Oleg HANIN, Chairman of the Board, KOMMESK-OMIR
Oleg HANIN: Gross premiums written by the Kazakh insurance market in 2016 increased by 24% as compared with 2015 and totaled KZT 357 billion. On the other hand, in 1Q2017 GWP totaled KZT 105 billion, up by 10% compared to 1Q2016.
One of the most discussed subjects in 2016 was the transfer of the road accident claims settlement activity from the independent evaluators to the insurance companies. Despite the surge in negative expectations, the measure resulted in an effective direct, non-intermediated interaction between insurers and their clients which led to the growing customer satisfaction with regard to the claims payment. In KOMMESK-OMIR case, in 2016, the level of satisfaction with the claims payments reached to 91%, while the quality of the settlement of losses was 90%.
There is under debate the possibility of integration of the insurance companies' databases with the judiciary information system, as well as the integration of the Unified Insurance Database to the government agencies' databases. Today, the document circulation between databases of insurance companies and judicial bodies is carried out on paper.
At the same note, there is under scrutiny the possibility for insurers to get access to the electronic services of the judiciary of the Republic of Kazakhstan through a dedicated tool, the "Court Cabinet". Among the benefits of such integration are the transition to an electronic workflow and a reduction in the time for obtaining orders for customers of insurance companies.
Regarding the integration of the Unified Insurance Database with databases of government agencies, first of all, it is necessary to check availability and legitimacy of an electronic policy (note: will be implemented) by the administrative police.
It is also important mentioning that in 2017 the insurance community is preparing for the introduction of an electronic policy on compulsory MTPL insurance.
XPRIMM: How do you evaluate the insurance companies' assets structure? What is, in particular, KOMMESK-OMIR's investment strategy?
Oleg HANIN: In 2016, total assets of the insurance market amounted to KZT 856.5 billion (up by 4%), insurance reserves - KZT 412 billion (growth by 9%), equity capital - KZT402 billion (a decrease by 1%) compared to FY2015.
The significant growth of assets in 2015 was due to the adjustment of the tenge's exchange rate against the US dollar. As a result, insurers obtained profit from the revaluation of financial instruments, which were denominated in foreign currency, and had a positive impact on the company's net profit for the year 2015.
In 2016, KOMMESK-OMІR's assets increased by 14% and reached to KZT 12.7 billion, while assets (excluding the reinsurance assets) increased by 20% and amounted to KZT 12.4 billion. The increase of assets was due to the growth of premiums, some of which were invested in financial instruments, reevaluation of fixed assets and an increase in the share of the reinsurer in insurance reserves.
XPRIMM: What is the main reason for the decrease witness on the annuity insurance class? Can we talk about exhausting the potential of this product?
Oleg HANIN: For a person in order to transfer its pension savings to an annuity it is necessary to meet a number of conditions. The minimum amount of pension savings for entering into a pension annuity contract are the following:
- for a man of 55 years - KZT 6 361 177;
- for a woman of 50 years - KZT 8 922 656.
Taking into consideration that not every person has this amount by the established age, respectively, for many the transition to an annuity is difficult.
XPRIMM: Property insurance holds an about 21% market share. What is the penetration among the population of property insurance?
Oleg HANIN: The percentage of dwelling insurance among individuals is very small, about 1-2%. In general, the corporate sector insures real estate. In recent years, insurance companies have participated in the discussion of a possible introduction of a compulsory dwelling insurance scheme.
In 2013-2014, the Ministry of Economy and Budget of the Republic of Kazakhstan prepared the concept of the draft law regarding the use of the insurance system in case of emergencies situation with natural or man-made causes.
In addition, within the framework of cooperation with international experts from the World Bank it has been issued a concept-note entitled "Compulsory insurance of catastrophic risks in Kazakhstan: defining the fundamental principles".
With the purpose of diversifying the financing sources in case of losses, the introduction of compulsory real estate insurance for individuals was proposed. Also, the establishment of a state insurance company, which may provide protection in case of catastrophic risks, separate from the state emergency reserves.
Basically, a three-level system for protection should be in place:
- State social objects are being restored using the government reserve;
- The state insurance company will accumulate mandatory insurance premiums and make payments in case of insured events with a natural character;
- In case of man-made events, responsibility for payments is planned to be transferred to the authorized private insurance companies.
So far, the final model of compulsory dwelling insurance has not been presented and it is not entirely clear if it will contain a new draft law "On compulsory insurance of the dwelling of individuals and property owners".
XPRIMM: How do you assess the development of the motor insurance lines in Kazakhstan?
Oleg HANIN: Traditionally, MTPL has been the driver of the market and the most competitive line of business. In 2016, GWP in MTPL increased by 23%.
On the other hand, Motor Hull went up only by 3% due to the declining in cars sales, including those financed by banking loans. Despite the fact that this line of business is a promising one, in 2017 we don't expect it to significantly develop mostly because of the population's declining purchasing power.
In 2016, one of the issues in motor insurance was that about 25% of the car owners, in order to save, had concluded MTPL insurance agreement only for 6 months, motivating it with seasonal exploitation of the vehicle. As a result, given that the MTPL agreement is valid until the first insurance event, the policyholder has the right to receive a full insurance compensation with the minimum insurance premium. Thus, to avoid such situation it is necessary to clarify in legislation the concept of "seasonal exploitation of the vehicle".
XPRIMM: How do you comment on the development of cross-border insurance? How much did increasing prices influence on the volume of GWP for this line?
Oleg HANIN: The increase in tariffs for cross-border insurance positively influenced the volume of GWP and the 23% growth in MTPL in 2016 (the whole market) is partly due to the increase of these tariffs.
At the same note, the level of losses under the cross-border insurance remains low. In addition, the liability of the insurer is substantially limited in time, because the contract is valid for the period when the vehicle's stay in the territory of the Republic of Kazakhstan.
According to our estimations, the share of cross-border insurance in the total volume of the MTPL insurance is about 20%. Based on our practice, claims rate of cross-border insurance before the tariff increased did not exceed 25%, while after the increase in tariffs, this indicator fell to 4-5%.
We do not expect any significant changes in cross-border insurance. Premiums are likely to remain at the same level, a significant increase in loss ratio is not forecasted compared to the classic MTPL insurance.
As the dynamics of the market shows, the premiums on MTPL insurance for 4 months of 2017 fell by 6%, while payments grew by 7%, loss ratio increased from 48% to 55%.
XPRIMM: The average level of net retention of companies decreased to 58% in 2016. What are the main causes of this tendency? What is the reinsurance policy in your company?
Oleg HANIN: In 2016, according to the National Bank of Kazakhstan, the volume of insurance premiums ceded by Kazakhstan insurers to reinsurance amounted to KZT 131.6 billion or 36.9% of the total GWP. At the same note, 86.1% of the total GWP was ceded to reinsurance to non-residents. The total amount of GWP accepted by insurance (reinsurance) organizations under reinsurance contracts reached to KZT 33.7 billion. At the same time, GWP accepted for reinsurance from non-residents of the Republic of Kazakhstan totaled KZT 15.7 billion.
In 2016, the volume of GWP accepted under reinsurance contracts by the KOMMESK-OMIR was KZT 217 million. The volume of GWP ceded to residents was KZT 219 million, non-residents - KZT 1.76 billion. By the end of 2016, 71% of GWP remained on KOMMESK- OMIR's net retention.
Among the partners of KOMMESK-OMIR are the leading international reinsurance companies: AIG Europe Limited; Zurich Insurance Co. Ltd; Ace European Group Ltd; Lloyd's syndicates; Hannover Ruck SE; Partner Reinsurance Company Ltd., SKOR Reinsurance (Russia), Polskie Towarzystwo Real kuracji SAA (Poland), Ingosstrakh (Russia).
In 2016, the company concluded CatXL- catastrophic risk reinsurance contract (with 100% of HannoverRuck SE) for property insurance, including private, commercial, industrial risks, as well as on voluntary insurance for motor vehicles.
XPRIMM: Please describe in more details your company's business profile. How do you evaluate the company's results for the past year? What are your expectations for KOMMESK-OMIR and for the market as a whole?
Oleg HANIN: There are six types of insurance in the company's portfolio, holding shares of over 5%, which indicates a good diversification of the portfolio structure. The important segments of business are: the compulsory MTPL insurance - 35%, voluntary Motor Hull - 18%, voluntary insurance of civil liability - 16%.
GWP for these classes exceed KZT 1 billion/per type. In 2016, due to the development of the corporate segment, KOMMESK-OMIR increased GWP for health insurance by 58% - from KZT 268 million to KZT 425 million. At the same note, supported by the development of the agents network, we have recorded a positive evolution of GWP on the MTPL insurance line, by 55%.
The results of KOMMESK-OMІR for 2016 are assessed positively. GWP for 2016 totaled KZT 6.8 billion, which is 44% more than in 2015.
By insurance lines, to the positive GWP evolution have contributed by MTPL, voluntary health insurance, volunatry Motor Hull, Cargo, civil liability, financial losses.
In 2016, KOMMESK-OMІR entered in TOP-3 insurance companies in GWP terms for two lines of business: Motor Hull (GWP reached by 89%, to KZT 1.2 billion) and CARGO (KZT 527.6 million, up by 151.5%).
In the reporting period, KOMMESK-OMІR has paid for more than 14,000 insurance events a total of KZT 2 billion. The increase in payments was 49%.
For the first quarter of 2017, the volume of GWP exceeded KZT 2.3 billion. In the reporting period, KOMMESK-OMІR has paid over KZT 540.8 million for 1,913 insurance events, by 21% less compared to the similar period of 2016.
By insurance lines, compulsory insurance paid claims totaled KZT 314 million (up by 43%), voluntary personal insurance - KZT 55.1 million (up by 104%), voluntary property insurance - KZT 171.6 million (down by 61%). In 1Q2017, average paid claims per day by KOMMESK-OMІR amounted about KZT 6 million.
In 2017, the introduction of the E-policy will become the driver of the insurance industry in the development of digital technologies and IT infrastructure. The efforts of insurers will be aimed at modernizing existing systems and automating business processes, developing websites with online services, creating web services, mobile applications, and integrating with other industries. With the preparation for the implementation of the E-policy issues regarding the information security of online services will be solved.
The innovations will affect the Unified Insurance Database in the part of transferring it to a new operator.
In order to increase the transparency of the insurance market the important changes will affect the agency network. Namely, it is planned to establish a ban for agents on participation in public procurement of insurance services. The insurance agent will be specified in the insurance contract. Also, will be established the principle "one agent - one insurer", so that the agent will cooperate only with one insurance company.
Since July 2017, Kazakhstan's employers will start contributing to the social health insurance fund. It is expected that the introduction of compulsory health insurance may lead to the reduction in demand for voluntary health insurance services from the corporate sector, because not all employers can carry a double burden. At the same note, there is a question if the consumers of medical services will be satisfied with the package presented.