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Cuts to growth rate in Azerbaijan's insurance market to last by end of 2014

3 September 2014 08:49 (UTC+04:00)
Cuts to growth rate in Azerbaijan's insurance market to last by end of 2014

By Aynur Jafarova

Cuts to the growth rate in Azerbaijan's insurance market will continue until the end of 2014, Khayal Mammadkhanli believes.

"Like a few years ago, the insurance market is developing a one-sided focus on car insurance and some types of compulsory insurance," the expert in the field of insurance told Trend Agency.

He noted the compulsory insurance is not well developed in Azerbaijan.

"The compulsory insurance of passengers hasn't paid off yet from the beginning of the year, and that is incredible considering the growth of road accidents," he concluded.

The tightening of car loans, reducing the volume of imports of vehicles due to the transition to the environmental standard Euro-4 since April, 1, as well as changes in terms of inspection, are the main reasons for the weakening of the market.

"All these factors have weakened the insurance market," Mammadkhanli noted.

For the development of voluntary insurance, the market hasn't offered a sufficiently wide range of products as well as new insurance services. There are also problems in the field of working with clients, obtaining reimbursements for insurance claims, etc.,

"And these factors affect the overall pace of development of the market," he added.

Mammadkhanly thinks insurance companies should try to get people to buy insurance services on a voluntary basis, and it is possible through the promotion and provision of appropriate insurance services.

In subsequent years, the growth of insurance in Azerbaijan is possible due to the mandatory health insurance, the introduction of which is expected in 2015. First of all it is necessary to determine the appropriate fee for the insurance policy, prepare the infrastructure, ensure the connection of all the insurance companies to the system, hold trainings in all health facilities, as well as creation of a single registry of patients for the introduction of this type of insurance.

"We can expect significant growth in the market at the expense of this kind of insurance," Mammadkhanly said.

The changes in conducting agricultural insurance in the country through the provision of agricultural subsidies and soft loans and other financial resources may also provide impetus to the development of the market and may become a new stage in the development of agricultural insurance.

Further growth of the insurance market will also be provided at the expense of life insurance.

"The interest in life insurance has seriously increased in the country, because many people use it as an investment vehicle," Mammadkhanly said, "Currently, means on life insurance allow companies to reduce the tax base, which makes it possible for companies to keep profits for themselves, and this activity has become an integral part of the social package."

Currently, an appropriate control mechanism has been created and an even greater increase in this market can be expected over time.

Azerbaijan's Ministry of Labor and Social Protection of Population has implemented hard work on gaining control over labor agreements and formalization of workers at the workplace, and as a result companies have to insure their employees. This will make it possible to provide a rise of both life companies and the market.

The three companies with the right to engage in life insurance in Azerbaijan, in particular Pasha Heyat, Atashgah Heyat and Gala Heyat collected 63.5 million manats for all types of life-insurance in January-July 2014, which is a nearly 56 percent (22.83 million manats) increase over the same period of last year.

The share of life insurance premiums in the total amount of insurance fees applicable in the country amounted to 25.2 percent.

The insurance market grew by 9.9 percent within the 7 months of 2014 compared to the same period of last year.

If compulsory insurance was the main driver of market growth in 2012, last year the growth of the market was mainly provided by the voluntary insurance. Last year the volume of voluntary insurance market grew by 26 percent, while the growth for compulsory insurance accounted for 5.64 percent.

Some 28 insurance companies are working in Azerbaijan. AIG Insurance (now Chartis), AXA, Miracle Insurance and Financial Group, Basak, Glencarron Group Limited are the largest international players in Azerbaijan's insurance market.

Also, Slovenian Sava Re reinsurance company, German Munich Re insurance company, Russian ROSGOSTRAKH, ROSNO companies have shown great interest to Azerbaijan's insurance market.

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