“In order to create new opportunities for consumers in the insurance sector, the range of insurance products has been significantly expanded in recent years. New socially-oriented products have been introduced in the life insurance industry. Today people have access to endowment within the framework of the State Education Savings System (SESS), joint and deferred retirement annuities,” clarified Deputy Chairperson of the Board of the Agency for Regulation and Development of the Financial Market of the Republic of Kazakhstan Mariya Khajiyeva.
As of September 1 of this year, the population has concluded 2,445 insurance contracts within SESS for a total of 733.3 million tenge. The number of active retirement annuity contracts is 87,509 thousand for a total of 537.6 billion tenge. Market participants believe that these figures show low penetration of life insurance services into the economy.
“Our market is stuck around three following products: compulsory accident insurance for employees, retirement annuities and bank insurance. We have virtually no savings insurance. We need to stimulate the population for such products. After all, life insurers can provide the state with "long money" or investments in infrastructure projects. We need tax breaks, and they are planning to cancel them in our country. It is clear that the benefits will not provide significant growth in the short term, but in a wide range of time they will allow many people to make savings,” said Oleg Khanin, Chairman of the Board of Life Insurance Company Kommesk-Omir.
Endowment insurance products are popular in developed countries for several following reasons: life insurance contracts are stable; they guarantee a relatively high return and provide insurance coverage. “Endowment insurance is the future of our entire market. But there is more than just tax incentives in the world. The housing savings program through Otbasy Bank has been operating for many years in Kazakhstan. SESS has been operating in the life insurance market for a year now. And there is scope for other measures of state stimulation of voluntary pension plans. This will bring long-term investments into the economy,” suggested Yerlan Kambetbayev, Chairman of the Board of Nomad Life.
Voluntary pension plans help people ensure a higher standard of living in old age than is possible only through compulsory pension programs. Voluntary pension plans are popular in the USA, Canada, the UK, Japan, Australia, and some EU countries. The governments of these states guarantee a small return, and employers pay a small percentage of income into employee accounts, so people are interested in independent savings for old age. Moreover, such products guarantee various benefits.
Azamat Yerdessov, Chairman of the Board of LIC Freedom Life, reports that the company is focused on working with young people: “Speaking about Generation Z, we must understand the unique characteristics of this type of consumer. This is the first generation of true digital natives, for whom technology is not just a tool but an integral part of life. They multitask, value visual information, are more careful with money, value individuality and strive for safety. But what does this mean for us, insurers? Our products must be as digital as possible. Generation Z wants to get insurance in a few clicks, manage the policy through app or in their personal account and receive payments online. No offices or paper documents.”
According to the Ministry of Labor and Social Protection, Generation Z will account for 37% of the workforce in Kazakhstan by 2030. “Voluntary types of insurance currently occupy 0.8% of the market. This can be called a blue ocean of opportunities for the development of all life insurance companies. We have several ways to sell products, and one of them is through partners. When we integrate our products into our partners’ services: be it ski resorts, sales of equipment for athletes we pay great attention to sporting events of various levels. Young people love sports, and we want them to have a sense of insurance. Moreover, these products give them a number of advantages,” concluded the Chairman of the Board of Halyk-Life Zhanar Zhubaniyazova.
Insurers have agreed that it is necessary to integrate the sale of voluntary types of life insurance through banking applications.
Photo courtesy of public sources