Life insurance firm draws up plans to shake up market
U. S. insurance giant AIG has established a fully owned subsidiary in Ukraine to sell life insurance. Ukrainian insurance companies believe the new player, ALICO AIG Life, will give a major boost to the country’s embryonic life insurance market.
Owned by AIG subsidiary ALICO, ALICO AIG Life will market individual life and group insurance policies and benefits through a network of brokers and agents that it plans to establish.
Mark Narovlansky, chairman of the management board of ALICO AIG Life, said his company currently markets traditional life, accident and health insurance products. Narovlansky said ALICO will soon become the first company to introduce group insurance policies in the country, and said that he hoped that businesses would come to see group life and accident coverage as a fringe benefit for employees.
“Group policies can help reduce employee turnover by making people feel more secure,” he said.
He said the company is planning to diversify its services in the future.
Narovlansky said the incentive to enter the market came when parliament amended laws regulating the insurance market in 2001. The changes allowed insurance companies with 100 percent foreign ownership to operate in Ukraine. Previously, only joint ventures with foreign capital were permitted. ALICO was the first foreign company to seize the opportunity when it acquired a license from the Finance Ministry in October last year.
Narovlansky said the company sees a vast opportunity for expansion in the country’s nascent insurance market, and while he didn’t specify figures, he said that ALICO plans to invest millions of dollars to develop its business here. The country’s present insurance market is miniscule compared to that of its neighbors: Ukrainians spent just ten cents per capita for insurance in 2000, while Czechs spent $57 and Hungarians shelled out $63 per capita.
Narovlansky said that demand for insurance is low in this country partially due to the public’s lack of knowledge about the advantages insurance can provide. He also said that the insurance industry suffers from a poor public image. The Soviet Union’s state insurance company, Gosstrakh, collapsed in the early 1990s, leaving policyholders out millions of dollars. Many of the small private insurers that replaced Gosstrakh have also failed to gain the public’s trust.
“We have a lot of work to do in order to bring life insurance to the Ukrainian people,” he acknowledged.
To educate potential customers and boost the industry, ALICO offers free seminars for businesses and schools that are attended by hundreds of people each week.
Natalia Hudyma, general director of the Insurance Organizations League, said that ALICO has already had an impact on the market after just a few months’ work.
“We know that ALICO AIG Life earned large insurance premiums after only a very short period of time,” she said. “We received a great number of calls from people seeking information about the company.”
Andry Pikula, first deputy chairman at ALICO AIG Life, wouldn’t disclose exact figures but said the company has so far netted more customers than it had originally hoped.
Hudyma also said the parent company’s worldwide reputation should also help ALICO develop fast in Ukraine.
With operations in 130 countries, AIG is one of the largest retirement savings businesses in the United States and is an active asset manager. The company’s total assets equaled about $500 billion at the end of 2001. ALICO’s assets totaled $28 billion.
Yelena Masharo, vice president of ASKA insurance company, said ALICO’S arrival is important for Ukraine.
“I hope ALICO will introduce products that we don’t know about and will teach Ukrainian companies how to do business better,” she said.
Masharo said ALICO would face little competition on the market, since it is still in its development stage. She said poor legislation and low average income have hampered the market’s development.
Life insurance occupies a miniscule portion of the country’s overall insurance industry. The Insurance Organizations League said that during the first nine months of 2002. revenue from life insurance sales comprised just Hr 14.7 million, or 0.5 percent of all insurance revenue.
Narovlansky hopes his company will be able to change that.
“We feel very strongly that with our help, financial services in Ukraine will show improved results and significant growth,” he said.
