In 2018, Timur Turlov became a board chairman of Asia Life and Trust Insurance, life and general insurance companies, respectively. As of October 29, 2018, they changed their names and are now called JSC Freedom Finance Insurance Company and JSC Life Insurance Company Freedom Finance Life.
What attracted the financier in the insurance sector, whether insurance companies will be part of the Freedom Finance holding - these and other questions were answered by Timur Turlov in the interview with Forbes.kz.
Why did you decide to enter insurance industry? The market lives on compulsory types of insurance, large corporations have their own insurance subsidiaries...
- When we came to the brokerage market, this market was in a similar state: there was something like compulsory types, the pension funds money must be transferred to the investment funds that managed it. The transactions in the stock market were mostly between pension funds, funds and banks, banks and companies. And we began to sell complex financial products to individuals, provide brokerage services, participate in the national IPO, and work with retail. I believe that we have proven to the market and ourselves that we have one of the best competencies for the sale of complex financial products in Kazakhstan.
If we are well able to sell complex financial products, and life insurance is one of them, it is logical to grow in voluntary types of insurance, do what we do better than anyone else.
In addition, we are competent in managing our own portfolio, and in life insurance, you also need to professionally manage the collected assets under very strict regulation. We have everything we need to make it happen.
Let's start with plans for the life insurance industry. What do you prioritize over?
- We see great opportunities in endowment. Now it is an empty market with almost no competition. Life insurance is sales through financial advisors that need to be trained. There must be enough of them, and they must be highly qualified enough to provide the service.
Freedom Finance has 150 investment consultants now, and selling of life insurance means professional financial counseling, a long-term financial planning: save money for education, or a big-budget purchase, or a higher pension guarantee. These are the tasks that the life insurance company must solve. It means, we need to build a professional agent network in life insurance and it is not the same as the agent network for compulsory insurance we have now. And it seems to me that we are the only ones who have this kind of network and investment consultants for that. Therefore, it is logical for us to be in this market.
What are you planning to offer?
- Clients do not want complex investment products, they need simple and more understandable ones, with which they are able to receive a good income, for example, save on education for children. These are large expenses, from 300 thousand to 2 million tenge per year, a large burden on the family budget for the overwhelming majority of the middle class. People start to think about it. For example, my youngest child is not even three now, the eldest is nine, and my wife and I want for them to get a good education regardless of whether something happens to me or her, or on how successful I am.
We are solving a very specific task: you must save, let’s say, 50 thousand tenge per month, starting from a certain year, and we guarantee that your child will learn at the university. If you get injured, sick, or die, the insurance company will pay all the remaining contributions. If everything is fine with you, you will save up for education and get an investment income. I believe this product is really in demand. People will not resist it if they can earn good money on it, and if it is reliable and profitable.
Same with health insurance: pay 40-50 dollars a month, and if you get seriously sick, you will have a million-dollar insurance policy for treatment. There are quite a number of people in Kazakhstan who are ready to allocate 400-550 dollars a year in order to make sure that in case something happens, they will not have to turn their lives into hell, sell real estate, or ask for money.
Have you made the calculations on how the voluntary insurance business develops, how much profit you get?
- We have no goal to quickly get return on equity. My objective is to build a volunteer market that does not exist yet. And it is about investments and a low return on capital. I do not rule out the possibility that in the next five years we will not beat records in profit, but we will do everything in our power to make customers like the product in order to earn their trust.
I hope that insurance companies will become a part of holding in the future, and I want it to be rated higher in America. In business, you should always look for an effective balance between development interests and current dividends to shareholders. We are now at the point where investing in future growth and conquering new markets can bring enormous benefits to our shareholders. This is the long-term vision that I hope to bring to life.
Compulsory types of insurance in life insurance are more profitable compared to general insurance, it is true. And life insurance has a huge potential.
An undeveloped market, unprepared customers, but along with this large-scale investments are needed: the National Bank sets a high bar for capital.
- It is quite expensive to build retail sales, you cannot have a small capital, or you will work at a loss exposing the customers to too much risk. I agree with the regulator on that. Life insurance undertakes the obligations before the customers, and if the stock market starts to fall, the company will need capital to absorb these risks.
Nevertheless, you decided to enter directly two insurance companies: life and general insurance.
- Life insurance is a logical continuation of our business, and our strategy in general insurance, in my opinion, is in line with the National Bank’s view on its development.
In general insurance the service should be sold to the client at the best possible price bypassing the middlemen. And the National Bank interprets it as an electronic policy, which has started working in the year beginning. This is a really good innovation made better than in Russia, it has every chance for success.
We realize that the main problem with the compulsory insurance market now is the size of agency commissions, which can take up to 30% of all revenues and put these types of insurance on the verge of profitability for the overwhelming majority of players. Competition turns into competition in terms of agency fees. The more reward you give, the more customers you get. If you want to grow, you start paying agents more, and all the traffic comes to you. Neither the client nor the industry benefits from this.
On the other hand, when launching an e-policy, we need to take into account a great distrust of online purchases. I doubt that through the site or mobile application, we will lose a significant proportion of traffic. In the future, we realize and actively invest in a mobile application so that the client can take a picture of the documents, everything is read and the policy is issued within five minutes. Using all our skills in IT and Internet marketing we will do it well, convenient and profitable for those who are ready to buy through the Internet.
But the main focus in compulsory insurance we make on the terminals. We will make a hybrid: an electronic policy, which will be issued by the insurance terminal. We already have several hundreds of terminals in stock, which will be installed in places where cars are registered, in public service centers, business centers, etc. A person will have the opportunity to insert his ID and car registration license in the terminal and get a printed insurance policy in less than five minutes. The copy will obviously be sent electronically to a single database.
In this sector the perspectives are probably more certain?
- We believe this kind of policy issuance will help save up to 30% of revenue due to distribution. And if clients realize that such a method takes less time, costs less and brings additional benefits, we will take a significant market share, hundreds of thousands of policies.
Out of a reasonably large amount of money that we used to spend on agents, we will give a part to marketing and the other part to the buyers themselves. We have put so many efforts to make it work, and I believe that our solution, between online and offline, is suitable primarily for compulsory insurance.
In compulsory types of insurance, the competition is not in brand, but in technology: how fast, cheap and convenient your services are. The products are the same, but you need to be able to sell them with minimal costs. If in volunteer life insurance it is investment counseling, in compulsory types it is a question of technology, IT battle.
In compulsory insurance, I want to find a good balance that allows a person to be sure that if something happens, the insurance company will really settle this loss. We need to build the settlement of damages much faster than most players do. I do not understand why it takes three weeks if it can be done in an hour.
What changes have your insurance companies already undergone?
- We changed the boards of directors, management, attracted a large number of specialists, both from inside and outside the holding, renewed marketing, IT, and sales teams. We are preparing for a full rebranding. We look to spend more than one hundred million or maybe more than one billion tenge investing in these companies.
Now we are waiting for the regulator’s approval and a license for compulsory types of insurance for our companies. We are still in the preparatory phase nevertheless, our goal is once again to show that we are able to properly conduct a normal market client business, behave like a fully functional non-affiliated company that does its job well.
