Premiums are growing, payouts are lagging behind

According to data presented at the round table "Kazakhstan's Insurance Market: Results of 2011 and Market Development Prospects for 2012", held in Almaty at the end of January, the profitability of insurance companies declined in 2011. Thus, ROA, return on assets (the efficiency of insurance companies' assets), was 8.47% in 2011, whereas in 2010 this indicator reached 11.71%. ROE, return on equity, also decreased, from 16.78% in 2010 to 12.61% in 2011.
 
However, net insurance premiums showed significant growth of 44.4% compared with 2010, reaching 133.68 billion tenge, with life insurance accounting for 33% of total premiums. The insurance premiums of general insurance companies grew by 37.3%, and life insurance premiums by 62.3%.
 
In the compulsory insurance sector, significant growth in 2011 was shown by compulsory motor third-party liability insurance (MTPL). According to the organisers' data, MTPL premiums grew by 38% to 25.5 billion tenge, compared with 18.6 billion in 2010. Insurance payouts rose by 69% to 5.9 billion tenge. Experts attribute the significant growth of premiums in this sector primarily to the new procedure for issuing compulsory insurance contracts introduced on 1 January 2011: policies were issued online and a single policy form was introduced. This had a positive effect in reducing the number of cases of fraud and counterfeit policies. In addition, the number of contracts increased significantly, by 962,143. The total number of contracts now stands at 3,685,696. Specialists link the growth of this indicator to the large number of cars imported into the country in the first half of 2011 due to the change in import customs duties from 1 July of last year. According to professional market participants, the MTPL market is approaching saturation. According to experts, 8 out of 10 vehicle owners in Kazakhstan are now insured. Insurers expect competition in this sector to intensify considerably.
 
At the same time, Marina Shipovalova, editor-in-chief of the magazine "Insurance Market", presenting the financial results of the insurance market for 2011, noted that, against the background of the significant growth in MTPL premiums, the level of payouts here still remains low and amounts to 23.6% for the market as a whole. However, Sergey Lavrentyev, Chairman of the Management Board of BTA Insurance JSC, noted that last year's losses carry over to the next year, and as a result the loss ratio will be higher. The expert stressed that the loss ratio for liability insurance generally tends to increase every year.
 
The organisers highlighted two companies whose premium growth in the voluntary motor insurance sector exceeded 200 million tenge. The results of IC Nomad Insurance JSC amounted to 223 million tenge, and those of IC Eurasia JSC to 208.8 million tenge. Overall, the voluntary motor insurance sector grew by 31% compared with 2010, reaching 909 million tenge. At the same time, payouts increased only slightly, by 11%, to 1.15 billion tenge.
 
Voluntary personal insurance grew by 53%. Market growth was driven by the increase in life insurance premiums to 6.2 billion tenge, or 315%, annuity insurance by 41%, and accident insurance, where premiums grew by 69% to 11.4 billion tenge. Marina Shipovalova points out that pension annuity contracts account for 77% of annuity insurance. On the one hand, experts see this as evidence of public interest in pension annuity contracts, but on the other hand, they link this interest to the possibility of receiving a lump-sum payment for several years at once, which is not possible when receiving pension payments from private pension funds (NPFs). According to specialists, although annuities are the "longest" contracts, the high level of payouts in annuity insurance, at 58%, indicates that the scheme of "cashing out pension money" is still being used today.
 
Rashid Gallyamov, Director of the Broker Sales Department of IC Generalli Life JSC, in turn explained the growth of the voluntary personal insurance sector: "The bank channel plays a significant role in the growth of the life insurance market. In 2011, insurers managed to encourage most clients taking out loans to buy life insurance rather than accident insurance. This is a strong guarantee that the loan will be repaid in any case. In addition, the corporate and retail segments grew. Clients are showing more interest in long-term retail products."
 
Overall, insurers' net assets grew by 19.14% to 354.8 billion tenge, net reserves increased by 34.64%, and net premiums grew by 44.4%. Experts do not rule out that these figures may indicate an understatement of insurance reserves. The aggregate capital of insurance companies grew by 18.4% in 2011 to 89.5 billion tenge.