BAKU, Azerbaijan, June 29
Trend:
Active development of the insurance sector of the Azerbaijani economy coincides with the adoption of the Law on Compulsory Insurance in the country in 2011, the Azerbaijan Insurers Association (AIA) told Trend.
“The insurance system in Azerbaijan is currently in a phase of active development compared to European countries. Comparing the current situation in the insurance market with the period of 10 years ago, the development and changes in a positive direction can clearly be seen,” the AIA noted.
“The presence of a developed insurance market in each country means that the mechanism of social protection of citizens of this country is also at a high level. This relatively reduces the social burden of the state,” the report said.
“Currently, most developed countries of the world delegate part of their functions for social protection of citizens to insurance companies, which is an effective mechanism for compensating for damage caused to people or organizations as a result of calamities, natural disasters or acts of terrorism. An example of this is the 9/11 tragedy. Some $58 billion of losses were reimbursed by insurance companies,” said the Association.
“In all countries of the world, the insurance sector has faced various challenges in its development. First of all, the development of the insurance system is carried out by introducing mandatory types through which information about the insurance system, the mechanism of its application and benefits are brought to the general public,” the report added.
“Today, insurance companies of developed countries offer hundreds of types of products for voluntary types of insurance. In Azerbaijan, this indicator ranges between 30-35 products,” added the AIA.
“The main factor holding back the development of the insurance market in Azerbaijan is the lack of confidence. The main reason for the low level of citizens' trust in insurance is a low level of awareness. Stimulating and increasing people's interest in insurance is carried out by applying a system of fines and the implementation of educational activities,” the report noted.
Since the average annual salary of citizens in Azerbaijan is approximately 8,000-9,000 manat ($4,705-5,294), citizens often consider the funds allocated for insurance as additional expenses, the AIA said.
”If to evaluate the recent dynamics of insurance development in Azerbaijan, it is worth noting that for the first 4 months of 2020, the growth of insurance premiums amounted to 17 percent compared to the same period of 2019. So, in the first 4 months of 2019, 265 million manat ($155.8 million) worth of insurance premiums was collected in the country, while in the same period of 2020 this figure amounted to 311 million manat ($182.9 million),” said the report.
“In early 2020, important steps were taken in the use of the Law on Agricultural Insurance. At that time, the Agricultural Insurance Fund was created, a mechanism for its activities was developed. Following the Turkish experience, the Fund has developed a system under which these types of insurance will be implemented. In the near future, the creation of a management company is expected. Surely, this new system will have a positive impact on the activities of enterprises engaged in agriculture,” the Association noted.
“Moreover, certain steps have recently been taken to increase the interest of farmers in insurance. As a result, in the first 4 months of 2020, collections on farm livestock insurance surged by 135 percent over the year, and collections on agricultural plant insurance - by 300 percent,” noted the report.
Thus, despite the fact that there is still a need to improve the insurance system in the country, if we look at the indicators for the last five years, a positive trend in the development of the Azerbaijani insurance sector can be observed, the AIA added.
(1 USD = 1.7 manat on June 29)