Dumping in insurance and its consequences

In the practice of compulsory insurance of employees against accidents, various dumping and illegitimate schemes are known that lead to the risk of insurance companies failing to meet their obligations. These include arrangements between the insurance company and the employer, insurance "kickbacks" and contracts without payment of the insurance premium.

Many insurance companies advocate raising insurance culture and financial literacy, urge employers to take a more responsible approach to choosing an insurance company and recommend following the company's advice on how to protect themselves from unscrupulous insurers.

At present, there are a number of problems in the compulsory insurance market. First of all, it is the low coverage of enterprises by compulsory insurance of employees against accidents. Today, no more than 50% of employers in Kazakhstan participate in the compulsory insurance system.

Dumping by insurance companies and insurance "kickbacks" are another problem in the compulsory accident insurance system.

We recommend not choosing an insurance company with understated rates. When an accident occurs, an annual contractual relationship becomes a long-term one, and insurance companies that have not assessed the risks adequately will look for a way to avoid making the insurance payout.

In turn, it is important that the employer provides the insurance company with the most accurate and complete information about its enterprise. Incorrect information and concealed facts may become grounds for refusing the insurance payout.

In practice, there are examples where an employer's desire to save money on its own employees later, when an accident occurred, put the entire enterprise at risk of bankruptcy.

When choosing an insurance company for employee accident insurance, we recommend being guided by the following criteria:

• the size of the insurance company's assets compared with its competitors;
• the company's solvency margin;
• the amount of insurance reserves formed;
• the volume of insurance payouts;
• the company's market position among its competitors;
• its rate policy in terms of the adequacy of calculations and dumping;
• its investment policy and the presence of a reinsurer;
• the company's history, goals and year of establishment (market experience);
• the company's shareholders, the frequency of changes in senior management, its affiliations and whether there is a supervisory body.

To examine a company's reliability, you can use open official sources, for example, the websites of the National Bank and the Kazakhstan Stock Exchange, and corporate websites.

• Without an insurance contract, an enterprise bears very high risks, since the sums insured in the event of an accident amount to tens of millions of tenge, especially in cases of occupational diseases and disability of employees.

• Evasion of concluding a compulsory insurance contract by a person obliged to conclude one under the Law "On Compulsory Insurance of Employees against Accidents in the Performance of Their Labour (Official) Duties" entails administrative liability in the form of a fine.

Company managers should be held personally liable for dumping in the insurance market.

Some life insurance companies deliberately understate the sum insured when concluding compulsory employee insurance contracts at an enterprise in order to attract a client. Yet several years later, such insurers will be unable to pay the amounts due to injured employees. In this situation, as a rule, both the employees and the enterprise itself suffer, as the enterprise will have to pay the promised insurance at its own expense.

The people who later stop receiving payments will then come to the gates of the enterprise and settle matters with the employer.

We would remind you that, under Kazakhstan legislation, every enterprise is obliged to conclude a contract of compulsory insurance of employees against accidents.

Evasion of concluding a compulsory insurance contract by a person obliged to conclude one under the Law "On Compulsory Insurance of Employees against Accidents in the Performance of Their Labour (Official) Duties" entails administrative liability in the form of a fine.

By choosing the right insurance company, you protect yourself from risks and ensure reliable protection for your employees and your business!