What does social insurance cover?

Our country has a multi-tier system of social protection aimed at providing social security to all segments of the population, from a child's birth to old age. Within the framework of the Address of the Head of State to the people of Kazakhstan of 19 March 2004, "Towards a Competitive Kazakhstan, a Competitive Economy, a Competitive Nation", compulsory social insurance was introduced in the Republic of Kazakhstan in 2005 as an additional form of social protection. With the transition to new standards of social security, the State Social Insurance Fund (SSIF) was established as a joint-stock company with 100 percent state ownership. The SSIF accumulates social contributions and makes payments to participants in the compulsory social insurance system who have experienced a social risk event. Participants in the compulsory social insurance system are employees or self-employed persons for whom employers pay monthly social contributions to the SSIF at a rate of 5 percent of the employee's income, within 10 times the minimum wage. The questions most frequently raised by readers with various authorities, including our newspaper, are answered by Almas Kurmanov, President of the State Social Insurance Fund JSC.

— Who are the participants of Kazakhstan's insurance market?

— Kazakhstan's insurance market is a competitive environment in which insurance companies operate under licences issued by the authorised state body for the regulation and supervision of the financial market and financial organisations to carry out specific activities in the financial market. To attract clients, each insurance company develops various insurance products for both legal entities and individuals, which are the subject of contractual relations between the policyholder and the insurer.

As a rule, the amount of insurance contributions and insurance payouts upon an insured event is determined by the insurance contract. For example, every car owner chooses an insurance company each year and is obliged to insure the vehicle for one year. Insurance contributions paid by clients to the insurance organisation are accumulated and invested in the financial market.

— Is the State Social Insurance Fund part of the insurance market?

— The SSIF does not operate in the competitive insurance market; it insures the social risks provided for by the Law of the Republic of Kazakhstan "On Compulsory Social Insurance".

Compulsory social insurance covers employees, except for working pensioners, and self-employed persons, including foreign nationals and stateless persons permanently residing in the Republic of Kazakhstan and carrying out income-generating activities in the Republic of Kazakhstan. The obligation of employers to pay monthly social contributions is established by law. It should be noted that, in order to observe the basic principle of insurance — that payments depend on the social contributions paid — incoming social contributions are recorded on a personalised basis using the social individual code. Consequently, social payments from the SSIF depend to a certain extent on the employee's income and the length of their participation in the compulsory social insurance system. Monthly social contributions are paid for all employees, but only those who experience a social risk receive payments. In this way, one of the general principles of insurance is implemented — the solidarity of persons insured under compulsory social insurance.

— Which social risks does compulsory social insurance cover?

— Since 2005, the SSIF has made social payments in cases of loss of working capacity, loss of a breadwinner and loss of employment.

Since 2008, within the framework of the Address of the Head of State N.A. Nazarbayev to the people of Kazakhstan, "New Kazakhstan in a New World", additional social payments have been introduced to support mothers and children. These cover loss of income due to pregnancy and childbirth, adoption of a newborn child, and childcare until the child reaches the age of one.

The amount of a social payment depends on the length of participation and the average monthly income of the participant in the compulsory social insurance system on which monthly social contributions to the SSIF were paid. I would emphasise that timely and full payment of social contributions by payers has a significant impact on the amount of the social payment. In other words, the amount of the social payment awarded to an employee when the above social risks occur ultimately depends on how law-abiding the employer is.

— What is the role of the SSIF in the event of job loss?

— In international practice, unemployment benefits are awarded to people who have lost their jobs and are actively seeking work. In Kazakhstan, too, a necessary condition for applying to the SSIF for a social payment for job loss is that the participant in the compulsory social insurance system is registered as unemployed with the authorised employment body. An individual may apply for a social payment for job loss if their employer paid monthly social contributions to the SSIF on their behalf for at least six months during the last 24 calendar months before the date of registration as unemployed.

The amount of the social payment for job loss is determined on the basis of the social contributions paid by the payer and the length of participation in the compulsory social insurance system.

The social payment for job loss is awarded for a period of one to four months, depending on the applicant's length of participation in the compulsory social insurance system. In 2005-2010, the SSIF made social payments for job loss totalling 1.7 billion tenge.

Social payments for job loss provide an unemployed person with a socially acceptable standard of living, during which they can actively look for work.

— People are often interested in insurance against job loss because it is linked to obtaining loans and mortgages from second-tier banks. What role does the SSIF play here?

— Second-tier banks (STBs) and insurance companies operate in a competitive financial market. To attract clients, STBs therefore develop lending rules with various conditions and documentation requirements for issuing loans and mortgages. These requirements are approved by the STBs' internal documents and are intended to ensure that loans and mortgages are repaid. If the client agrees to the bank's terms, the relevant agreements are concluded between the client and the STB.

An STB's requirement to insure the client's risk of job loss when granting a loan or mortgage pursues only one goal — timely repayment of the loan if the borrower loses their job. In such cases, the loan is serviced at the expense of the insurance company with which the borrower insured the risk of job loss. Insurance against the risk of loan default due to the borrower's job loss is provided only by life insurance companies, which offer various risk insurance products on a contractual, voluntary basis.

The risk of default on loans and mortgages is not a social risk, and therefore the SSIF does not insure such risks.

— Where should one apply for social payments from the SSIF when a social risk occurs?

— When a social risk occurs, the applicant may apply for a social payment with the relevant documents to a branch of the State Centre for Pension Payments (hereinafter — SCPP) at their place of registration. The SCPP has branches in every region, down to district level. This saves people from having to spend time taking documents to regional centres and cities of republican significance.

The SCPP forwards the documents received from applicants for social payments from the SSIF to the authorised body for awarding social payments — the territorial department for control and social protection of the Ministry of Labour and Social Protection of the Republic of Kazakhstan (hereinafter — the department). The department then decides whether to award or refuse the social payment. The department has the right to verify the accuracy of the information submitted. To this end, it may request data from the tax authorities on the correct payment of all taxes and mandatory payments, including payers' monthly social contributions.

— What is the volume of SSIF social payments to date?

— In 2005-2010, the SSIF made social payments totalling about 131 billion tenge for the five types of social risk described above, of which 93 percent were social payments related to pregnancy and childbirth, adoption of a newborn child (children) and childcare until the child reaches the age of one.

— Where can people turn with questions about the compulsory social risk insurance system?

— The SSIF attaches particular importance to public awareness and outreach, since the compulsory social insurance system affects the interests of the country's working population. The advantages of the system can be learned through the media and through brochures, booklets, posters, audio clips and video materials prepared by the SSIF.

In addition, any visitor to our website www.gfss.kz, from anywhere in the world, can obtain advice on matters of interest concerning compulsory social insurance in Kazakhstan.

Staff of SCPP branches and of the territorial departments for control and social protection also carry out outreach work on compulsory social insurance.

— What can you say in general about the development of Kazakhstan's social protection system during the years of independence?

— During the years of independence, Kazakhstan has built a social security system that meets international standards. It protects every Kazakhstani and is constantly improved, taking into account present-day realities and best international practice. The global financial and economic crisis that broke out in 2008 had a significant impact on the socio-economic situation of developed countries and led to substantial cuts in their social security spending. It should be noted that the Government of the Republic of Kazakhstan, on the instructions of the Head of State, promptly developed an anti-crisis plan, in particular a special Employment and Retraining Strategy (the "Road Map") aimed at ensuring employment, preventing a significant rise in unemployment, and preserving and creating jobs. In 2009-2010, the periods of social payments for job loss from the SSIF were extended to between two and six months, depending on the length of participation in the compulsory insurance system.

Social security spending was also increased by raising social benefits and pensions. Thus, alongside a set of measures to restore the health of the financial system, which had been adversely affected by the crisis, Kazakhstan took steps to prevent a decline in the living standards of socially vulnerable groups.

One of the main priorities of the Address of the Head of State to the people of Kazakhstan, "Let's Build the Future Together!", of 28 January 2011, is social modernisation — a new social policy aimed at raising the standard and improving the quality of life of all citizens, and strengthening social stability and the security of the population.