INSURANCE MARKET STRUCTURE
AND DEVELOPMENT OF INSURANCE MARKET IN KAZAKHSTAN
Indira Sattarova master
first-year course
Specialty «Finance» KBTU
Functioning of the insurance market is a
complex system consisting of various structural units. The first such party to
the insurance market are the direct insurance companies (insurance companies),
specialized organization conducting insurance operations. It is here that the
process of formation of a special, specific funds available for compensation to
those who participate in the creation of these funds. A total of 1989 on
foreign sources of such companies in the world, there were over 15 thousands,
and the number of them in the last 20 years has not changed. Along with a large
number of small volume of insurance liability and assets of companies in the
insurance market, received about 100 major insurance corporations whose
activities are distinct international character. Therefore, for sufficiently
sharp struggle between the insurance companies, though there is no
monopolization of the insurance market of a company. The decisive role in this
belongs to the presence on the market of a large number of small insurance
companies, which do not allow leaders rigidly dictate terms to policyholders.
Economically
separate insurance companies build relationships with other insurers on the
basis of reinsurance. And reinsurance companies should be allocated for the
second invariable participant in the insurance market. Reinsurance market
serves a vital factor in the development of the market of direct insurance. At
the current level of concentration of production and the enormous cost of
property only a mechanism of reinsurance allows insurers to take on insurance
risks and losses of such magnitude that far exceed the capabilities of even the
largest insurance companies and sometimes individual insurance markets. In this
case, the distribution of risk is not only in the national economy, and given
the internationalization of economic ties, become international.
In
foreign countries, reinsurance companies are mandatory participants in the
insurance market. They are specialized companies that have compared with
insurance companies more resistant, more of the volume of the share capital,
more resources to invest in various sectors of the economy, business and
commerce. At present, the world operates 250 professional reinsurers. Leading
companies are "Munich Re" (Germany), 'Svies Re
"(Switzerland)," Zheneral Re Group "(USA), etc.
The
participants of the insurance market are the so-called mediators is insurance agents and brokers that their
efforts contribute to the promotion of insurance services from the insurer to
the policyholder. It is necessary to distinguish between the two forms of
mediation. In addition, there is a
so-called alternative distribution network of the insurer "is a set of
entities (Office Dating, travel agencies, legal services, notary public
services, etc.) that act as insurance agents. Along with the services on the
main profile of their activities they offer to make certain insurance
contracts. Relationship between the insurance company and insurance agents
entities governed by general cooperation agreements or contracts with the
employees of these companies, which act as part-time agents. Under present
conditions prevailing in the dissemination of policies stock insurance
companies abroad is a system of general insurance agents. In this case, the
vertical level of sales of insurance policies built into the chain:
Professional
insurance agent is determined by the final result, that is, firstly, by the
fact of how much revenue insurance payments provided it is signed and existing
contracts, and secondly, what impression of the company as a whole were the
customers after the signing of the insurance contract and when the insured
event. It was from an insurance agent consumer receives information on
insurance services, namely it forms a real image of the company to potential
policyholders and depend on it in the end, whether the consumer to use the
company's services again. Therefore, the effectiveness of any insurance company
is more dependent on the performance of primarily low-level in its structure -
namely, insurance representative (agent). Noteworthy experience of foreign
insurance practices that focus on the proper selection and training of
insurance representatives.
The
next person insurance market - various organizations and associations
(Association of Insurance Companies). They are usually responsible for
compliance by its members and authorized insurance laws regulate their
activities in the interests of the policyholders, to monitor compliance with
ethical standards, to maintain healthy competition. As the international
experience, insurance associations should conduct economic research and prepare
for the government and management appropriate practical suggestions and
recommendations to develop a commercial insurance policy business. They are
obliged to promptly inform the insurer of any interest to their legislation,
administrative and arbitral decisions. An important aspect of the activities of
insurance associations the foreign trade, representation in international
insurance associations, the organization of scientific conferences and
symposia. For example, members of the British Association, insurers are 450
insurance companies, whose interests it protects the government, the media.
Start
of Kazakhstan Insurance Institute coincides with the independence of our state.
Despite the fact that all the CIS countries have a common base, insurance in
each of the states has its own distinctive features. Insurance in Kazakhstan
differs from insurance our closest neighbors - Russia and Central Asian states.
For example,
in the Republic of Uzbekistan provides that the right of mandatory insurance
has only state-owned company, which accumulates most insurance payments. In
Russia, the insurance companies involved in the special insurance may be
engaged in life insurance and contribute to increased insurance reserves.
The first
insurance company in Kazakhstan appeared in 1990. Organizational structures
evolved from cooperatives and associations to stock companies.
By 1993, when
the adoption of the Law "On Insurance" laid the foundation of our
state insurance laws, the number of insurance companies reached 900. True, many
of them tied to the insurance just a name. Requirements imposed by law, able to
meet only 13 insurers. In the same year, on the initiative of 38 companies was
established Insurance Association of Kazakhstan.
Decree of the
President of the Republic of Kazakhstan dated 19 April 1994 "On the
institutional arrangements for the formation and development of the insurance
market" given the right to establish a system of state regulation of
insurance. Within the Ministry of Finance established the Department of
Insurance Supervision.
In 1994-1998,
the new Law "On Insurance" and the introduction of compulsory
insurance of civil liability of vehicle owners. The concept first saw the light
of the development of the insurance market. The authorized capital of the
insurance companies had to be 40 000 MCI or about 20 million tenge. The number
of insurance companies in this period ranged from 70 to 150.
A new stage
in the development of the domestic insurance industry has become the
presidential decree "On measures to further optimize the government"
of 30 June 1998, according to which the functions and powers of the supervisory
authority was transferred to the National Bank. At this moment in Kazakhstan
were 72 insurance companies.
In November
2000, the Decree of the President of the Republic of Kazakhstan ¹ 491 was
adopted by the State program of development of insurance for 2000-2002. In a
diverse series of regulations adopted to regulate the insurance market over the
period of the state of independence, was the first program to be specified by
the prospects of this sector of the economy and public policy in this area.
Law of the
Republic of Kazakhstan "On insurance" was adopted on 18 December 2000
for ¹ 126-2. The law defines the basic provisions for the implementation of
insurance as a form of business, especially the development, licensing,
regulation, business interruption insurance (reinsurance) companies, insurance
brokers, the conditions in the insurance market of other individuals and
entities, the task of government regulation of the insurance market and
principles of supervision the insurance business.
Prior to
2004.in Kazakhstan regulation of insurance companies is the National Bank,
which took a number of measures relating to the finances of insurance
companies, asset management in the insurance market, which are aimed at
creating a more civilized market. One of the most important measures -
increasing the minimum capital requirement for insurance companies to KZT 100
million, resulting in a reduction in the number of insurers. This measure is
aimed at improving the reliability of insurance companies at the expense of small
insurers.
By
Presidential Decree ¹ 1270 "On further improvement of the system of state
regulation" from January 1, 2004 the basic functions of regulation and
supervision of banking, insurance activities and work pension and investment
funds of the Agency of the Republic of Kazakhstan on regulation and supervision
of financial market and financial organizations. To the Agency over the
functions of control and regulation of the insurance market.
One of the
first documents developed by the Agency, the State program was the development
of insurance market in the Republic of Kazakhstan for 2004-2006, approved by
the Government on July 1, 2004, ¹ 729.
Thus, from
1998 to 2004 was introduced "Prudential regulations and other binding
rules and limits", the law "On insurance", and also established
the Agency of the Republic of Kazakhstan on Regulation and Supervision of
Financial Market and Financial Organizations and the State Programmer
development of the insurance market in the Republic of Kazakhstan. Number of
regulations developed by the Department of Financial and Insurance Supervision
National Bank, reached number 46, the number of insurance companies for the
period decreased to 32. First of all, the reduction in the number of insurance
companies due to increased legal requirements for insurance undertakings,
including their financial stability and ability to pay and, as a consequence,
the withdrawal from the market for being unreliable, financially unstable
organization of insurance that allowed the systematic violation of the law on
insurance business.
For the
1997-2004 year, the value of the ratio of premiums to GDP increased from 0.19%
to 0.67% of GDP. In the republic in 2004, the ratio of premiums per capita
totaled KZT 2629.6 per person.
To ensure the
successful implementation of the program of development of the insurance market
of Kazakhstan 2004-2006, as well as the program for the further expansion of
social reforms in the Republic of Kazakhstan for 2005-2007, 24 December 2004.
was created by JSC "Life Insurance Company" State Annuity Company
"with absolute participation in the authorized capital of the state.
Ownership and use of the state stake was transferred to the Ministry of Labor
and Social Protection
If before
2002 the structure of the insurance market of the Republic of Kazakhstan was
represented only by insurance companies, starting in 2002, there were brokers,
actuaries, auditing organizations that have a license for the audit of
insurance companies, and insurance companies with the participation of
non-residents.
The presence
of these regulatory organizations, provide an opportunity to check the
activities of any insurer any insurance organizations, thereby increasing
confidence in insurance.
For 1997 and
2004. Total equity of insurance companies has increased by 2169%, or 22.8
billion. However, from 1997 to 2004, assets of insurance companies increased by
40.3 billion tenge.
Dynamics of
the insurance reserves of the country for eight years as a whole tends to
increase.
With regard
to the activities of insurance companies in the insurance market, the positive
fact is the growth of insurance premiums as one of the most important
indicators of competitiveness and confidence of policyholders to the insurer.
So, in 2004 collected about 40 billion, one hundred by 38.4% or 11.1 bln more
than the amount collected in 2003. If we assess the market for the year 2004,
then the share of ten insurance companies account for 75.5% of the total
premium collected.
Loss ratio
(the ratio of insurance claims made and collected premiums) in 2004 was 16.7%,
an increase of 2.2 points, compared with 2003, the figure for the whole entire
period of the insurance market can be said is almost no change (if in 1997
16.0%, in 2004 - 16.7%). But if we consider them of branches of insurance, life
insurance, this indicator has a tendency to decrease (from 117.4% in 1997 to
0.7% in 2004) and it is normal, because the industry is cumulative, ie . at
present only the contributions accumulate. And there is general insurance.
Increase this figure, from 13.2% in 1997 to 17.5% in 2004, which is also, in
turn, is a positive thing.
Actually, as
of January 1, 2004 in the insurance market of Kazakhstan carried out by
licensed activities 32 insurance companies (including: 1 - Life Insurance, 6 -
with the participation of non-residents of the Republic of Kazakhstan), 6
insurance brokers, 28 actuaries and 34 auditing organizations licensed to
perform the audit of the insurance organization.
For the
2004-2009 insurance premium per capita increased by KZT 6437 and totaled 2009
9102 tenge ($ 74 U.S.). Including the cost of life insurance population on
average is 378 tenge.
The share of
insurance premiums to GDP is much lower than the average of those countries
(2.8%). Total insurance premiums as a percentage of GDP in 2009 were 0.9%.
These figures indicate that the insurance market of Kazakhstan is still in its
infancy and has great potential for growth.
Insurance
premiums per capita in the field of "life insurance" in the CEE
countries are 80-270 dollars in the U.S. - 1922 USD, Canada - 1387, Great
Britain - 5730 dollars.
In general,
summing up, it may be noted that, despite the positive development of insurance
companies, some statistics indicate lack of effectiveness of measures taken to
improve the financial sustainability of the expansion and improvement of the
quality of the insurers.
The problem
of low participation rates in the insurance because the insurance companies pay
little attention to public awareness of the results of their activities,
providing the necessary information about existing and new types of insurance,
making quality and content of advertising. Not enough is being studied and is
working to build consumer demand for insurance services to a broad explanation
of the mass media major consumer of insurance services.
World
experience shows that the amount of insurance markets are growing in proportion
to the economy. In this regard, Kazakhstan in today's insurance market has
great potential development of traditional life insurance services and
expansion of their new species.
As of January
1, 2011 in the insurance market of Kazakhstan is carried out activities 44
licensed insurance companies, 8 of them - in the field of "life insurance",
36 - in the field of "general insurance".
References:
1.Reitman
L.E. Moscow, 1992.
2.Mayanlaeva
G.I., Theory and Practice of Insurance. Almaty, 2005. 3.
3. Insurance
from A to Z. Book for insurers. Edited by Korchevskaya L.I., Turbina K.E.,
2007.324 page 5.
4. www.strategy.kz