Positives of successful development of insurance market in azerbaijan
The Insurance market of Azerbaijan demonstrates striving rise, the local experts urge.
According to the Azerbaijani Finance Ministry, over the first quarter of 2007 insurance revenues of Azerbaijan9i companies made up AZN 36.8mln. This figure is 29.5% more as compared to 2006, when it was fixed in the amount of AZN 28.42mln. The growth tendency of insurance market is clearly shown in the table below.
However, Azerbaijan essentially lags not only the world leading countries, but also some closest neighbors. It is well seen while comparing the share of insurance premiums in the GDP and per capita insurance premiums in Azerbaijan with other countries. Thus, as a result of 2006 the figures comprised 0.5% and AZN 10.5 ($12.2) in Azerbaijan, 2.4% and $122.8 in Russia, 3.02% and $53.1 in Ukraine, 1.03% and $34.1 in Kazakhstan.
The world leader for the share of insurance payments in GDP were Taiwan with 14.11% and for per capita insurance premiums Switzerland with $5,500.
Two major factors affect on the development of the insurance market - people's possession of definite funds and confidence in the insurance sector. Over the past few years we have observed high growth pace of net gross money incomes of people of Azerbaijan.
Unfortunately, this rise is not accompanied by growth rate peculiar to the development of the insurance market. Respectively, one can make a conclusion that that the major factor impeding the development of the insurance market is the absence of necessary confidence of Azerbaijani citizens in this sector.
There is a range of factors affecting the formation of people's confidence on insurance. Firstly, this is the level of capitalization of the entire insurance market and separately taken companies. As the company more capitalized, as the financial stability high in case of the unfavorable development of processes and respectively the probability of bankruptcy is lower. Naturally, the company with high level of capitalization excites high level of confidence by the potential clients.
Another problem impeding the development of the insurance market in the country is the absence of necessary level of knowledge and understanding of importance of insurance services, as well as the commercial establishments and enterprises. Therefore, the Finance Ministry attaches more importance to the development of education programs and conduct of different courses.
The level of efficiency of the state insurance control is an important factor affecting the formation of the confidence. If people are sure in the right state control over the activities of the insurance companies, then people will trust them and feel themselves more protected.
As to prospects of the development of the insurance market, indeed, the general economic growth in the country and increase of the capital funds, including the consumer credits потребительские кредиты, will promote the growth of the insurance market. At present the banking market is one of the major supplies of the insurance market for enterprises and people. Respectively, the role and volume of services rendered by insurance companies in this sector will increase.
Azerbaijan's participation in many transport projects will lead to increase of the amount of the cargo deliveries via Azerbaijan, which in its turn will contribute in the development of the transport companies, as well as increase of the amount of insurance оservices for the transport sector.
One should not forget that the insurance companies solve several macro-economic tasks. Firstly, they open new jobs. Secondly, the insurance companies are serious investors at the domestic market. The world experience shows that the insurance business is the biggest investor in economy, because it is dealt with the elementary capitalization of business: funds are collected and placed. Moreover, their profitability is also maintained. Actually, this is not the company's, but insurers' funds, which the company should not be simply maintained, but multiplied and in case of necessity returned. If the enterprise insures major funds (goods, automobiles, property and etc), then its investment reasonability is increased, because while this can be restored very fast and less loss of finances in case the technogen. Thus, the insurance makes its contribution in the establishment of basis for the development of the stable development of the regional economy through insurance, minimization of production losses, enterprises from the technogen catastrophes and natural calamities. The insurance premiums collected by insurer, are later distributed through banks in other sectors of economy.
One more positive milestone in the activities of insurance companies is their ability for implementing long-term investments. Though enterprises usually have short-term circulation funds, the insurance companies increase the portfolio of their investments following rise in the amount of premiums. Therefore, the insurance companies throughout the world are the only long-term investors. At present the insurers are studying the opportunities for application of a scheme of accumulative, pension insurance, which will be considered for a long period. Therefore, the insurance companies should strive for being 'durable', because they need to fulfill their obligations which sometimes are designed for tens of years.
The insurance plays considerable role in attraction of foreign investments. There is real mechanism of insuring the foreign trade contracts and deals on direct investing. In this case it is necessary to develop in direct cooperation with the authorities, because exit to international markets should be carried out through designing a unified conduct line.
If the accumulative type of life insurance and other types of long-term insurance develop actively, amount of annual premiums can increase 2-3 times. The development of accumulative types of insurance in Azerbaijan might lead to increase of annual premiums given to insurers. Coming out from the current situation, the average growth rate of insurance premiums might comprise some 25% a year. In this state of development, by 2010 the volume of companies' insurance premiums might reach $200-250mln.