AN OPEN DIALOGUE

The substantial fluctuations in the national currency over the past few months have called for a "reassessment of values" in virtually all spheres of the Azerbaijani economy, especially those affecting the financial sector. From now on, companies will have to exert greater effort if they don't want to lose their share of the market, and they will find it more difficult to do so, given all their problems. The number of complaints by people about insurance companies has increased markedly of late, leading to a special commission being set up. At the same time, the companies themselves also have complaints of their own about the tax regime. Ways of eradicating these problems and improving the effectiveness of the business were discussed at the third National Forum of Insurance Agents.

According to assurances by the head of the State Insurance Supervision Service of the Finance Ministry, Namiq Xalilov, the devaluation of the manat has not affected the financial stability of insurance companies in Azerbaijan and has not led to an increase in the cost of their services. "The liabilities, payments, reserves and assets of insurance companies are calculated in manats, so devaluation has not created currency risks for these companies," Xalilov said.

However, if one is talking about an indirect impact of the current situation with the national currency on the insurance market, then, of course, there is. Bearing in mind the fact that in conditions of devaluation the population prefers to switch to an "economy" regime and curb unnecessary spending, it is perfectly logical that the sphere of voluntary insurance services risks losing a considerable number of clients. In this connection, measures need to be taken to sell the business to the population even more.

A special subject at the forum was the public's dissatisfaction at the work of the insurance companies. Musfiq Israfilov, deputy head of the state service, said that the State Insurance Supervision Service had set up a commission to study cases of insurance companies failing to honour payments to policy holders. A letter had been sent by the President's Administration pointing out the increase in the number of complaints from the public that they had not received the insurance payouts they were entitled to. According to Israfilov, only about 20 per cent of the complaints were reasonable, but from now on they would be closely studied by the commission and anyone would be able to express a complaint about the activities of the insurance companies or submit proposals about improving their work.

"In 2013, following intervention by the state service, reimbursements of 700,000 manats were made, and in 2014 over 500,000 manats," he added, stressing that this question was now under the control of the Finance Ministry and the President's Administration.

The state service itself has also been unhappy about the work of insurance agents. For example, although over 900 insurance agents are registered in Azerbaijan, some of them do virtually nothing or have stopped operating altogether. However, they cannot be bothered to inform the State Insurance Supervision Service that they have stopped operating.

Statistics show that the number of insurance agents in Azerbaijan has increased almost fivefold - from 201 in 2009 to 950 in 2014 (60 are corporate entities and the remaining 890 private individuals). However, in practice their numbers are much lower. "Every quarter insurance agents have to present a report about their activities, but unfortunately not all of them do so. Today, only about 800 insurance agents have presented reports on the third and fourth quarters of 2014, but over 100 have still not done so," Israfilov said.

These and other flaws have prompted the state service to revoke the licences of 46 insurance agents, 10 insurance agents have themselves notified about terminating their activities and 81 have had their licences suspended for 6 months.

For his part, Mahir Abdullayev, head of the department for licensing and examining statements and complaints of the State Insurance Supervision Service, has urged insurance agents to show caution when carrying out their duties as there have been cases of an agent of an insurance company, whose licence has been revoked, continuing to provide services on its behalf, unaware that he also bears responsibility for paying a client for an insurance event. "Insurance agents are obliged to inform the company about any agreements and also to explain to clients the conditions of their insurance. We had one instance where an insurance agent had assured a client that he was insured against all cases, although there were provisos and a specific list in the agreements. To prevent such misunderstandings and complaints detailed information must be provided," Abdullayev noted.

The Finance Ministry spokesman also pointed out cases where, in contradiction to the law, insurance agents sold insurance policies to their relatives, with the reminder that such transgressions are punishable not just by administrative penalties but also criminal responsibility.

Another basic problem in the work of insurance agents remains the question of commission for compulsory types of insurance. "The amount of remuneration for compulsory types of insurance is strictly limited, but some companies continue to encourage their agents with larger commissions," Abdullayev said.

As far as the population is concerned, here the main part of the dissatisfaction at the insurance companies is based on complaints about incorrect information about the amount of the insurance payout. "Whereas in the past clients complained at the companies' refusal to pay the reimbursement, now they are unhappy about the amount. In other words, it could be said that there have been certain qualitative changes," Xalilov noted, among other things. He also added that worldwide there was no country in which clients were completely satisfied with the work of the insurance companies. In order to reduce dissatisfaction to a minimum, the three-year plan of measures to develop insurance includes clauses on introducing changes to the law regarding the consideration of complaints, singling out individuals in each company responsible for this question. "If each company treats clients' problems more carefully the number of complaints will decrease and the quality of services will improve," Xalilov concluded. 

Meanwhile, the insurance agents themselves also have complaints about the state structures. They are particularly unhappy about the fact that the Tax Ministry is demanding from them payments of 20-per cent income tax instead of the 4-per cent simplified tax - the ministry believes that insurance agents are engaged in entrepreneurial activity and therefore they should pay tax on their income. During the forum the insurance agents asked the state service and the country's Association of Insurance Companies to help them resolve this question. The Tax Ministry was not long in replying. "Insurance agents and brokers in Azerbaijan should be encouraged to pay income tax of 20 per cent because their activities are regarded as entrepreneurial, just as the activities of insurance and reinsurance companies are," the fiscal department said. It emerged that insurance and reinsurance companies, as well as insurance intermediaries (agents and brokers), are professional participants in the market and special permission (a licence) is required for them, which deprives them of the right to be a simplified tax payer. At the same time, participants in the insurance market continue to retain the benefit of exemption from payment of VAT. In short, despite the number of criticisms, the market is developing and there is no stagnation, which is a very positive factor bearing in mind recent negatives, both external and internal. And one can only learn by one's mistakes, as they say…