Bank borrower insurance

In 2011, the regulator of the Republic of Kazakhstan amended the Law "On Banks and Banking Activity", giving bank borrowers the right to conclude insurance contracts with any company. This allowed insurers not affiliated with banks to "move into" a niche previously unavailable to them – bancassurance. However, some market players are convinced that this segment is developing very slowly and that the amendments alone are not yet enough.

The growth of lending in 2011 contributed to higher premium collections in lending-related types of insurance, according to the review "Bancassurance Market: Running on the Spot" by the rating agency Expert RA Kazakhstan.

According to the source, the volume of loans issued by second-tier banks of the Republic of Kazakhstan reached KZT 5,777,925 million in 2011 (compared with KZT 3,788,912 million in 2010). The volume of mortgage loans grew to KZT 124,901 million (KZT 85,147 million in 2010). The volume of consumer loans last year amounted to KZT 811,146 million (KZT 394,616 million in 2010).

According to the experts, although the adoption of the amendments to the Law "On Banks and Banking Activity" encouraged insurers to step up their activity in the bancassurance market, it did not lead to a significant redistribution of premiums in the market. Premium collections in lending-related types of insurance are skewed in favour of banks' subsidiary insurance companies. For example, in the property insurance segment in 2011 premiums were distributed as follows: 60% – bank subsidiaries, 40% – other companies. "The situation in 2011 does not differ much from that in 2010, before the amendments to the Law 'On Banks and Banking Activity' were adopted," the review notes.

For the market to develop further, it is necessary to address "banks imposing the services of their subsidiary insurance companies" and "borrowers' low awareness of their free choice of insurer", the experts believe.

During a round table organized by the rating agency on 27 March in Almaty, market participants expressed the view that dumping, where companies start cutting the price of insurance products, remains a worrying factor. Much also depends on how the process of building relations between insurers and banks proceeds, the players believe.

Meanwhile, as Sofia Moskalenko, Managing Director of the Association of Insurers of Kazakhstan, noted during the discussion, at this stage insurance companies themselves, when negotiating with banks, approach the matter "from one side only" and do not help borrowers understand their rights.

Assessing the current market situation, Daulet Akizhanov, Managing Director of Amanat Insurance IC JSC, disagreed that there are no visible changes in this segment. In his words, a turning point is now being observed, as insurers are building a base for a start: they are undergoing accreditation and agreeing terms of cooperation with partners and clients. "In my experience, agreeing terms with one bank takes six to eight months. So I would not describe the current situation as 'running on the spot'," he said in an interview with Kursiv.

According to Dauren Imanzhanov, Deputy Chairman of the Management Board of Nomad Insurance IC JSC, the amendments have played a positive role in the development of the bancassurance segment. "Whereas previously a client who came to a bank was afraid that they might be refused a loan if they wanted to conclude a contract with a non-affiliated insurance company, the situation has now improved significantly," he believes.

Bancassurance in Kazakhstan is developing at a rather slow pace. This is due to the issue of affiliation between the parties, the low growth rates of the banking sector and even "bankers' lack of interest in developing this area". In this case, it is reasonable to say that some affiliated insurance companies do not want to share this market with their competitors.