“Nairi Insurance” Executive Director Gor Khachatryan’s interview to Mediamax and Banks.am portal

- According to the data of the first quarter, profit of insurance companies in Armenia reduced by 12%, as compared to the analogous period of last year, and made $1,95mln, while insurance premiums in the first quarter increased by 56%, making $4.7mln. How do you explain reduction of insurers’ incomes against the background of general economy stirring up?

- Insurance incomes, as a rule, are formed not only from the difference of insurance premiums and compensations, but also from reassessment of the capital. Since the means of insurance companies are also kept in foreign currency, increase of incomes took place due to March devaluation of AMD in 2009.

As a factor of profitability decrease, one can also consider activation of car insurance, since it is relatively unprofitable for insurers: compensation here is more than in other types of insurance.

- “Nairi Insurance” company, not being the leader of the sphere as to its sizes, stands out by a high level of profitability of the capital and assets. In 2009, the company leaded in the market as to these indices (ROE – 43%, ROA – 27%). How does the company manage this?

- These are important indices for assessing any business. “Nairi Insurance” always tries to maintain an optimal level of general capital, which has its positive influence on the index of profitability.

On the other hand, until recently, “Nairi Insurance” did not much focus on sale of policies through mediators and agents. As compared to competitors, we mainly realize service via our office and at the expense of our own resources. This is the main reason for high level of profitability of capital and assets. I hope that we will maintain leadership as to these indices; however I am sure that such high indices will not repeat again, since commission payments will start playing a more significant role in the total sum of expenses.

- What are the indices that the company completed the first quarter with?

- In the first quarter, the insurance premiums we collected exceeded our expectations, making about 180mln AMD. Significant diversification of the insurance portfolio also took place.

Insurance of car transport means also exceeded expectations (premiums for insurance of land transport – 55.8mln AMD, premiums for insurance of liability coming from car transport operation – 23.2mln AMD), and this, I believe, is related not only to stirring up in car crediting by banks, but also by development of the culture of insurance among citizens.

An unexpectedly high share among the customers made individuals, who wanted to voluntarily insure their cars. This may be also related to steps on implementing compulsory insurance, although we warn customers that voluntary insurance is not an alternative to the compulsory one.

Quite a large share in the first quarter was also occupied by insurance of damage to property (35.9mln AMD).

Despite the fact that in the current quarter our proceeds from insurance premiums are lower than the expected level, at the same time a much more important issue is being solved: the level of our portfolio diversification is increased. This inspires with more confidence for the business of an insurance company, since if, as a result of crises, the proceeds from one sphere reduce, the expenses of the company are compensated for at the expense of other types of insurance.

“Nairi Insurance” still has to carry out volume work in the direction of diversifying the portfolio, in particular, we want to consolidate the line of medical insurance.

- What directions of insurance prevail in “Nairi Insurance” portfolio and what are the segments, which do not have significant share yet? Can one state that in one of the spheres you are more specialized than your competitors?

- We have held quite serious work on developing car transport insurance, since this segment provides for more stable profitability. We have held a serious research of the sphere, including a sociological one, analyzed conditions of car insurance, provided by all insurance companies, functioning in Armenia, and, as a result, we elaborated quite a serious, competitive and constantly improving product.

We, in particular, have implemented a calculator, which estimates the size of the insurance premium for any car. People, who have undergone insurance before, find it difficult to imagine how its cost is formed and the calculator partially solves this task.

Besides, we are seriously getting ready for compulsory insurance of liability, coming from use of car transport means.

I do not want to state that we are the most specialized ones in this segment: even if we prevail in some aspect, this is also reality due to our competitors, since we constantly study and analyze the market, aiming at improving the services.

- From the beginning of the year, two out of twelve Armenian insurance companies stopped their existence. What is this conditioned by and will this tendency continue?

- This is a normal phenomenon, since the market is quite small for such a number of insurers. One can enumerate numerous reasons for leaving the market, however, I believe that the main role here was played by commercial factors and economic expediency.

Consolidation of the insurance market will continue. I believe that in the course of 2-3 years, there will be 5-6 insurance companies left, at that, three of them will be more universal and the remaining 2-3 will be specialized in concrete directions.

- It is known that now the dominating part of incomes for insurers comes from corporate customers. What changes of the market conjuncture are expected as a result of implementation of compulsory car insurance?

- Corporate customers have always dominated in insurance market of Armenia. If we take into account the fact that the main part of individual customers turns to us on the demand of banks and embassies, one can make a conclusion that in insurance of individuals, the corporate culture is a key factor.

Since last year we have been carrying out policy, aiming at attracting individuals, since if the insurance culture is established among individuals, negative phenomena, which have become rooted in running business among corporate customers, will disappear. 

If, for instance, in the first quarter over 80% of insurance premiums came from corporate customers in the Armenian market, as a result of compulsory car crediting, the share of individuals will be more than 50%, and the market will increase at least twofold.

- When, according to you, will the idea of implementing compulsory medical insurance mature in Armenia?

- I somewhat don’t believe in soon prospect of implementing compulsory medical insurance. Serious level of infrastructure establishment is necessary for that: here we speak of introduction of the principle of reporting at hospitals and a single information system, establishment of healthy competition among medical institutions.

If the compulsory medical insurance creates problems in a country, such as the USA, I don’t think that here this issue will be settled right away. Here there are many more uncertainties than in case of car insurance.

Compulsory medical insurance itself is an expensive product. For its implementation in Armenia, they should study the international practice, bring it to compliance with other spheres and secure its balance with the European legislation, where the load of compulsory medical insurance is mainly on employees.

According to my assessments, it will take about 6 years to organize all the above-mentioned processes