Azerbaijan’s insurance sector forecast to grow further

By Nigar Orujova

The young and still developing insurance market of Azerbaijan has finalized 2015 with about 5-15 percent monthly growth. The last year was remembered with a number of events, results of which will be visible this year.

Traditionally, in 2015 the market was mainly formed on base of the life insurance, insurance of property against fire and other risks, compulsory insurance of the real estate, fully comprehensive automobile insurance and health insurance.

The data for 11 months of 2015, demonstrates the overall picture of the Azerbaijani market that includes 26 insurance companies. For this period, charges exceeded 403 million manats ($258 million), and payments reached 157 million manats ($100 million).

However, novelties were also noted in the market: a unified system of damage assessment Audatex was introduced in 2015, the country has joined the international system of auto insurance Green Card, and some progress has been recorded in developing mechanism for health insurance and improvement of agricultural insurance, etc.

Audatex assessment, which allows implementing a common approach and system of damage assessment of an accident, was introduced in October. The new system has not shown its results yet, however, many insurance companies observe decrease in number of complaints and dissatisfaction of customers in this area.

Another significant event was marked in last May when Azerbaijan has joined the international system of auto insurance Green Card, which implementation started from this January.

This system will relief Azerbaijani citizens from the unpleasant problems related to vehicles, different types of property, life and health in a few foreign countries. If a car owner holding an Azerbaijani Green Card suffers losses in the territory of one of 48 member countries of Green Card, then the sum of the insurance payment will be determined by the largest amount provided in the legislation of the country.

Car owners will have to purchase an Azerbaijani Green Card before entering a country that is a member of the system. At the same time, car owners registered in those member states that are part of the system will not need to contract border insurances.

This year, one more novelty in the car insurance is expected in the country. The Parliament will review amendments to the law “On compulsory insurance”, which include the introduction of direct settlement in an accident.

This means that after changes in the law the affected person can receive payments from his insurance company. However, there are some nuances: firstly, it only applies to the mandatory liability insurance of vehicle owners, and secondly, the direct settlement implies insurance availability of the both sides of accident.

Nevertheless, these amendments will facilitate the process of obtaining insurance payments, as the customer will know in advance, whom to contact to get insurance cover.

In addition, the amendments presuppose that conclusion of contracts and carrying out of calculations for compulsory insurance will be implemented online. This will reduce fraud during settlements between insurers and intermediaries.

Conclusion of the contract through the Internet will also reduce the charge of the insurance companies, which creates opportunity to provide products at a cheaper price.

Some progress was also observed in the field of medical insurance. Despite that fact that voluntary health insurance has long been available in the country, this type of insurance is still mostly in demand among large companies. In January-November 2015, voluntary health insurance accounted for only 15.7 percent or 64.3 million manats ($41 million) of all fees on the market.

The government is still discussing application of the compulsory medical insurance, considering social importance of health insurance. Last year saw adoption of specific measures in this regard.

In the first half of 2016, the State Agency for compulsory health insurance is expected to determine the national model of compulsory medical insurance, develop proposals for legislative acts, as well as finalize preparation of the medical institutions for the implementation of the model.

By 2017, implementation of a pilot project for the introduction of compulsory medical insurance is expected.

As for property insurance market, it managed to increase by more than half in 2015. However, about a third of the insured property in Azerbaijan accounts for the capital Baku, which raise the need of development of this sector in the region as well. Insurance of responsibility for operation of real estate also increased in the country last year.

Population is not well educated about the insurance in Azerbaijan. This often causes problems between insurance companies and its customers. A special commission was created in 2015 because of the large number of claims on work of insurers. However, practice shows that only 20-25 percent of the complaints are justified.

Both the government and the insurance companies in Azerbaijan are carrying out measures to educate the public. An action plan until 2018 was adopted last year for the development of insurance, which also sets out specific objectives and defines a serious and tough law to protect the interests of policyholders.

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Nigar Orujova is AzerNews’ staff journalist. Follow her on Twitter: @o_nigar

Follow us on Twitter: @AzerNewsAz