The XIII International Conference on Insurance and Reinsurance ended in Tashkent, in which experts from the UK, Kazakhstan, Ukraine, Mongolia and representatives of domestic companies made reports.
The participants discussed the current state of the insurance market in Uzbekistan and the prospects for its development, global trends, problems that hinder the full development of the insurance market.
The insurance market of Uzbekistan is not yet large (0.003% share in the world market), but the market is growing rapidly. In 2016-2019, the growth of insurance premiums averaged + 50%, in 2020 -6% compared to 2019, for 9 months of 2021 accelerated growth was + 66%. The main reasons for the decline are the introduction of quarantine regulations, the lack of remote work of some companies and a decrease in the income of the population during the quarantine period.
However, the penetration rate of insurance products remains at a very low level of 0.4%, while in developed countries the penetration rate reaches 12%. Insurance premiums per capita in the world are equal to $ 1000, in Uzbekistan – $ 6. This speaks of the low price of the product. At the same time, the leader of the list, Hong Kong, has this figure of 8.5 thousand dollars. And the reason for this is the strong dependence of the economy on the raw materials sectors, low insurance culture and low incomes of the population, the state insurer and the lack of long-term development strategies for insurers. The role of reinsurance relations was also noted. The total premiums for the global market amounted to $ 6.274 billion in 2020. The volume of reinsurance premiums throughout the market has been stable for many years and averages $ 315 billion per year. At the same time, the share of reinsurance in Russia, Kazakhstan and Uzbekistan together is 0.72% of the share of reinsurance in the world market.
The problems of national markets in these countries are similar and in Uzbekistan, in particular, the following:
– Low penetration of insurance, weak protection of the economic interests of consumers
– Lack of own capacities to cover large corporate losses, as well as cumulation
– Coverage of catastrophic risks = low percentage of coverage
– High percentage of electives high administrative costs and the likelihood of refusals
– Price wars and dumping, lack of adequate insurance premium rates, impossibility to place on high-rated markets
– Poor quality of risk security and underwriting
– Insufficient level of capitalization of insurance companies
– Lack of statistical data and their quality.
In order to break out of this lagging segment, experts proposed the following measures:
– Practice of using obligatory reinsurance contracts – Treaty
– Solutions for Catastrophic Risk Models, Obligators
– Adequate approach to calculating reserves and capital
– Image solutions for integration into the world market
– Stabilization of the general price level
– Overall risk quality and underwriting
– Statistics are our everything
– Strategic development initiatives for insurers
– Privatization of the insurance sector
– Initiative of the EAEU Single Market of Insurance Services.
Another trend in the global market, which the conference participants recommended to take a closer look at in Uzbekistan, is the introduction of a risk-based approach. Insurance companies assess not just the risks associated with the premium and the liabilities of the insurance company, but at the same time assess the risks of assets, credit, market. This allows you to more actively manage the capital of the insurance company. This trend is spreading to emerging markets as well, driven by the desire to attract foreign investors, for whom a risk-based approach in terms of capital management is more understandable and provides more opportunities in terms of comparability.
Most importantly, there was one more positive moment at the forum, everyone noticed that the Regulator – the Agency for the Development of the Insurance Market, actively participated in the work of the forum from the very beginning to the very end, and did not shy away from communication. The regulator gave us the opportunity, the private sector, to speak out on our own, to listen to each other, and then they will probably take the right measures to put the entire market in order. The regulator noted that along with fruitful work and progressive reforms in the insurance sector, the issue is not only that it is necessary to increase the volume of insurance premiums. It is necessary to develop the culture of the insurance community and the understanding of people that insurance is protection, which makes it possible to further increase the welfare of the population, reduce the burden on the state and allow insurance companies to be responsible for their obligations.
The participants of the forum drew attention to the issues of civilized development of intermediaries and distributors of insurance services, discussed the problems of unfair advantages in the sale of insurance products and ways to solve them. The following three were cited as the basic principles of behavior of insurance intermediaries:
– to act with maximum consideration of the interests of the consumer
– know the needs and needs of the consumer
– maintain an appropriate level of qualifications.
Much attention was paid to the issue of the lack of qualified personnel, and the regulator and many participants said that it is important to educate personnel. The regulator noted that in 2020, the “insurance business” direction was introduced in specialized universities, where employees of insurance companies can enroll in distance learning without exams. In addition, mechanisms will be introduced to improve the insurance and financial literacy of the population. In cooperation with the ministries of education, finance-related subjects will be introduced in schools and universities. The experts also noted the need for ongoing training, for example, each insurance intermediary is required to go through 15 hours of structured activity per year, which includes seminars, conferences or writing articles on the topic of insurance.
Experts shared the latest achievements in modern technologies, in the practice of bancassurance and new insurance products.
Author
OYBEK N. KHALILOV
General Director of AIC, and concurrently, Chairman of the Board of the Association of Professional Participants of the Insurance Market of Uzbekistan.