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Friday, 30 January 2015 13:30

Insurance companies must definitely raise service quality – Orkhan Bayramov Featured

Caspian Energy (CE): What types of insurance do you use?

Orkhan Bayramov, Chairman of Insurers Association of Azerbaijan: I have a mandatoryreal estateinsurance, mandatory insurance of motor transport, CASCO insurance for an automobile, which is not mandatory, and now I am considering insuring my life.

 

CE: Why do you use these types of insurance?

Orkhan Bayramov: Two types of the insurances are mandatory and using them is important for every citizen of Azerbaijan. It is required by the law of the Republic of Azerbaijan. As far as CASCO insurance is concerned, it is necessary for people who often use an automobile. Driver can negligently be involved in a road traffic accident or their  vehicle can be touched. Potential risk is a main reason why I use insurance.

 

CE: Imagine that you have to convince a person to use insurance. Whatwillyoutellhim? Can you admit that many people would reject the insurance if it were not mandatory.   

Orkhan Bayramov: If the insurance of real estate, especially an automobile, were not mandatory, the percentage of people using these types of insurances would rapidly reduce. It is for sure.

 

CE: Why does it happen?

Orkhan Bayramov: Let’s takeamandatory insurance of real estate.Nowadays,only 10-12% of people apply this type of insurance. For instance, real estate insurance in New Zealand is not mandatory, but 95% of the population uses it. This figure makes 37% in Turkey. The main reason is the lack of culture of insurance and traditions in this sphere. These traditions have been introduced in New Zealand 100 years ago while for Azerbaijan it is all new for now. It is where certain problems and misunderstanding come from. Nobody denies it. But one thing is noteworthy that not only insurance companies but also people themselves should aspire in order to have the quality raised.  People buy an insurance product but they do not know what they pay for. For instance, people mainly use a mandatory insurance in order not to be fined by road police officers. How much does a mandatory insurance of an automobile cost? Let suppose that a person has paid 75AZN. It is not a small sum. Why does not a person see what he/she pays for when giving this sum?  It is necessary to understand that mandatory insurance of an automobile is not a tax that a car owner pays in order to show a road police in case of necessity. It is a service that an insurance company sells to a client. The company should clarify what a client pays for. Meanwhile, a client must also show interest in what he is offered and what he should if a traffic accident happens tomorrow. It is what the problem is. People pay for insurance but they do not know what to do with it and how to use it.

 

CE: I guess nowadays it is easier for people just pay for an insurance which insurance companies themselves deliver to clients, which satisfies both sides. A person gets an insurance without spending time on it while a company sells its product without any problems. How can it be changed?

Orkhan Bayramov: Theproblemresides in both sides (a client and an insurance company). Both sides certainly benefit when signing a deal. But what is going to happen when a problem arises? In this case there will no advantage for both sides. A client remains unsatisfied with a service of an insurance company and has to repair his car on his own. As to an insurance company, it loses a client who will unlikely apply to this company next time again. Therefore, all possible risks that can arise in future must be assessed. As a person who is involved in this sphere for a long period, I may say that a one-sided approach in this issue is unacceptable. Both a client and a company must come to this issue in more responsible manner. A client must know his/her rights and obligations. The problem which is observed for now is that an insurance agent and a company he represents are an informed party since it is part of their job whereas a client, as a rule, is not informed at all.

 

CE: Could you tell what a person, who intends to get an insurance, must do?

Orkhan Bayramov: First of all, you are a client, paying for services, namely for insurance. When you are presented a contract, you must look it through. I don’t say that one must thoroughly study it but it is necessary to be aware of its main items. Simple question, what does a mandatory insurance of a vehicle mean? And what is going to happen in case if a problem arises? An insurance agent must step-by-step explain to you the way you should use an insurance and advantages of it. Everything he says must be reflected in the contract including major items. These are cases stating when a person must pay himself and when it must be done by a company once a problem arises.

 

CE: Must insurance companies take measures aimed at informing of the citizens?

Orkhan Bayramov: A humanfactor plays an important role in this issue. If a client does not wish or he has no time to listen to an insurance agent, then nobody can force him to do it. Most of clients simply pay money, get their insurance without showing interests in advantages it provides. If you sing a document, it means that you have familiarized yourself with conditions and whether you agree with the conditions of the insurance. And it does not matter whether you have read the contract or not. In the meantime, I do not justify insurance companies as well. If a mandatory insurance of an automobile is a short-term business for a company which aims to gather clients in every way possible, then it will only lose from it. It is possible to end up a year with a surplus but no one knows what will happen in the coming year. A company must stay close a client so that to arouse the latter’s interest in using its services in the next year as well. Let’s suppose that a road traffic accident occurred. What should a driver do in this case? He waits for road police officers who issue a protocol. It is the protocol that an insurance company must refer to but not conduct its own investigation. If they are not satisfied and have a different opinion about the accident, then they can complain to the police. It is the way it happens when people remain unsatisfied with the work of the company when a traffic accident happens, and leads to the rise of a negative opinion about all insurance companies. We held a monitoring to find out whether people are satisfied with the work of insurance companies. It turned out that 6 out of every 10 people, who express dissatisfaction, have never come in contact with insurers still remain displeased with them.

 

CE: Why does such opinion arise?

Orkhan Bayramov: It happens mainly because of misunderstandingbetweena client and an insurer.But I agree that a big informational work must be carried out. Azerbaijan Insurers Association also carries out an active work to have the population informed about insurance services. We have recently held many meetings with students from different higher education institutes. We hold courses every Saturday, where over 100 people constantly gather. The interest in these activities is big enough. We are using an interesting format of informing, which is one of the reasons arousing people’s interest in our work. If people read contracts they would be informed better about all details. But it does not happen, for this reason we prepare video-clips. The event itself is held on basis of the questions-answers format. We do not prepare insurers. We just inform them about insurance products.

 

CE: What could you tell about the present insurance market of Azerbaijan?

Orkhan Bayramov:Azerbaijan’s insurance market has not been occupied yet since this segment of the market is still young. This room of the market is at stage of development. Rapid development in terms of human resources has started since 2010. As of today, we have a sufficient amount of skilled human resources who are capable to develop the insurance market. Azerbaijan’s Insurers Association started implementing global projects. A training center has been established. It happens as the market requires it. I can safe say that Azerbaijan’s insurance market is developing dynamically. We will reach the development boom at a certain stage as it happened in the banking sector. For this purpose, companies must definitely raise the quality of service. All processes must be fully facilitated as the world practice demands it. A client must not face difficulties when a problem arises. The easier is the process the more people will be there, wishing to use this product. But as I have already mentioned, insurance companies do see their problems and work on them. For instance, there are companies which provide a client a car for a temporary use while his is under repair. There are also many other innovations. Mandatory insurance is not a state mechanism but business. One should understand what insurance is in general. What does a company take money for? A risk is purchased and sold in the insurance sector. You sell your risk to a company once you purchase insurance.

 

CE: Which types of insurances, including automobile, are in demand now?

Orkhan Bayramov: Life insurance is becoming more popular now, whichenvisagesaccumulation of means. If you insure your life, say, for three years, a certain sum is subtracted from your salary on a monthly basis. Quite a big sum is accumulated throughout this period. Another advantage is that you are partially freed from payment of part of taxes. Coming back to the issue of the insurance market, it is noteworthy that Azerbaijan is not unique in this context. The development of the market started from these processes in all countries. Considering the experience of developed states, it can be said that a mandatory insurance is not beneficial for companies. Speaking conditionally, if a company collects 1000, it pays, as a rule, 1100. It is clear that it is not beneficial for companies. According to the law, if a company has a license then it must offer mandatory insurance as well. What should a company do in such situation? They start developing voluntary types of insurances. Nowadays, the market of mandatory insurance in Azerbaijan is profitable. However, it gradually is becoming unprofitable as the market develops. Firstly, it happens because the number of road traffic accidents increased. Secondly, people started applying to insurance companies more often and demanding for payment. For this reason, companies try to arrange voluntary insurances as much as possible. Speaking conditionally if an insurance company has sold insurances worth 100AZN, it makes payments, let’s say, to the sum of 40 AZN. In case of the mandatory insurance, it has sold insurance products worth the same sum (100AZN) but paid 110AZN. In total, it turns out a company has earned 200AZN but paid 150. As s result, it anyway gains 50AZN.

 

CE: Which types of insurances are the most profitable and unprofitable for companies?

Orkhan Bayramov: A medicalinsurance is the most unprofitable. For insurers it is favorable to work with corporate clients since only a few people out of the total amount of insured employees of a certain company get payment in fact. It is unprofitable to work with private clients. Insurance of cargoes and cargo transportation is the most profitable business. As far as the most popular type of insurance is concerned (mandatory exclusive), it is an automobile insurance CASCO. About 10% of drivers use it. As you see, the number is not big enough. Comparing it with the mandatory insurance of vehicles, we will have an indicator reaching almost 80%.

 

CE: How is it possible to secure the growth of voluntary insurance?

Orkhan Bayramov: It is necessary to offer a product that people would buy. That takes time. A client must be confident that in case of a problem an insurance company will solve it without causing him additional problems. Secondly, a product should be presented in a proper manner. An insurance agent must have an ability to arouse interest in a client when presenting a product.

 

CE: Where can a person apply in order to obtain more information about types of insurance?

Orkhan Bayramov: We have 27 insurance companies where a citizen can apply to in order to get full information about insurance.

 

CE: The thing is that a company is an interested side for which it is extremely important to have its product sold. How is it possible to obtain information without applying to any insurance company?

Orkhan Bayramov: This situation is more complicated but there are insurance brokers who represent interests of a person who wishes to get insurance. The thing is that we don’t have many brokers.

 

CE: What is the potential of the insurance market of Azerbaijan?

Orkhan Bayramov: According toestimatesof the World Bank, the potential of the insurance market of Azerbaijan, in its ideal condition, makes 4-6% of GDP of the country. The same indicators are observed in Europe as well. This figure makes 10% in Holland. In numbers it makes $4bln. We for now have just $500mln.

 

CE: Could you tell about the work of the Insurers Association of Azerbaijan? What are the objectives of the organization?

Orkhan Bayramov: The main objective is to develop the market. Business institutions in Azerbaijan are actively developing now. The market is developing along with subsidiary organizations.  Now we are facing the lack of human resources. We are discussing the problems of the market and stay in close contact with companies. We create a platform for companies. They gather, discuss a problem and try to find a common solution. Then, these proposals are submitted to the government for consideration. Apart from this, we do marketing and promote insurance as a product. We closely cooperate with Mass Media and publish statistics. The total amount of insurance related information that Media possessed made 2700 in 2012. This figure grew up to 18,000 within 11 months of 2014. We provide 14% of the general amount of information.  

 

CE: How long has the Association been operating?

Orkhan Bayramov: Insurers Association of Azerbaijan started operating in 2006. I have been its chairman since 2013.  

 

CE: How does your working last?

Orkhan Bayramov: You have to work hardall day long.A general meeting is held once a week while a meeting with the youth is held every Saturday. We are implementing different projects.

 

CE: What does you work mean to you?

Orkhan Bayramov: First of all I enjoy it. I started working for the insurance sector and do not see myself anywhere else. The best rest for me comes when everything goes well.                

 

Thank you for the interview

 

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