THE COMPULSORY FLIPSIDE

Azerbaijan 2012 | FINANCE | B2B: INSURANCE

TBY talks to executives from two insurance firms on how compulsory lines are changing the sector.

Elkhan R. Hashimov
ELKHAN R. HASHIMOV
Chairman of the Board of Directors
AzSigorta

What led to the establishment of AzSigorta, and how has the market evolved since the company's inception?

ELKHAN R. HASHIMOV The dynamic development of the insurance sector in Azerbaijan was a key factor behind the establishment of AzSigorta. After independence, many fields in Azerbaijan's economy started to grow, and people's welfare began growing with the development of the economy. People thus require a mechanism to protect their belongings. The most reliable of these methods is an insurance mechanism, which has passed the test of history. Today, as a universal insurance company, AzSigorta, which was established in November 2006, is interested in all areas of the market, meaning that we operate in the direction of insuring the health of individual clients, automobile and real estate interests, and the business interests of our corporate clients. Giving moral and material support to our clients during tough times is important for us. We offer 32 types of insurance services, meeting the requirements of our individual and corporate clients. For these services we have a financial and professional base. As any field evolves over time, so does the insurance market and new needs emerge. And as in many developed companies, our personnel are also working on developing new innovative insurance products and introducing these products to the market.

How has the merger between MBASK and AXA strengthened the position of the company in the Azerbaijani insurance market?

YAVUZ ÖLKEN AXA and MBASK are delighted with the course of action taken since the merger. In fact, we are already working on a long-term strategy in the country, and AXA is looking to expand its services into neighboring countries as well. It has been a very successful partnership; AXA has transferred almost all of the industry's best practices to this emerging market, supported by AXA Sigorta Turkey, and has established an agent network across the country, implemented IT services within the company, and shifted the business strategy toward a more customer-centered organization. Those are the key factors. The staff here has been very supportive, engaging with the company at all times. Also, the brand AXA MBASK has been warmly welcomed, and we have had a lot of customers coming in response to our extensive branding and marketing campaign. Thanks to its experience in Azerbaijan, AXA is now looking to invest and expand its activities to neighboring countries if we see an opportunity and AXA would like to use the best practices from the Azerbaijani market in those countries.

How will recent changes in Azerbaijan's insurance laws and the increase of compulsory lines impact the sector?

EH The government plays a key role in the development of any sector, and insurance is not an exception. The new legislation on compulsory insurance will bring growth and development to the insurance sector. The Azerbaijani insurance market is still young, and the new laws will positively impact the sector's activity and our company as well. Increasing the customer base and creating an insurance culture throughout the country will benefit all parties involved in the game. As a result of such developments, we expect to see strong growth in 2012.

In Azerbaijan, the penetration of insurance is very much linked to the central bank's insurance policy. Voluntary insurance is very limited in terms of the retail business. The new law is a very important step toward opening more doors in the retail business and raising insurance awareness, and it will generate opportunities for insurance companies to grow quickly. At the same time, the companies involved in the sector have to understand that there will be competition, of course, but it will be competition for quality services, rather than between us. It is time for the insurers to educate the market on how to use policies. That will help to drive the penetration up, and I am convinced that with the right tools the insurance market can produce 10 times more than what it is currently producing. Nowadays, the regulatory system is very strict in terms of solvency, companies' financial structure, and their capital. However, we need to invest in business intelligence and professionalize the sector with well-trained agents, and also make an investment in technology, because in the future the law will oblige insurers to record their policies in real-time in the database of the national bureau. At the moment, the majority of policies in the sector are sold and written by hand. That needs to change immediately by using IT as leverage.

In which areas do you face the most competition?

EH There is strong competition in the automobile, property, and health insurance fields. These fields are of great interest to the population. To beat the competition, we pay special attention to the quality of the services we offer. In this respect, our personnel attend seminars and training sessions in European and Asian countries at well-known insurance and reinsurance companies. We also conduct internal business process monitoring and customer satisfaction surveys.

The insurance market has experienced strong growth over 2011, and AXA MBASK has also been on a growth curve. How is your company working to increase its penetration rate in the market?

The growth the sector has experienced is important, but it differs in life and non-life. If you exclude life premiums, the real growth of the sector is 23%. AXA MBASK has grown 62% within that segment. We have made AZN10.8 million, and our company is one of the leading companies in motor and property insurance. In order to increase our penetration in the market, we are heavily investing in a distribution network. Face-to-face relationships are key to achieving a higher penetration rate in the market. Also, we have a partnership with Unibank through which to provide our insurance products. At the same time, we are extending our activities in the corporate segment, targeting SMEs. However, our main focus will always be individuals. We expect to see the income level of the local population increase even more in the next few years, and that will help people to acquire insurance policies.

What specialties define the Azerbaijani customer?

EH As in other countries, an important factor for our customers when applying for insurance services is the quality of the product and its support. Today we can say with confidence that medical insurance is the field with the highest demand.

Azerbaijani people want reputable brands, and they are price sensitive, like most people. They also like to maintain constant contact with the insurance company's representatives, as they like quick resolutions to challenges. If services are rendered slowly, it is easy to lose reputation in the market.

What goals has your company set for the next few years?

EH Our main targets are to improve the quality of our services on a regular basis, develop and introduce new products to our customers, meet daily requirements by conducting market research, and increase customer satisfaction. We want to maintain our position as a market leader in 2012.

We have a strategic plan that will run until 2015 and by that time we would like to double our premiums. We are also looking to achieve a market share of around 10%. At the same time, we are targeting an expansion in the number of agents in Azerbaijan, and we would like to have between 75 and 80 agents in our network. AXA MBASK wants to attract the largest number of individuals; we want to achieve plenty of insurance policies and plenty of clients. For that reason, AXA MBASK is going to focus very much on retail business. There are opportunities for all the players to grow quickly, but we need to use the right tools to take advantage of these opportunities. AXA MBASK has grown over 60% in 2011 and we aim to keep growing in the following years at a rate of around 30%.