TBY talks to Yavuz Ölken, CEO of AXA MBASK, on the development of the insurance sector in Azerbaijan.
TBY Why did AXA choose MBASK to be its partner in Azerbaijan?
YAVUZ ÖLKEN AXA has a strategy to invest in emerging markets. After having studied all the possibilities, AXA decided to invest first in the Caucasus, starting from Azerbaijan. This country was chosen specifically because of its huge potential, large population, stable financial system, and positive signals in the forecasts for the coming years. AXA sees great potential in the retail business in Azerbaijan. The banking industry is also very active in this environment, in order to produce the credit loans and mortgages for individuals, as well as other products. This is in line with AXA’s main strategy, which is financial protection for individuals.
What are your strategies for developing the retail insurance sector in Azerbaijan?
A clear long-term strategy is required to develop the right environment. It has to be well understood by the whole market that the distribution network is very important. It is not possible to grow in this market via bancassurance, and also the culture is not ready for direct sales such as internet or mobile technologies. That’s why the first element on which we are focusing is distribution channels. AXA plans to co-operate with the sector as a whole, and with the Ministry of Finance and its insurance department, in order to create this awareness in the market. We hope that in a very short period of time professional agency-ship will become a recognized profession. In addition to the distribution network it is also clear that we will invest to increase the insurance awareness in the country by providing customer-oriented solutions.
What penetration rates are you targeting?
In Azerbaijan, the penetration ratio for motor damage policies is very low. It’s less than 10%. We only have obligatory motor third-party liability insurance, for which the penetration rate should be 100%, but is currently in the region of 50%. That’s why the industry must come together to increase awareness, to increase service quality, and to encourage people to buy insurance. In the second half of 2011 we expect new obligatory insurance products to provide leverage to the insurance market, thanks to the regulatory office and their efforts on that.
What regulatory changes would you like to see to improve the insurance environment?
First of all, the regulator in Azerbaijan works very hard to understand the insurance markets worldwide. It performs research and brings in many good ideas. It looks to European standards in terms of reserves, solvency, distribution, capitalization, products, and so on. However, it will take time to get the right framework in place. Firstly, it focuses on the good financial health of a company. This is important, because if a company fails in claim payments, it affects the whole market. Secondly, it is very open minded in terms of foreign investments and foreign applications, and this is very positive.
How do you differentiate your products in order to be unique?
Differentiating services is a challenge. Products consist of three elements: the product itself, contact management with your client, and claim services. In order to achieve the preferred level we put a focus on customer-focused organization at each level. We have invested also heavily in IT and see it as crucial in order to deliver the best service to our distribution channel and clients. In that regard, AXA looks to be the sector leader.
What kind of projects do you have in the IT field?
AXA has invested in insurance software, which is going to be online for all distribution channels and regional offices. We promise online services to our clients, and to our partners. We offer 24/7 customer service, not only via our distribution channel, but also via our customer service center. We call it the customer care management model, and it is part of our quest to create a customer-oriented organization.
How does AXA MBASK tie into AXA’s regional network?
AXA Sigorta Turkey is crucial and a very important best practice for us, and this is the Turkish wing of AXA Global. For HR and training we use its HR department as a co-partner in our activities by people hiring or by reorganizing the company. We use the regionalization and profit-center model of AXA Sigorta, and we utilize AXA Sigorta’s leading position in Turkey in terms of its distribution network management, and we know very well how to manage the distribution network via IT solutions. In claims management, we bring here all the best practices applicable for Azerbaijan. But always—and this is a rule of the game in our country, in our company, and in the AXA world—we really think globally, but we realize, operate, and manage with local teams. We try to engage local people in global thinking.
Is it hard to find skilled people to work in the insurance sector?
We are lucky, because MBASK already had a very skilled team, and we have continued with them. There is only one person over the medium term that we hired from AXA Sigorta, and he is now the CFO and the CIO of the company. He came from Turkey, while the rest are 100% Azerbaijani.
What is your economic outlook for 2011 and onwards, and how do you see the size, nature, and direction of the Azerbaijani insurance market?
The Azerbaijani insurance market is not producing enough premiums. It has to start to see the opportunity, and there is potential here. The insurance market is only focused on bancassurance and corporate risks but we should not miss the potential in retail or SME customers. This market closed the year 2010 with a premium level of AZN155 million, which is very low. Our company produced roughly AZN8.5 million in 2010, which is also low. For 2011, from a market perspective, the 1Q results show that it will be a difficult, but 2011 will be a recovery year compared to 2010.
Did global prices affect the insurance market?
In Azerbaijan, yes, but in 2010 we saw the first signs of recovery. We are now working hard to push growth. All the managers in this company are focusing very much on operational excellence, differentiating our services, lowering expenses, and creating the advantage of differentiation in order to give the best service and price to our agents and clients. This is the unique solution on the way to being preferred.
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