BAKU, Azerbaijan, Feb. 24
By Yusif Aghayev - Trend:
Raising confidence in insurance is the key to successful development of Azerbaijan’s insurance sector, Azer Aliyev, chairman of the Azerbaijan Insurers Association (AIA) told reporters, Trend reports.
Aliyev noted that presently, the population’s confidence in insurance isn’t at the needed level.
“This is caused by many reasons,” the chairman added. “First of all, of course, this is associated with a low level of awareness in the field of insurance, its tasks and goals, insurance legislation, as well as those products and services that are available in the market. Many people perceive the insured event as a way of additional enrichment, while the payment of insurance compensation is intended to compensate the insured for the losses that he or she suffered as a result of the occurrence of this insured event, to restore his or her original financial position.”
Aliyev said that this year the AIA will pay special attention to the implementation of activities related to raising public awareness in the insurance sector, attracting professional participants of the insurance market to work in this direction.
Touching upon the prospects for the development of the insurance sector in the future, the chairman noted that at the end of last year, the insurance market regulator in Azerbaijan changed.
The Financial Market Supervisory Authority of Azerbaijan was abolished on Nov. 28, 2019, and in accordance with the decree of the head of state on improving the management of the system of regulation and control of the financial services market, its powers to supervise financial markets, defined by the laws of Azerbaijan, including its rights and commitments in the field of licensing, regulation and supervision of the financial services market, protection of the rights of investors and consumers of financial services were transferred to the Central Bank of Azerbaijan, Aliyev added.
At the moment, great expectations are associated with the policy and strategy of the Central Bank of Azerbaijan in the field of regulation of the insurance services market, the chairman said.
Aliyev noted that the framework regulating relations in the industry needs serious reforming and many legislative acts adopted years earlier are outdated and don’t correspond to the realities existing in the market.
They need to be updated and adapted to the situation that has developed at the moment in the insurance industry, and in this regard, it is the market regulator that plays an important role, added the chairman.
Regarding certain types of insurance, the head of the association emphasized the need to develop compulsory types of insurance, because, as international practice shows, when compulsory types of insurance are actively developing, voluntary ones also start to develop.
“In this direction, a lot depends on the Compulsory Insurance Bureau,” Aliyev said. “It is no secret that the Bureau is carrying out considerable work to improve the compulsory insurance system in the country, and the digitalization of processes in this area holds a special place there. In Azerbaijan, for the first time in the CIS, compulsory liability insurance of vehicle owners began to be carried out in electronic form, appeals by vehicle owners and concluding insurance contracts are made online, without the use of paper workflow.”
This became possible due to the integration of the database of the Compulsory Insurance Bureau on liability insurance of vehicle owners and the electronic system of Azerbaijan’s Interior Ministry, the chairman added.
“Most recently, the transition to electronic format was carried out, without paperwork, in the field of insurance against industrial accidents and occupational diseases,” said Aliyev. “The work is underway in the field of digitalization of compulsory real estate insurance, within the framework of which it is necessary to integrate the database of the compulsory insurance bureau for real estate insurance and the electronic system of the State Real Estate Registry. This is also expected to be implemented this year.”
“In addition to the above mentioned, there is ongoing activity in the field of increasing the efficiency of the electronic system for recording insurance cases for compulsory liability insurance of vehicle owners, which allows more clearly and efficiently calculating the bonus-malus coefficient used in this type of insurance,” the chairman added.
“As for voluntary types of insurance, in this segment, great development prospects are observed in the field of voluntary life insurance,” said Aliyev. “Although a significant decline was recorded in insurance fees in this area in 2019, amounting to 86.3 million manat ($50.7 million), which is 28 percent less than in 2018, due to changes in the tax legislation, there are all opportunities for introducing many different products and services, such as combined “bank/insurance” products and more.”
The head of the association of insurers also noted that control should be strengthened over corporate governance among professional participants in the insurance market.
“Serious steps have to be taken in this direction, since the entire insurance system of the country suffers from gaps and shortcomings in this area,” Aliyev noted. “Often this leads to serious shortocmings, violations of financial statements, sometimes to the bankruptcy of insurance companies and, of course, to a decrease in the level of customer service, which undermines confidence in insurance in general.”
Speaking about specific figures, Aliyev noted that if all the necessary reforms are implemented, he expects an increase in market fees by about 200 million manat ($117.6 million), and if this doesn’t happen, a further drop is possible.
The AIA was established in 2006 as a voluntary association of professional participants in the insurance services market. AIA includes 20 insurance companies, one reinsurance company and five insurance agencies.
Azer Aliyev was appointed chairman of the AIA board on Jan. 21, 2019. Azer Aliyev is also the chairman of the board of Ateshgah Sigorta insurance company.
Azerbaijan’s insurance companies collected insurance premiums in the amount of 681.1 million manat ($400.6 million) in 2019, which is 46.7 million manat ($27.4 million), or 6.4 percent less compared to 2018. At the same time, Azerbaijani insurance companies paid insurance indemnities worth 301.5 million manat ($177.3 million) in 2019, which is 61.2 million manat ($36 million) or 25.4 percent more than in 2018.
Presently, 22 insurance companies and one reinsurance company operate in Azerbaijan.
(1 USD = 1.7 AZN on Feb. 24)