Exclusive interview of INGO Armenia insurance company executive director, Levon Altunian, to ARKA news agency

ARKA – Mr. Altunian, what is you vision of global economic developments in the next several years, particularly, in the insurance market?

L. Altunian – Unlike global processes in this sector, Armenia’s domestic insurance market is fairly predictable, unless the lawmaking thought makes unexpected twists and turns. Nonetheless, we can count on progressive movement, particularly because we have now the mandatory insurance of motor vehicles, which is developing day after day.

ARKA - In this context, what is you outlook for development of car insurance market?

L. Altunian - We expect either a small loss by yearend, or an acceptable amount of profits. We will not have to revise anything, except for some nuances to make the refund faster and more convenient for citizens and insurance companies. We assume that nothing will change.

ARKA - How do you see the development of the insurance market in Armenia in general?

L. Altunian - The insurance market will continue to evolve due to streamlining of administration losses and concurrently increasing sales of other insurance products. We expect our agents’ to gain more experience and skills that will after all result in increasing cross-sales. It's no secret that the agents are ordinary people who like most of our citizens, first heard about insurance with the advent of mandatory insurance of cars. They are simply the most enterprising part of the population who want to make money by attracting new customers. Naturally, some of them will quit thiFs job, but another part will keep on to eventually improve their skills. They will not be satisfied by simply selling a car insurance at 30 thousand AMD - they would like to tell client about other products as well. World statistics show that eight out of 200 meetings end with the conclusion of a contract, and one day this will be happening in Armenia too. This is one of the ways to develop the insurance market, the other one is to develop projects for compulsory medical insurance. And of course the planned pension reforms. This will be the most technological and highly developed insurance trend.

ARKA - So you think that these types of mandatory insurance will be introduced as a priority?

L. Altunian - As someone who is closely involved in insurance business and is professionally curious about its influence on the economy, I believe that other types of compulsory insurance should be introduced as well. Environmental insurance, liability insurance for high-risk industries, employers' liability insurance, professional liability insurance of those professions whose influence on public life is large enough, such as lawyers, appraisers, doctors should also become mandatory.

ARKA - Which way do you support?

L. Altunian - I am for evolutionary way of development because revolutions bring no good. However, evolution can proceed by leaps, like the technological progress over the last century, but it can be slow too. I hope that we will develop faster and faster.

ARKA - What are the main barriers you see in the way of development?

L. Altunian – In my opinion the main obstacle is insufficient level of jurisprudence and legal services in the country. The judiciary and advocates are the institutions that are supposed to guard civil rights. And if we do not have enough practice of defending civil rights, consequently it is not serious to talk about insuring types of responsibility on part of structures, be it a harmful industry or a surgeon that operated the wrong patient, or billing a claim for damages. The authorities may sentence a doctor for operating a wrong patient or a chief engineer for polluting the environment to a prison term, not more. But if the entrepreneur, the owner of a plant, an individual had to pay for the damages, then liability insurance would be on an absolutely different level.

ARKA -In your estimate, what is the current volume of Armenia’s insurance market?

L. Altunian - Traditionally, our portfolio and indicators reflect the average statistical situation of the market. And if we assume that insurance companies have just doubled the amount of insurance premiums, which is a fact, our share is about 22-24 billion drams.

ARKA - Mr. Altunian, what is the share of your company in the insurance market in general and in the mandatory insurance of cars in particular?

L. Altunian - Given the fact that we have insured about 70,000 vehicles of 380,000, this is approximately 17%. In the market of voluntary insurance our share was about 24%. Therefore, we can say that our market share is around 20%.

ARKA – What is your yearend forecast?

L. Altunian – There is no doubt that car insurance will make no more than 50% of our portfolio. We will deter further growth, if there is any. As for volunteer types of insurance they are likely to grow by 20% compared to last year and as much will grow car insurances. Accordingly, our overall portfolio will increase by 20% from 2010. I do not know how much the market may grow and if it grows by more than 20%, we will lose part of market share. If less, we will take the same market share as last year, or slightly larger. Last year we held 24%.

ARKA - What are the recent indicators in particular, in terms of car insurances?

L. Altunian - The volume of insurance claims of the company for five months of 2011 amounted to 554.3 million drams, including 304.6 million drams of payments for car insurances, 249.7 million drams for other types of insurance, up from the aggregate figure of 167.3 million drams in the same time span of last year and from the yearned 482.7 million drams. The volume of collected insurance premiums from January to May this year amounted to 3.1 billion drams against 1.1 billion drams in five months last year and from 1.9 billion drams for the full year 2010. Car insurance premiums for the reporting period amounted to 2.03 billion drams, and of voluntary insurance to 1.1 billion drams.

ARKA - There is also criticism that compensation for health insurances are not enough to cover the cost of treatment?

L. Altunian - I think it is a signal that it is time to reform our health care system. Here we should go through revolution because we are somewhat delayed with evolution.

ARKA – Did you have instances of car insurance fraud?

L. Altunian – We did not have cases of malicious fraud, when people arrange they cars and tell us how they bumped. There are cases of "spontaneous fraud," when after an accident the parties try to agree on what each of them should claim in order to get the highest compensation possible.

ARKA – Mr. Altunian, how can we assess the competitive field in the market and whether you think the number of insurance companies in the market is optimal?

L. Altunian – We used to work at this market when there were about 33 companies. Now we have an unprecedented low number of companies on the market - eight of them, and I certainly associate it with tougher regulation. People began to realize that this is a very special kind of activity, and not as profitable as trading or banking, so the shareholders and owners of companies are thinking thrice before to engage in this kind of business. With regard to the competitive field, I think it is quite normal and healthy. We work and interact with absolutely all the insurance companies, whose executives are adequate people.

ARKA - Do you think that the division in the context of life and non-life insurance is correct? Does not it impede the development of the market?

L. Altunian - No, it does not. If you do something you do it professionally and thoroughly. Life insurance segment was so small that when we could have licenses to operate in both segments, still we did not put life insurance in a separate unit because of economic inefficiency. There was no market at all. Our total premiums did not go beyond $30 thousand, and we did not have pain when in 2007 we canceled the license. In fact, there were no prerequisites for the development of life, tax, pension or other insurances. Now, after the pension reforms, one or two of these conditions have appeared. I think that companies that are engaged in life insurance will emerge.

ARKA - Do you think it possible and promising to develop the agricultural insurance in Armenia?

L. Altunian - It is realistic and feasible. The next few months - July and August- will proceed in our company under the motto of agricultural insurance, and I think we shall offer some surprises to our farmers and administrate officials. We intend to offer paid, adequately calculated insurance services. In this context we need to understand that nothing is impossible, and importantly it is a market in which everything has its price. Farmers should be prepared to pay for the risk and receive appropriate compensation.

ARKA - What types of insurance are the most interesting for INGO Armenia?

L. Altunian - Each type of insurance contains some specific interest. For example, we are interested in property insurance to the extent that it stabilizes our portfolio due to the low loss ratio. Despite the lower tariffs, loss-making from property insurance is still low. Car insurance - whether mandatory or Casco or health insurance gives us the opportunity to enter the retail market and work with our clients face to face. It educates us and turns us to individual needs of our clients. Liability insurance is one of the most technological and knowledge-intensive types of insurance, and is interesting to us in this sense. I think every type is interesting in its own way and may catch our attention.  -0-