BAKU, Azerbaijan, Feb. 29
By Yusif Aghayev – Trend:
The development of the insurance sector in Azerbaijan must be associated with growing enlightenment in the field of insurance, public awareness, as well as with the creation of new insurance products adapted to the current realities, Chairman of board of Standard Insurance company Kamran Babayev told Trend.
Regarding the prospects for the development of the voluntary kinds of insurance, the chairman of board of the Azerbaijan Insurers Association Azer Aliyev attached special importance to the creation and promotion of such combined products as bancassurance (bank insurance) in line with the development strategy of the Azerbaijani insurance market in 2020.
From an institutional point of view, bancassurance is a way of organizing cooperation between banks and insurance companies. From a functional point of view, it is a system of cross-selling of banking and insurance products through a single point of sale, mainly through a network of bank branches.
It is the acquisition of products of insurance companies already operating in the market by organizing a system of sales of insurance certificates through a network of bank branches.
Bancassurance increases the liquidity of banks and also allows increasing competition in the insurance market.
The purpose of bancassurance is to increase the portfolios of banks and insurance organizations through the implementation of the main spheres of cooperation. Mutually beneficial cooperation in such cooperation includes the possibility of developing new financial products at the junction of banking and insurance activity; a decrease in the cost of transactions and information costs; attracting additional customers and achieving full control over the financial flows, which expands the possibilities of marketing analysis.
The need for the insurance company to participate in organizing the banking business is determined by its nature and content, a wide range of risks that banks cannot level themselves.
Bancassurance products can be divided into two main blocks in the Azerbaijani insurance market. The first of them is directly related to the activities of banks, namely, loan and mortgage insurance. As a rule, the availability of certain types of loan insurance (one or more) is a condition for a bank to issue a loan to a borrower. This block also includes the bank card insurance.
The second block of insurance products is not connected with the core activity of banks. It simply uses their wide branch network and a convenient opportunity for contacts with potential customers. Such products are mainly aimed at customers - individuals.
One of the important features of such insurance products is their simplicity and a very short sales cycle. Therefore, all types of box insurance suit for the sale through banks (i.e., simplified insurance products that do not require expertise in case of insurance and with noticeably limited amounts of insurance compensation).
As both domestic and foreign practice shows, the insurance premium for these products must not be high for bank customers - individuals.
According to the experts, the products related to an increase in the insurance amount of compulsory liability insurance of vehicle owners and compulsory insurance of real estate of individuals could be the most suitable box products of bancassurance in terms of domestic realities.
In general, the development of this sphere will enhance cooperation between banks and insurance companies, improve their activity, increase internal competition and public confidence in financial institutions in general.
Some 30 banks and 22 insurance companies operate in Azerbaijan.
