White spots, one of which is the insurance as a tool for financial market development, or rather, life insurance, still remain on the map of economic achievements of Azerbaijan, which has already passed a long way in terms of developing and strengthening the national economy. To see this, it just needs to look at the main indicator for this type of insurance in Azerbaijan, exactly the amount of insurance charges from the total insurance market, which totaled 0.96 percent over 11 months of 2010. As known, the same figures in the developed countries make up 60-70 percent and in Eastern Europe, the picture looks as follows (figures for 2009):
Azerbaijani society is gradually changing, adapting to the new requirements dictated by the outside world. We unwittingly react to the increasingly accelerated rate of life, trying to make less effort and make the most rational decisions. Acquiring an insurance policy for life insurance is from this series. Our work has a certain economic value, which we share with those who depend on us for whatever reasons, and who may suffer economically in case of our death - children, spouses, elderly parents and so on. Life insurance would manage economic risks, which may be exposed to a dependent person in case of our death.
Life insurance, as a financial instrument, is at the beginning in Azerbaijan. The number of participants in this market segment is very little. Throughout the year, those few companies that represent the Life-insurance in the domestic market have been training specialists - insurance brokers and actuaries. Also during the year, the companies conducted market research, figuring out what forms of life insurance can become popular in Azerbaijan, taking into account the economic and national-cultural factors, population's attitude towards long-term financial planning, the attractiveness of sold products in terms of profitability of invested funds, lack of information of the population. According to competent persons, some insurance companies are ready to begin active sales of insurance policies from the beginning of 2011.
In 2010, the government took a number of incentive measures to support the life-insurance in Azerbaijan, adopting a Law on compulsory insurance of labor ability loss in production, as well as amendments to the Law on Social Insurance and the Tax Code, providing tax incentives (exemption of the insurance premium from income tax and social insurance contributions) in life-insurance for more than three years. The last measure is very useful, since the tax incentives are important factors that could awaken public interest in investing in life-insurance. Perhaps in the near future, along with investing funds in traditional areas - bank deposits and real estate, the potential insured will be willing to invest their money in this investment niche, but under certain conditions. Firstly, this is the awareness and clear understanding of the acquired products. This is also the trust in the insurance company. And most importantly, what has already been noted is a guaranteed return on invested capital, and in this regard it would be successful to use examples of international experience.
Life insurance with an investment component (Unit-linked Insurance) is a type of insurance, long and successfully used in Western Europe (makes up half of all life-insurance premiums in countries such as Germany and the UK). Over recent years it has become a powerful impetus for development life-segment in Eastern Europe. Unit-linked is a kind of savings insurance, in which the client is given the opportunity to receive a share from income earned by insurance companies from investing its funds in shares, securities and other financial instruments that are potentially attractive. The client can participate in making decisions about where to invest, however, in this case, the client undertake some investment risk. The practice of the Eastern European countries, especially Slovenia, Poland, Czech Republic, shows that the product has greatly increased people's interest in life-insurance. In the post-Soviet countries, for a number of objective reasons ("immaturity" of the stock market, banking and other financial institutions), the Unit-linked product has not yet cone to demand. Most likely, it is too early to talk about the introduction of such next-generation products in Azerbaijan, but thinking about it in the future would be worthy.
