If the state requires you to have a policy

Since its establishment in August 2003, the Insurance Payments Guarantee Fund (IPGF) has paid out more than 860 million tenge to Kazakhstan residents. This includes compensation of about 160 million tenge transferred to the accounts of insurance organisations for 22,055 re-issued insurance policies that were in force at the time of the liquidation of the Altyn Polis insurance company.

Unlike the State Deposit Guarantee Fund, the IPGF has no state shareholder, although it was originally established by the National Bank. Its shareholders are insurance companies, but its task is the same: to assume the obligations of insurers in the event of their compulsory liquidation. Since 1 October 2008, the IPGF has had an additional function: the fund pays insurance to persons who have suffered exceptionally serious bodily harm caused by a vehicle owner who fled the scene of a road traffic accident, or to their families in the event of their death. Unfortunately, such cases are not uncommon. According to the fund, 175 road accidents in which the drivers fled the scene were recorded in 2010. In some years, the number of such cases reached 750.

But victims and their families often did not know that at such a bitter moment they could receive help from the fund. The statistics confirm this: the IPGF has paid out only 1.5 million tenge for such insured events, although the fund's capacity is much greater. That is why we constantly carry out awareness-raising work and tell people to contact us in such situations, says Kulbanu Mussayeva, General Director of Insurance Payments Guarantee Fund JSC.

Let us talk with her in more detail about this very important function of the fund and its other tasks.

…May such an insured event pass us all by

– Before asking questions on this topic, I would like to wish everyone that such insured events pass us by!

– Unfortunately, the statistics of tragic road accidents are merciless… That is why we understand that even relatively small payouts from the fund in such situations are badly needed by the victims, and that this social function of the IPGF is extremely important for people. That is why we are helped in this work both by law enforcement agencies and by the Ministry of Health, whose institutions distribute our leaflets and notices in city and regional hospitals, trauma centres, outpatient clinics and internal affairs bodies throughout the country. Our information is also disseminated by the media: print, radio and TV channels. I believe all Kazakhstan residents should know that they can count on the fund's help in these cases.

– Kulbanu Serikkhazhievna, do I understand correctly that these funds are contributed by all insurance organisations and can be paid to all victims without exception, even if they are not insured?

– Yes, this additional fund is formed from mandatory contributions of insurance organisations. Contributions are made by all 27 insurance companies participating in the insurance payments guarantee system. When payments are made to victims who are citizens of Kazakhstan, it does not matter whether they have insurance or not. Foreign nationals and stateless persons will need an accident insurance contract. If a person is injured, they (or their relatives) apply to the fund and receive payments in the amounts established by law: compensation for harm to life — 250 MCI; compensation for serious harm to health — 150 MCI; compensation for funeral expenses — 15 MCI. Let me remind you that for the current financial year one MCI is set at 1,512 tenge. You can calculate what the payout amounts are in each of these cases. I would also remind you that the MCI is revised every year. Applications for payouts are accepted by the fund at: 21 Koktem-3 microdistrict, Almaty. More detailed information is available on our website: www.fgsv.kz. If the person at fault in a road accident flees

– To help readers better understand in which cases they can contact the fund, let us look at specific examples. Recently, in our neighbourhood, a young man with no driving licence, no vehicle documents and under the influence of alcohol hit two female students. Both are now in hospital with serious injuries, and the person at fault has been detained. Can the victims contact you?

– If the person at fault is known, then it is no longer our case. Our insured event is when the person at fault in the accident is unknown and has fled the scene. We pay the victims the amounts mentioned above. If the person at fault is identified and found, the law enforcement agencies inform us, and we pursue recourse in this case. That is, we bring a claim against the person at fault for the amount we have paid to the victim.

– And if the person at fault is not detained or identified, the "recourse" is not subsequently directed at the victims?

– Under no circumstances! The victims and their families do not return anything, not a single tiyn, to the fund. A recourse claim is brought only against the person at fault for the accident. Currently, the number of people who have applied for payouts and are entitled to them under the law is small compared with the number of the insured events in question — only a few people. Injured citizens of the country contact the fund both verbally and officially. However, we would particularly note that the fund makes such payouts in respect of victims who sustained fatal injuries only to persons who meet the requirements of Article 940 of the Civil Code of the Republic of Kazakhstan: disabled persons who were dependants of the deceased or who, as of the day of his death, were entitled to receive maintenance from him; a child of the deceased born after his death; as well as one of the parents, the spouse or another family member, regardless of their ability to work, who does not work and is engaged in caring for the deceased's dependent children, grandchildren, brothers and sisters under fourteen years of age or who, although over that age, require outside care for health reasons according to the conclusion of medical authorities. I can cite two tragic cases from our practice when the fund paid insurance to the relatives of the deceased. In the first case, an unidentified car hit a serviceman who was crossing the road on his way to work. He left behind a small child and a wife who was on maternity leave. Another tragedy: a pensioner, a veteran of the Great Patriotic War, suffered serious harm to her health as a result of a road traffic accident. Those responsible for the accident were not identified. We paid full compensation, and there is no question of any refund to the fund.

– How quickly are decisions made in such cases, and what do victims need to submit?

– First of all, it is essential to submit a forensic medical examination report confirming serious harm or death. Payouts are provided only for serious bodily harm and death. The full set of documents also includes: an application (in free form) for compensation of harm; a document from the internal affairs authorities confirming the occurrence of the insured event itself, that is, the fact that the person who fled the scene of the accident and is responsible for it has not been identified. A copy of the report of the medical institution where the victim received medical care in connection with the serious harm to health caused by the accident will be required, indicating the nature of the injuries sustained by the victim, the diagnosis and the period of temporary disability. It is also necessary to provide a notarised copy of the victim's death certificate (in the event of death); a document confirming the person's right to compensation for harm in the event of a fatal outcome; documents or copies thereof confirming funeral expenses; a copy of the applicant's identity card and bank details for the transfer of funds. Once the full set of documents has been collected, the fund decides within thirty working days either to make the payout or to refuse it. The payout itself is made by the fund within five working days from the date of the decision. Do not anger God with lies

– What may be grounds for refusing a payout?

– First, actions of the victim recognised as intentional crimes or administrative offences causally related to the traffic accident. Applying to the fund more than one year after the accident in which the person at fault fled the scene. If the accident occurred as a result of force majeure, that is, extraordinary circumstances that could not be prevented under the given conditions, such as the effects of a nuclear explosion, radiation or radioactive contamination, military operations, civil war, gatherings, rallies, marches, pickets and demonstrations, mass riots or strikes. Submitting an incomplete set of documents or false documents is also grounds for refusal.

When the fund steps in

– The fund's activities are little known to the general public. Evidently, this is because the insurance market has given the fund few reasons to step in. Nevertheless, everyone needs to know about the powers of the IPGF in order to understand where, why and with what to apply. For example, many people believe that the fund can help when an insurance contract has been concluded but the insurer finds reasons not to pay, or if the insurance organisation itself has declared bankruptcy?

– You are right, people find out about us when they face a real problem with their insurance. So let me explain that at present three types of compulsory insurance affecting the property interests of broad sections of the population are included in the insurance payments guarantee system. These are compulsory civil liability insurance of vehicle owners, of carriers to passengers, and of tour operators and travel agents.

The main mission of the fund is to protect the interests of insured persons in the event of compulsory liquidation of their insurance company. That is, we do not take part in any of the cases you listed — there are other dispute resolution mechanisms for those. The fund is liable only for compulsory types of insurance and only in the event of compulsory bankruptcy of the insurance company.

For example, drivers are obliged to buy insurance to protect themselves and their passengers. In the event of an accident, the insurance payout is made by the insurer. If the insurance company that sold the policy is compulsorily closed, the fund assumes responsibility for protecting people's interests.

This has already happened four times in our history: we were liable for the obligations of the compulsorily liquidated joint-stock companies Valyut-Tranzit Polis, IC Altyn Polis (with a 25% share of the motor third-party liability market), IC NASKO-Kazakhstan and Premier Strakhovanie. The fund successfully made guarantee payments to the creditors of these compulsorily liquidated organisations and continues payments to the creditors of Altyn Polis and Premier Strakhovanie. More than 3,700 applications were received from the creditors of these insurance organisations. Overall, in our history we have re-issued more than 22,000 insurance policies that were in force at the time of the insurance companies' liquidation. That is, the 23 insurance companies operating in the market shared among themselves all the clients of the liquidated insurance companies.

This approach and mechanism are justified: if the state obliges people to have insurance, it also creates additional protection — the guarantee institution. That is why the fund was originally established by the National Bank, and only after the National Bank of Kazakhstan withdrew did the insurance companies themselves become its founders.

The fund's further plans are to cover all compulsory types of insurance, voluntary property insurance and life insurance. The system is developing gradually, and from 1 January 2012 savings insurance for pension payments and annuity payments relating to compulsory accident insurance of employees will additionally be included. I would note that in developed countries all types of insurance are also guaranteed by similar funds.

The fund will answer for a bankrupt insurer

– If the regulator has launched bankruptcy proceedings against an insurance company, what should its client do?

– First, the regulatory authority decides to revoke the licence. Then the documents are submitted to court, and if the court decides to liquidate the company, only then does our work begin. Within a certain period, the fund starts information and awareness-raising work: it places publications and notices and organises press conferences. At the same time, the financial statements of the company being liquidated are reviewed, from which we see the situation in the company and how much money needs to be paid out for insured events that have occurred. Within two months after the court decision, we accept applications from the company's clients. The liquidation commission determines how much the fund must pay under policies for which an insured event has occurred. For policies in force, work is carried out to transfer the insurance portfolio to other insurance companies, to which we transfer funds upon completion of the liquidation procedures. Therefore, insured citizens can be completely confident that within the period established by law they will receive an insurance payout or the obligation under their insurance will be assumed by another company.

– Let us consider cases where, for various reasons, people are not informed about the liquidation of their company.

– Such cases are inevitable. That is why two months are given to accept applications for events that have occurred. If the deadline is missed, one can subsequently apply to the liquidation commission. In accordance with the order of priority established by law, such persons are creditors and can expect payments according to their place in the queue. But that is a matter for the liquidation commission.

For "dormant creditors": no limitation period

– According to your statistics, are there many who have not applied?

– There is a category of clients who submitted applications but did not provide the required documents. They account for about 15% of the total number of applications submitted. We call them "dormant creditors". There is no limitation period for these applications. The main thing is to register the application. I would also note that for clients who were involved in a road accident precisely during those two months — between the court decision and the transfer of policies to another insurance company — under the law we pay the insurance companies acting as agents for the loss assessment in the amount of 7 MCI and pay the insurance payout itself in accordance with the assessment report.

– A practical question: the fund's head office is located in the National Bank building, but are there other offices? Where should people go if necessary?

– For the convenience of clients of insurance companies being liquidated, our staff are located at the head office during the period when applications are accepted. An application can also be sent by post. In the case of Altyn Polis and Premier Strakhovanie, for example, we were located in the same building as the liquidation commissions. In addition, insurance companies and their branch networks acted as agents, accepting applications and forwarding them to the fund and advising people. Still, most creditors applied to the fund themselves by post.

– Are clients of liquidated companies always satisfied with the decisions taken?

– No. In our short history there are already about 300 court cases that we are handling because people disagree with the assessed amount. People who missed the two-month deadline also go to court.

– And how were these matters resolved in court?

– In different ways; each individual case has to be considered separately. But if we understand that we are right, we defend our position to the highest instance.

– Are all insurance companies participants of the guarantee fund?

– All insurance companies that sell policies for the three types of compulsory insurance must be participants of the fund. Without participation in the fund, they are not issued a licence. All companies that were engaged in this type of insurance before the fund was established automatically joined the fund. New insurance companies that would like to engage in this type of insurance must conclude an agreement with us before they receive a licence from the regulator. The fund participation agreement is attached to the list of documents required to obtain a licence from the Financial Supervision Committee. Currently, all companies engaged in this type of insurance are not only participants of the fund but also its shareholders.

– The National Bank sold its entire stake in the fund. This raises the question of the IPGF's supervision: how does the state control it?

– Indeed, in 2008 the National Bank sold its entire stake to insurance companies. We are registered as a joint-stock company, but we are a non-profit organisation, that is, we do not seek to make a profit. Our task is to protect the interests of creditors in the event of compulsory liquidation. Creditors are both individuals and legal entities that have purchased policies. The Financial Supervision Committee of the National Bank of Kazakhstan is the fund's authorised body. Moreover, a representative of the Financial Supervision Committee of the National Bank of Kazakhstan sits on the fund's board of directors. I would also add that the return of the National Bank to the fund's shareholders is currently under consideration.