previous year results and plans for this year

Legislative innovations were introduced last year, thanks to which several relevant products appeared on the market. However, the rate of development of the life insurance market was lower than in 2021, as there was a significant decrease in premiums on the retirement annuity class. At the beginning of 2021, the population was allowed to use part of their savings in the UAPF on improvement of housing conditions and medical care. Top managers of several LICs spoke about the results of the past year and plans for this year.
Life insurance market: previous year results and plans for this year

At the beginning of 2022, the Kazakhstani insurance market was affected by adverse factors of a difficult geopolitical and macroeconomic situation, changes in the exchange rate of the tenge against the dollar and the ruble, and the resulting difficulties in doing business.

“For our company, as for everyone else, this year was not easy. However, despite all the events that took place at the beginning of the year, our Company, following the results of 11 months, is in the leading position. Halyk-Life is the largest life insurance company in the Republic of Kazakhstan and a leader in many financial areas today, - says Zhanar Zhubaniyazova, Chairman of the Board of Halyk-Life. - In general, despite the difficulties, once again the company is completing the year in the status of leader with a 35% market share. In fact, every 3rd contract in the life insurance market is now concluded with our company.”

The decline in growth rates is partly due to market correlation after the high sales of retirement annuity products in 2021, associated with innovations made to the country's pension legislation. It is also worth noting that the change in the pricing principles on CAI services, carried out in 2022, also had a certain impact on the life insurance market, increasing sales.

“We revised the target structure of the insurance portfolio compared to 2021, thanks to which we managed to significantly increase net profit compared to last year. The Ministry of Labor and Social Protection of the Republic of Kazakhstan should not go unmentioned, which upset the market with its non-systematic approach to the regulation of compulsory insurance of workers against accidents (CAI). The document, on basis of which the CAI premium is calculated, has been changed twice for the year. By the end of the year, draconian proposals for a return to socialism were born in the bowels of this department. Despite the fact that the system of protection of interests of employees within the framework of market relations has been functioning well, CAI is proposed to be taken away from the market and divided among government agencies. How the government took care of the "hazards", this is how the current concept developers call workers employed in hazardous industries, many remember from Soviet times. Therefore, the innovations of not all regulators are equally useful,” notes Gulmira Ubegaliyeva, the Board Chairman of LIC Eurasia. However, it is worth noting that LIC Eurasia retained its international rating against the backdrop of a large-scale revision of the ratings of both private domestic companies and the quasi-public sector.

Despite the difficulties, the Kazakhstani life insurance market remains promising and attractive for investors. Thus, 2022 was a turning point for IC Kommesk-Omir. A decision to restructure the company in terms of changing the insurance industry was made this October. “This is due to good perspective of the life insurance industry, strengthening positions in this market segment, optimizing the management structure, business processes and expenses of the Centras group of companies, since it includes three insurance companies. The insurance portfolio (including general insurance assets and liabilities) of IC Kommesk-Omir JSC was transferred to the general insurance sister company IC Centras Insurance JSC. All contracts continued to be valid on the same terms,” commented Oleg Khanin, the Chairman of the Board of LIC Kommesk-Omir.

Legislative innovations

Legislative conditions for more comfortable customer care services have appeared in the country. This is especially true of the most social type of insurance, compulsory insurance of employees against accidents. “It became possible to do without some paper documents confirming the insurance event, so that the client would not have to collect them. The insurance company will be able to receive information from government databases. Besides, the role of insurance ombudsman is being strengthened, which in fact is a public institution of an independent defender of the insured, the beneficiary,” Zhanar Zhubaniyazova emphasizes.

Legislative amendments came into force last September allowing insurance organizations to participate in the State Educational Savings System (SESS), the press service of the Agency of the Republic of Kazakhstan for Regulation and Development of the Financial Market reports. Thus, Halyk-Life, Freedom Finance Life and LIC Eurasia received licenses. “Insurance companies participating in the SES system are more competitive and attractive compared to banks due to the presence of a life insurance element. The state supports the development of the endowment insurance market as well as the domestic educational sector with the help of subsidies. This measure will positively affect the entire life insurance market in Kazakhstan and enhance their social role. The entire market places great hopes on joint retirement annuity, which should give another round to the development of domestic life insurance. Joint annuity will help pool the pension savings of the spouses, if one has insufficient funds, while the other has an excess, and receive insurance payments to the spouses without waiting for the official retirement,” emphasizes Gulmira Ubegaliyeva.

By signing an educational endowment life insurance agreement within the SESS framework, parents will be able to save up for their children’s education receiving, in addition to the investment income accrued by the insurance organization, a state premium in the amount of 5% to 7% per annum.

Besides, additional options on retirement annuity have appeared, such as joint retirement annuities, where one of the spouses does not have sufficient savings, but due to the pooling of savings, it becomes possible to conclude an agreement and, using such a product, receive regular pension payments. The clients of insurance companies are now allowed to transfer part of their savings from the LIC back to the UAPF, minus the minimum balance, if two years have passed since the agreement conclusion.

“Speaking of our plans, we have to consider the development trends of the life insurance market. The voluntary life insurance market has grown 2.5 times over the past 3 years. Moreover, the insurance market annually collects premiums on voluntary insurance types that exceed Retirement Annuities and CAI indices together. This is due to development of promising products on the market that are of interest to our compatriots, in particular endowment insurance programs,” said Galym Amerkhodzhayev, the Board Chairman of LIC Standard Life.

Plans

Halyk-Life will be improving existing products and developing new areas. “Every year the company sets very ambitious plans in general both in the life insurance market and insurance market. Business digitalization is an important area of development for us as any business considering today’s realities. Some insurance products are already available online through the Halyk Homebank application or our website. The next step is to expand the list of insurance products that will be available to our customers online, which will widen population coverage,” shares the Chairman of the Board of Halyk-Life.

The life insurance company Kommesk-Omir will be strengthening the brand and increase recognition in a new quality due to technological development and other competitive advantages. “In the near future we will receive a license to carry out insurance/reinsurance activities in the life insurance industry with the subsequent accession of a subsidiary LIC Centras Kommesk Life. The company is planning to enter the market with new products of the entire line of endowment life insurance, unit-linked investment life insurance, digital products that can be purchased on our website without visiting the office, and others in order to provide a wider range of services for insurance consumers,” says the Chairman of the Board of the LIC Kommesk-Omir.

LIC Eurasia will continue to develop within the framework of the adopted strategy. “From the end of 2022, we began to take an active part in the international reinsurance market. The experience of the parent company IC Eurasia is very helpful, as it is a recognized international reinsurer with a successful long history. The international reinsurance market is a kind of blue ocean for LIC Eurasia, since no other insurance company, except for the parent company, is active as a seller of reinsurance capacity on the international market,” says the Board Chairman of LIC Eurasia.

Photos are from open sources.

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