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Kazakhstani Insurance Market Tries to Re-emerge from the Pandemic

Erlan Burabayev, executive director of the Kazakhstan Financiers’ Association, shares his opinion about the country’s insurance market

Photo: Shutterstock

COVID-19 not only ruined sales on the Kazakhstani insurance market but also decreased the number of insured events. For example, payments on the most popular insurance product of fully comprehensive car insurance declined by 31% during the quarantine.

However, once restrictive measures were softened, traffic accidents soared sharply. Perhaps this is the right time to show customers the very importance of the insurance solutions that one day can be very helpful.

According to the National Bank of Kazakhstan during the first half of this year, combined assets of all insurance companies as well as their own capital have amounted to ₸1.38 trillion ($3.3 billion) and ₸614 billion ($1.46 billion) respectively. These are pretty good results if compared to other industries. However, the primary growth occurred before the COVID-19 impact. For example, in the first quarter, insurance companies collected about ₸162 billion ($387 million) of premiums and only ₸118 billion ($282 million) in the second “COVID” quarter. If compared year-to-year, the decline is almost 13%.

In that period of time, insurance companies paid out about ₸91 billion ($217 million) with ₸24 billion ($57 million) of payments during the first quarter. About ₸41 billion (roughly $100 million) were reimbursements by foreign reinsurance companies. On the one hand, such diversification of risks, as well as cooperation with big international reinsurance industry players, helps to reduce costs of the Kazakhstani insurance companies, and on the other hand, it was a very valuable experience of work with complicated insurance products.

While the whole market declines, we can’t say the pandemic just stopped all insurance activities. The coronavirus became a stress test for industry players but it also gave a chance to explore new directions and create new products that might be helpful for both clients and insurance companies. Since 2019 any customer can sign an insurance contract online. After the pandemic, companies were forced to put some claim settlement procedures online as well. Businesses now know that changes are needed and the introduction of digital services is necessary. 

A new document is currently being developed by the Agency for Regulation and Development of Financial Markets in cohesion with Financiers’ Association. It details new changes and amendments to the legislation on insurance and securities while also paying attention to digital services in the financial sector.

For example, it suggests the so-called Europrotocol be introduced in Kazakhstan. Actually, this protocol is a simplified procedure to fill out the road accident with no police involved if an accident has not led to casualties and both parties agreed about who is at fault. In other words, people will be able to fill out an accident form on their own, inform the insurance company, and leave the scene to prevent traffic jams. 

Concerning life insurance, companies collected ₸91 billion ($217 million) since the beginning of the year. The volume of payments in that period was ₸12.5 billion ($29.8 million) with relatively similar figures in the first and second quarters (₸6.2 billion or $14.8 million). This year payments increased if compared to ₸10.5 billion (or $25 million) in the same period of 2019. 

We have to admit a decline in all segments of the insurance industry. Currently, people and businesses are less interested in insurance products and have less money as well. Given direct insurance market dependence from the country’s economy, we do not expect growth at the end of this year. If the volume of mandatory classes of insurance would stay at the same level as of 2019, we should be happy. Perhaps, all voluntary products will decline, particularly in small and medium-sized businesses. However, I believe insurance companies will be able to use this pause to develop completely new products and digital services to boost their businesses in the future.

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