Caspian Energy (CE): What could you tell about the development of the insurance market of Azerbaijan in recent years?
Selcuk Adiguzel, First Deputy Chairman of the Board, AXA MBASK OJSC: Insurance market is growing in line with the economic stability and development of Azerbaijan. According to the results of September 2013, total written premium has reached up to 303.3 mln AZN, including the life products, which is 18.4% higher than the figures of the past year. The overall growth is being maintained in the economy owing to the reforms that are implemented on the financial markets possessing sufficient amount of liquidity. Insurance is a complementary component of economy when economical growth is present and legislative arrangements comply with market needs. As a result, the insurance market grows. Insurance spending per person has now reached 37 AZN, it indicates a huge potential compared to the other European countries. Players in the market are also very active. State Insurance Control Service is successfully leading the market’s change by structuring mandatory products and legislative framework. All the companies are competing hard to gain more clients and provide them products and services. As for the AXA Group operating in 57 countries, the Azerbaijani market is considered as a very promising and timely entered market among all the other emerging markets. These positive aspects are all satisfactory but there is still a lot to be done in the short and mid-term, especially by the insurance companies.
CE: How have the market trends changed? How do you manage to meet new requirements?
Selcuk Adiguzel: Companies are currently benefiting from the upward trend of mandatory products to reach more clients. Corporate and individual clients are now benefiting from the tough competition between companies to get the best value of their money, price sensitivity is extremely high. Under these circumstances, only the companies which know the insurance business well and have long term strategies for tariffication, capital management, and reserving will be able to continue competing. When you check the premium growth by line of business especially in the voluntary products, it is obvious that an overall growth is not a result of population’s awareness or demand for insurance, but a result of the support of the mandatory life and non-life product sales by the legislation. For example there’s no change in voluntary casco premium as of September2013 which should normally rise in line with the current car ownership growth. Therefore, insurance companies must focus on demand creation through offering tailor made voluntary products and high quality service to the population. It is important both for diversification of companies’ own portfolios as well as for maintenance of a balance between mandatory and voluntary products or individual and corporate clients. As AXA MBASK, we have the experience of global markets (both mature and emerging ones). For example we now apply this experience to manage our newly established Motor Third Party Liability portfolio in order to create added value, forecast future trends and be prepared financially for the future. Our business strategies do not cover just a one or a two-year period because we believe the liability of an insurance company to its clients is for a lifetime.
CE: What niche of the insurance market is nowadays especially important for AXA MBASK Company in conditions of Azerbaijan?
Selcuk Adiguzel: AXA MBASK has been building totally a new portfolio since 2011 and market trends such as MTPL are supporting our strategy. We are trying to create a balanced portfolio of voluntary and mandatory products as well as increasing the portion of individual clients in our portfolio. Individual clients are essential because most companies prefer prioritizing the acquisition of corporate clients rather than spending some resources to increase penetration and deliver mass products for individuals. It can be considered as a quick win for a short period of time but in the end it results in a highly volatile portfolio formation because corporate clients prefer to use their volume as a bargaining power for pricing and leave the insurer with an unprofitable business if their demands are not met. Risk management of small risks is easier. They are diversified and can be used for creating other potential sales opportunities. Finally, it ends up with the satisfaction of the customer regardless of other temporary benefits or deductions that companies offer. A corporate or an individual client will always prefer an insurance company which they trust, which operates well, brings expertise and added value to their business.
CE: How actual is it for the Company now to develop online-insurance?
Selcuk Adiguzel: Nowadays, the globalization and latest technological trends are pushing all the companies to integrate with the external world. It does not matter whether you are a big or small company, you must have a flexible and capable IT structure in order to deliver the services demanded by your customers or your partners (such as banks, agencies or repair shops). But it does not mean making big investments in hardware and software for a certain period. You must have the proper mindset and the skill sets for such transition. Over the past year and a half, we have completed this transition and created our core insurance ERP called “Phoenix”. 98% of our policies are presently written online by our distribution channels, banks and agencies. Since the beginning of this year, all the claim files have been processed online with real-time connections to our claim staff, experts at the field and repair shops. The concurrent user number is varying between 500-700. It is a quite high indicator of online activity. There are 3 main targets behind this strategy. The first one is to have a strict control over our business, our processes and workflows because operational excellence is a must for any company that wishes to have not only control over income or expenses but also operation with minimum errors. Insurance business is very sensitive to mistakes when it comes to servicing and claims handling. If you have miscommunication or any underwriting errors when issuing a policy, it may result in huge costs and other liabilities when an incident occurs. The second target is to have a strict control on our figures. Insurance is totally based on statistics. Therefore, one must have a detailed and high integrity data in order to price risks in appropriate manner. Analytical thinking became a culture in our company. Each of our employees uses integrable data and figures provided by our actuaries and business intelligence unit when making proposals or decisions. We also apply this culture to all our business models. For instance, soon we will start risk segmentation of our clients and deliver them our products based on their risk values. A risk averse client will certainly benefit more from this. And the last target of IT restructuring was to provide an excellent service to our clients, agencies and partners. Every client must demand for a very high quality service from their insurance companies since this is what they are paying for. Provision of speed, transparency and self service solutions are very important today. Insurance is mainly sold with face to face interaction through agencies, so it may take some time to adapt online insurance sales and companies must certainly be technically capable to support it. Now, our IT infrastructure supports us to communicate with our clients transparently and fast. For example, we deliver automatic claim messages to our clients’ cell phones to inform them about each step of their claim files. AXA MBASK agencies can contact their customers via automated SMS solutions or create digital campaigns on their own. Our digital roadmap is ready for 2014-2016 period and we still have a lot to do on the technological side because each day brings something new.
CE: Which business areas does the Company intend to develop in the near future?
Selcuk Adiguzel: Increase of the volume of voluntary products, support of our efficient distribution network and provision of high quality service are our top priorities for now and will be for the upcoming years. Voluntary products are important in order to gain constant and stable revenue. In 2013 we delivered revolutionary products to the market. Among them noteworthy are an individual health product, a complementary product for MTPL called “icbari+5”, and our individual casco products updated in accordance with the market needs. We will continue creating new voluntary products in line with market requirements. Today we have a very efficient distribution network across Azerbaijan. Our regional offices provide regular support to our independent agency network. Our target is to maximize the efficiency and professionalism of our agencies so that to provide them with opportunities to increase their income by selling more complex products. We constantly arrange trainings (about technical insurance topics) for them at AXA Academy and also provide them sales tools on our IT system for different selling techniques. As I’ve mentioned earlier, customer satisfaction will be a key for the retention of clients and acquiring new ones. Word of mouth is very important in Azerbaijan. Therefore we will sustain our position as a reputable, trusted and service oriented company by providing our customers correct, fast and a solution oriented service.
CE: Do you manage to maintain the high level of profitability? What are the preliminary results of Company’s activities in the current year?
Selcuk Adiguzel: We are trying to create a company of the future. We have applied a new business model for 2 years and are still investing into technology and distribution. Once we achieve the optimum investment level, we will automatically see the profitability growth. As of today, the growth of our company goes in line with the market trend and the most important issue is that within 2 years we managed to diversify our portfolio without any negative effects to our market status.
CE: How does the Company plan to develop its activities outside Azerbaijan?
Selcuk Adiguzel: According to Q1 2013 results, AXA Group’s worldwide revenues grew by 22% in high growth and emerging markets. Investing in high growth and emerging markets is a strategy of AXA. Therefore, markets that have a potential growth, just like Azerbaijan, are always under the scope of the group. So, we can say that there is always the possibility of investing both in Azerbaijan or surrounding countries when the timing is right and an opportunity is present.
CE: What could you tell about the importance that the Company gives to the development of human resources?
Selcuk Adiguzel: Insurance market is expanding and job opportunities are definitely increasing. Today, a candidate has two options to select. One of them is working in an insurance company as an employee and the other one is founding his/her own business. Currently, there’s a lack of candidates especially those with required technical insurance skills and experience. Our company is investing heavily in local and foreign training programs. We are sending our employees to other AXA entities to gain experience and bring back the best practices in order to apply them in Azerbaijan. Staying a preferred company for our employees is a part of our strategic plan because we know that it is impossible to succeed without dedicated people. In order to create a culture of trust and sharing, we conduct an opinion poll which enables our employees to submit their wants, remarks or proposals directly to the management. These results are not only shared within Azerbaijan but also delivered to AXA Group to create action plans. Last year, our employee engagement totaled 93% which means that we are a good team. The other option for becoming an insurance professional is to become an insurance agency. Our trainings at AXA Academy continue and AXA MBASK will keep supporting people who is capable, open minded, active and have the willingness to create their own story.
