BAKU, Azerbaijan, March 10
By Yusif Aghayev - Trend:
The Central Bank of Azerbaijan is interested in developing the voluntary life insurance sector, Chairman of the board of the Azerbaijan Insurers Association (AIA) Azer Aliyev told Trend.
Through consultations between the Azerbaijan Insurers Association (AIA) and the Central Bank, the regulator representatives asked about reasons for the sharp decline in the segment of voluntary life insurance last year, and especially cumulative life insurance forming major part of levies in the segment, as well as measures to be implemented to improve the situation.
The AIA representatives responding to the questions offered to revise tax privileges for accumulative life insurance in order to return the attractiveness of this type to the population.
In 2019, the accumulative life insurance sector showed a 35 percent drop compared to the 2018 figures. The reason for this was that due to Azerbaijani tax legislation changes, the amount of wages which citizens could pay for accumulative insurance was limited to 50 percent, while previously there were no restrictions. In addition, persons taking out insurance for surviving for a period of more than three years were exempted from paying fees for compulsory social insurance.
Additionally, from January 1, 2019, income tax for the private non-oil and gas industry employees is 0 percent for monthly income of up to 8,000 manat ($4,705) and 14 percent of monthly income above 8,000 manat for 7 years. The previously existing total rate of 14 percent (for incomes up to 2,500 AZN ($1,470) per month) and 25 percent (for incomes above 2,500 AZN per month) has been applied to the oil and gas industry and public agencies to this date.
As a result of this, a significant decline in the accumulative life insurance segment, which the population used as an effective tool for investing money, on the background of crisis phenomena in the banking sector, lowering trust in banks and reduction of interest rates on deposits.
According to "PAŞA Həyat Sığorta" insurance company, they did not see a significant decrease in the number of customers, simply reduced the amount of deductions made by them for accumulative life insurance.
In January 2020, the life insurance market showed steady growth. In January 2020, levies of insurance premiums in the segment of voluntary life insurance amounted to 16.2 million manat ($9.5 million), which is 4.7 million manat ($2.7 million) or 40.7 percent higher than in January 2019.
To this date, 22 insurance companies and 1 re-insurance company operate in Azerbaijan, only 4 of which are involved in life insurance.