BAKU, Azerbaijan, October 21. New approaches are being implemented in Azerbaijan to calculate insurance premiums based on individual risks, with digital technologies and data analysis playing a crucial role in this process, Head of the Insurance Intermediaries Supervision Department at the Central Bank of Azerbaijan, Ramin Jafarov, said, Trend’s correspondent reports from the event.
He made the remarks during a training titled "Role of the insurance sector in financial stability” in Baku on Wednesday.
According to him, digital transformation within the insurance sector facilitates more efficient operations for insurance companies and enables the provision of personalized services to clients.
Jafarov noted that the development of insurance technologies (insurtech) has made the processes of product delivery, claims settlement, and payouts faster and more effective. The use of artificial intelligence and chatbots in these processes is also expanding.
The department head added that digitalization is creating new opportunities for the assessment of insurance risks. While the traditional approach involves designing insurance products based on the general characteristics of specific consumer groups, data analysis and artificial intelligence now enable the determination of premiums tailored to individual risk profiles.
He explained this by citing the example of motor insurance. Specifically, a data-driven underwriting approach (the assessment of insurance risks) allows for the individual risk indicators of the policyholder to be taken into account separately.
"Previously, granting a power of attorney to another person to drive a vehicle could affect the insurance premium, often leading to an increase. The new approach, however, allows for the policyholder's own risk profile to be assessed independently. Issuing a power of attorney to another individual does not automatically result in a change to the policyholder's personal premium rate," he remarked.
According to Jafarov, developing products that align with customer needs is another key direction for the sector's growth. In this regard, offering voluntary civil liability insurance coverage, in addition to mandatory motor insurance, expands the scope of protection available to customers. He noted that insurance products, which can be activated as the need arises, offer additional opportunities for customers. For instance, travel insurance can be purchased for short-term trips abroad, even for periods as brief as three to five days.
The department head emphasized that the assessment of climate-related risks has also become a pressing issue for the insurance sector. According to him, the risks posed by natural disasters and weather-related events in recent times necessitate the adoption of new risk assessment models by insurance companies.
He mentioned that, in this context, the development of risk maps to identify catastrophic risks is of great importance. Given that Azerbaijan is located in a seismic zone, efforts are currently underway to create a national risk map, incorporating the expertise of international specialists.
