Azerbaijan, Baku, 25 July/ Trend / The life insurance is one of the non-developed types of insurance in Azerbaijan its while insurance market is rapidly developing with a growth of 63% in 2007. However, it is considered to be a separate product all over the world and serves as an engine of the market. There are companies in Europe which offer only life insurance services only because of its profitability. So, 65% of the companies offer only life insurance services in the countries with a developed insurance market.
In the first quarter of 2008, the life insurance in Azerbaijan made up not more than 1.5%. The major types of insurance services in Azerbaijan were car insurance (24.6% of the market), medical insurance (12.1%), insurance of property (11.2%) and obligatory types of insurance (9.4%).
Apart from the identification card, the citizens in the western countries also have insurance certificate. This is due to the concerns of the people about their social welfare and peace of mind. However, in spite of the worldwide development of life insurance, the Azerbaijani people do not trust this type of insurance that much and there are ambiguous attitude toward it. First of all, it is prompted by the current low level of capitalization in the insurance companies which totaled to AZN75.4mln in the early 2008. Naturally, the companies with high level of capitalization are more trusted by the potential clients. The more the company is capitalized, the more financial stability it has in case of unfavorable development of events, the more it is reliable and the less chances of bankruptcy.
The Ministry of Finance of Azerbaijan plans to adopt new demands toward the capital of the insurance companies in August 2008. The new regulations which are to take effect from January 2009 are needed to increase the capital of the current companies to AZN0.8mln and AZN1mln for the newly-established ones.
The lack of knowledge of the necessity of insurance services, that is, the financial ignorance also affects the trust of the people and businesses to the life insurance and insurance as a whole. It is because of the low level of campaign about the life insurance. The potential client of the policy of the long-term life insurance lacks basic knowledge about this product. Therefore, it is important to attach great importance to the development of programs on education, conducting separate courses, large enlightenment works and development of insurance universities.
Another factor to hinder development of life insurance in Azerbaijan is that the insurance companies unable to provide market with interest and quality products on life insurance due to shortcomings of professional staff. It should be better if the country to take the experience from insurance companies in developed countries with developed marketing and staff potential.
The Insurer Association has already started working over this issue and held a forum with participation of over 100 delegates from more than 15 countries, as well as 20 Azerbaijani insurance companies. The forum was dedicated to develop tendencies of insurance market in the country, as well as affection of experience in European countries on the development of insurance sector and corporative managing. Association plans to hold such forum annually.
These problems are important, but not so relevant. One can explain population that it is the issue of time and money. Thoughtless attitude of compatriots towards their life is a real trouble of insurers. Insurers' service demand depends on the fact that citizens think off their life only after saving their property.
Despite of these problems, life insurance has its perspectives for development. According to the analysis 'Sigma', the largest Swiss re-insurance company Swiss Re, which analyzed the Azerbaijani insurance market, the highest development rate is observed in the life insurance sphere by rising to 410% within four years with AZN 2.23mln premiums.
Development in life insurance may even play an important role to provide macro economic stability, drop of inflation tendencies and transformation to investment tool. The insurance premium indicator per head is one of the most important showings of development the rate of insurance market in any country, AZN 17 or $22 demonstrates a huge potential for further growth in insurance market in Azerbaijan. For this purpose there is need to develop compulsory types of insurance, as well as to work to upgrade the economic and legislation basis to develop life insurance. Concrete conditions are necessary to introduce in order to develop this business in the country.
Leyla Abdullayeva, expert in the analytical centre Trend .
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