A FUTURE WITHOUT RISK

The dynamic development and growth of the Azerbaijani non-oil sector are the requirements of our time. The country must have serious reserves for long-term development. A big bet is placed on the financial sector, which, as evidenced by world practice, is able to be the engine of the economy. At the same time, many experts are pinning great hopes on the insurance market, which, as evidenced by the figures voiced by market participants at the conference "The dynamics of the insurance market of Azerbaijan: 2003-2013" in Baku, has all prerequisites to play an important role in the fundamental growth of the country's economy in general.

For everyone

The population's interest in insurance has been steadily growing, as evidenced by the growth in sales of insurance policies. And as a result - according to the chairman of the Association of Insurance Companies of Azerbaijan (AICA), Orxan Bayramov, the Azerbaijani insurance market grew by 8.2 times in 2002-2012. Moreover, special activity on the market was observed after the adoption of the law "On mandatory types of insurance" in 2011, and in 2012 alone the premiums of insurance companies for compulsory insurance increased by 2.45 times and payments - by 1.87 times. At the same time, 19.7 % of payments fell to the share of compulsory insurance, which accounted for 37.2 % of the insurance market last year. According to Bayramov, overall in 10 years the premiums for voluntary insurance increased by 6 times and compulsory - by more than 40 times.
Figures also show an increase in insurance premiums due to the increase in the number, variety and quality of insurance services to the population.
For example, in 10 years, insurance payments increased by 14 times while payments for voluntary insurance increased by 15 times and mandatory - by 11 times.
In addition, over the past decade, insurance premiums per capita in Azerbaijan increased 7-fold - from 5 to 37 manats - with an average annual growth rate of 22%.
"Insurance covers more general strata, and today 7 of 10 Azerbaijani families are involved in this sector. This trend is an incentive for insurers to develop and offer the public more and more new products," Bayramov said, adding that in the coming years, there will be 100 manats of insurance premiums per capita. The head of the Economic Policy Committee of the Azerbaijani Milli Maclis, Ziyad Samadzada, is even more optimistic in his forecasts. According to him, in the next 7 years, i.e. by 2020 the insurance premiums per capita will reach 120 manats in Azerbaijan.
For its part, the government is also going to introduce the most effective mechanisms to facilitate the growth in the number of policyholders. For example, the Parliamentary Economic Policy Committee is developing a package of proposals that involve increasing penalties for failure to comply with the law "On mandatory types of insurance". It is also planned to form an appropriate mechanism for monitoring and identifying the bodies that will be responsible for the situation on the market.
"Certainly, there is a problem such as the low level of awareness ... But in general, the insurance market shows a rising trend, and it will continue," Samadzada said.

More and more

We must say that the outlook is quite real. After all, not all segments of the insurance market are active today.
For example, experts pin great hopes on life insurance - last year alone payments for this type increased by 9 times, and it accounted for 10.74 % of the insurance market. In 2011, this market segment increased by almost 15.5 times. However, most of the fees for life insurance in 2012 - 59% - were received from compulsory insurance against accidents at work and the loss of occupational working ability resulting from occupational diseases. This, of course, cannot be considered satisfactory for the full development of the segment so the work in this field is intensifying.

"Currently, the market is stimulated by car and property insurance (compulsory insurance), but in the future the main areas will be life insurance and compulsory health insurance (CHI). To do this, a lot of work has been done - the improvement of the legislative framework and the study of international experience in this field ... After the launch of the CHI system, every citizen of Azerbaijan will be involved in insurance," Bayramov promised.
He is convinced that in the future not only quantitative but qualitative components of the insurance market will develop. And expectations are connected with an increase in the range and improvements in the quality of insurance services and fees for them. Of course, a substantial contribution to the common cause will be made by the expansion of online sales of insurance policies - in fact, the insurer will not have to visit an insurance company to conclude a contract.
It is planned to introduce electronic policies of motor vehicle liability insurance in the country. According to the head of the State Insurance Supervision Service under the Ministry of Finance, Namiq Xalilov, this innovation will make life easier for car owners, insurers and the State Traffic Police (STP). Data from these insurance policies will be entered into a single information system that will be integrated with the database. Thus, car owners will no longer need to produce their motor vehicle liability insurance to STP employees, for example, during the technical examination. Electronic policies of motor vehicle liability insurance may appear in the country no earlier than in 1.5-2 years since the introduction of the new system will require technical conditions for the traffic police, whose officers must be able to verify the existence of insurance policies online.
Another type of insurance that can revive the market is agriculture. "One of the biggest challenges is the development of insurance in the country's agricultural complex, which now employs more than 35 % of the working population. Its involvement in insurance will expand the potential of this market," Samadzada said.
In parallel with the market, the potential of its participants and their capital have been increasing over the past 10 years. This was done in order to improve the stability of the insurance system and its compliance with the requirements of the country's growing economy with world standards. As a result, in 2002-2012 the capital of insurance companies has increased by about 20 times, indicating an annual growth of 35 %.
In short, as mentioned above, there are all prerequisites for the development of the insurance market today and, as Samadzada noted, it's time to set the task to bring the amount of premiums to 500 million or even 1 billion manats. Well, with an annual growth rate of 14-15 %, the insurance sector may be able to provide 1% of the country's GDP by 2021...