Insurance market and its state regulation

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Insurance market and its state regulation

 

PLAN:
1. Concept of the insurance market and its participants.
2. Types of insurance market and their general description.
3. Importance of insurance market infrastructure in insurance market development.
4. Objective necessity and forms of state regulation of insurance activities.
5. State insurance control: its functions and tasks.
6. Insurance activity licensing procedure.

1. It is known that in any market there are sellers and buyers, and relevant goods (services) are exchanged between them. Similarly, the insurance market involves a seller (insurer) and a buyer (potential insured). Here, a reasonable question may arise as to how to interpret the concept of potential insured. The point is that if we call a potential policyholder a direct policyholder, we will make a big mistake. After all, in accordance with the current laws, legal and natural persons who have signed contracts directly with insurance companies and have civil capacity are called insured persons. On the other hand, persons who need to buy an insurance "product", but have not yet entered into relevant insurance relations with insurers, are called potential insureds. Now, if we talk about insurers, insurers are legal entities that have been granted the right to carry out insurance activities on the territory of the country and for which insurance is considered the main type of activity. It can be seen that the insurance company must have a license from the competent state body and not engage in non-insurance operations in order to operate properly.
Insurers offer to the market their own product - insurance service. These services can be sold by hundreds or thousands of insurance companies. In itself, this situation leads to increased competition among insurance companies to attract potential customers in the insurance market and has a positive effect on the quality of the "product". The most important thing is that the potential insured will have a "product" that fully meets his needs. What has been stated is not empty talk, but a simple fact that is happening in the market of developed countries today. The above mentioned points can be clearly seen in the diagram below.
For a deeper understanding of the nature of the insurance market
It is appropriate to give a simple example from our daily life.
We go to the flea market to buy clothes for ourselves or our children. Let's say we want to buy some clothes, more precisely, a shirt. There are different types of shirts in the market, and their prices are different. We definitely buy the best quality and the lowest price. The same process happens in the insurance market.
Drawing 1

Insurance market and its subjects

Insurance companies Insured

An insurance company should not forget that it has a great responsibility when it sells its product in the market. Because the insurer accepts a large amount of risk for a small premium and is obliged to pay the insurance coverage in the event of an insured event. At this point, we advise people who want to contact an insurance company or need a certain insurance service to familiarize themselves with the financial situation and balance sheet of the insurance company before concluding an insurance contract.
It should be noted that, like other goods and services, the price of the insurance service appears on the basis of demand and supply, and this price has its lower and upper limits. The amount of insurance income equal to the amount of insurance payments and expenses of insurance organizations means the lower limit of the insurance price. In such circumstances, the insurance company cannot profit from the main activity. In many cases, fierce competition in the insurance market forces insurance organizations to reduce tariff rates in order to attract potential customers. In foreign countries, when insurers suffer losses from insurance activities, these losses are covered by the income from investments.
The upper limit of the price of the insurance service is determined by the volume of demand and the amount of bank interest. When there is a sufficient demand for a certain type of insurance service, the insurance organization can maintain the price of this service at a high level. However, with the increase in the types of insurance services in the market over time, the tariff rates will automatically decrease.
2. The insurance market is divided into international, regional and national insurance markets depending on the territorial location. The national insurance market includes insurance institutions and their activities on the territory of a country. The largest national insurance market in the world is the United States of America. More than 43 percent of the insurance revenue collected in economically developed countries is accounted for by the USA. More than 2600 life insurance companies and 3800 other general insurance companies operate here. Some of them are leading in the world insurance market. For example, the company "Prudential of America" ​​took the first place in the domestic market of the country, and in the beginning of 1992, it took the third place in terms of existing assets and collected insurance premiums.
The regional insurance market means the internal market of several countries that are closely related in terms of trade, economy and other aspects. The EU insurance market is a large regional market.
The international insurance market is understood as the domestic market of individual countries that conduct insurance activities on a global scale. In particular, currently the Japanese insurance market has an important place at the international level, and in the next decade, Japanese insurers are leading the world market. According to the data, in 1992, 20 of the 9 largest life insurance companies in the world, or 45%, belonged to Japan. The financial potential of these companies is 869 billion. dollar estimated in the amount.
Insurance markets can vary by type of insurance as well as by geographic segmentation. In the practice of economically developed countries, the insurance market is divided into two: 1) the market of insurance services related to life insurance; 2) General insurance services market.

3. Economic reforms in the Republic of Uzbekistan are rising to a new level in terms of quality. In this process, insurance activity is also developing and flourishing. As a component of the market infrastructure, the insurance institution plays an important role in its development. From this point of view, the transfer of risks in insurance activities, in turn, depends on the level of development of the market infrastructure.
Here, the concept of "infrastructure" is different in economic scientific dictionaries: for example, "a set of economic sectors serving the main production sectors and the population" or "producing and non-producing serving a certain sector it can be noted that it is used in such meanings as "a complex of networks". In particular, when revealing the essence of the infrastructure of the insurance market, a set of activities that create guaranteed conditions for the effective functioning of the economic entity is envisaged. As you know, there are specific aspects of selling an insurance product and this process:
— collecting information about insurance risk and clarifying it;
— includes steps such as signing the insurance contract and ensuring its validity.
These stages of risk transfer in insurance activity require specific knowledge. At the same time, due to objective and subjective reasons, it may be considered economically unproductive to include a specialist company required for a certain short period of time. Therefore, the company usually uses the services of specialists from other fields in its activities. Therefore, it can be noted that the infrastructure of the insurance market as a mutual relationship between its professional participants and experts in other fields is considered a factor that ensures the effectiveness of risk transfer in insurance activity.
Based on the uniqueness of the insurance market infrastructure, it can be noted that it includes entities such as insurance intermediaries, insurers' association, accident commissioner, surveyor, actuary, insurance auditor, specialized consultants and valuation firms. (Figure 1). At this point, it can be noted that insurance underwriters are included in the London insurance market infrastructure.
Drawing 1
Subjects of the insurance market infrastructure

Each of them insurance b

Uzbekistan has a unique position in the insurance market. For example, an actuarial entity is considered when determining the price of insurance services. In doing so, he uses large numbers and the laws of probability, as well as statistics. In developed countries, insurance organizations cannot ensure economically based pricing of insurance services without actuarial activities. The actuary participates in processes such as strategic planning of insurance activities, analysis of insurance sectors, classes (types), as well as the composition and quality of the insurance portfolio for the company. In some countries, the report of the insurance organization is required to be approved by an actuary in addition to its authorized persons.
Another main subject of the infrastructure of the insurance market is the accident commissioner. He participates in the activities carried out in accordance with the terms of the contract after the occurrence of an insurance event. It can be noted that the accident commissioner operates on the basis of the contract concluded with the insurance organization. He, as a representative of the insurance organization, inspects the property damaged by the insured event, determines its extent and causes, and draws up an accident certificate. In some countries, the accident commissioner may also be authorized by the insurance company to cover the costs of searching for lost property within a certain limit.
In most cases in our country, the task of the accident commissioner is performed by the insurance organization itself or, depending on the type of event, by relevant organizations (road patrol service, evaluation organization, etc.). This situation certainly affects the quality of the insurance service.
In recent years, the insurance market of Uzbekistan is developing rapidly. In this process, the establishment and development of the activity of the accident commissioner will be a factor in increasing the confidence of various subjects in insurance.
Subjects such as surveyors and dispatchers operate "side by side" with the accident commissioner in the infrastructure of the insurance market. A surveyor is a special expert who inspects insurance objects at the request of an insurance organization. He can also be engaged by the insured to inspect the object. It should be noted that there are similarities and differences between it and the accident commissioner. In addition, the level of specialization of the surveyor is usually higher than that of the accident commissioner. Therefore, the accident commissioner also sometimes uses the services of a surveyor.
In the insurance market, together with the accident commissioner and surveyor, a dispatcher can also operate. This activity is mainly developed in coastal countries due to its connection with marine insurance. Property or other objects are insured against various risks that may occur during the process of delivery to the destination by sea. It is known that the property of several entities is loaded in sea transport and they may be insured. Damage to property caused by an insured event at sea is known as a general casualty.
In the case of a general accident, it will be necessary to determine how much damage each property owner has suffered. This is exactly what the dispatcher does, and he is a specialist in calculating the damage and distributing it objectively. The document drawn up on the account of the damage is called dispatch.
In the infrastructure of the insurance market, insurance intermediaries occupy a special place as professional participants. They are important entities in terms of mediating activities between the insurer and the insured. Insurance intermediaries include entities such as insurance agents, insurance and reinsurance brokers. In particular, an insurance agent is a legal or natural person who organizes the conclusion of an insurance contract and its execution on behalf of an insurance organization or on its behalf. An insurance broker is a legal entity that performs activities related to the conclusion of the contract and its implementation on behalf of the insured or on his behalf. Insurance intermediaries have a special system for selling insurance products and form a unique infrastructure of the insurance market.
An association of insurers is an important component of the infrastructure of the insurance market, which can be established to serve the interests of its members (for example, the Association of British Insurers, which has been operating since 1985). The task of this association is wide-ranging, it operates in such directions as popularization of knowledge related to the insurance industry, publication of special booklets, statistical data.
In the infrastructure of the insurance market, auditing organizations also have a special place. In accordance with the Law of the Republic of Uzbekistan "On Auditing Activities" adopted on May 2000, 26, it is mandatory for insurance organizations to undergo an audit. The audit is carried out based on the request of the insurance company. According to its result, the auditor gives his opinion on the financial situation of the insurance organization. This summary reflects the financial situation of the insurance organization. Based on the conclusion provided by the auditor, the insurance organization develops a strategy to improve its financial situation and implements it.
Insurance activity also has its own characteristics and requires the development of a special (for example, commercial bank accounting) accounting procedure.
It should be noted that if the auditor inspecting the insurance activity does not have special knowledge in this field, a disagreement may arise between the parties. For this reason, in the development of insurance activity, keeping its own accounting is of great importance.
In addition to the above, specialized consultants can also act as subjects of the insurance market infrastructure. These entities include specialized and comprehensive consulting offices, law firms, and appraisal firms. At this point, it can be noted that the level of development of consulting services in our country is not high, and these specialists are almost not involved in insurance activities.
By the end of 2004, insurance premiums in Uzbekistan amounted to 32,9 billion. amounted to about soum. This indicator is expected to increase in 2005. These indicators indicate that the insurance market of Uzbekistan is developing rapidly. Further development of the insurance market in our country requires expanding the scope of its services and improving their quality.
The study of international experience shows that the market infrastructure is a process that goes hand in hand with the formation of the insurance market infrastructure. In Uzbekistan, the formation of the infrastructure of the insurance market is taking place in a somewhat different way.
Insurance brokers, auditors, assessors (experts) of insurance objects and other subjects who should work independently in the infrastructure of the insurance market, in contrast to the foreign practice, to the insurance organizations operating in our country. attached. Although the development of the infrastructure of the insurance market is slow, efforts of insurance organizations to develop their own infrastructure are visible. In particular, in this regard, "Uzbekinvest" EIMSK is the leader, under it "Sugurta Olami" insurance business training and "Innovation and development of insurance services" centers, "Uzbekinvest Eksiminform" marketing and "Uzbekinvest Assistance" service agencies, investment company "Uzbekinvest Sarmoyalari" as well as other subsidiaries are operating efficiently.
The formation of the insurance market infrastructure and the improvement of the regulatory and legal basis of the activities of its subjects will bring the development of the insurance market in Uzbekistan to a new stage of development. In particular, the organization of the association of insurers, the establishment of the activities of subjects such as actuaries and surveyors are gaining importance in our country. It should be noted that this process requires special specialization of insurance market infrastructure subjects and mutual coordination of their activities.
4. The activities of insurance organizations differ sharply from the activities of other types of economic entities. Because they serve to ensure the continuity of production and cover the damage caused by insurance events. This situation imposes a special responsibility on insurers, and therefore, it is necessary for them to be controlled by the state.
Forms of state regulation of insurance activities. State control of insurance activities can be conditionally divided into three (see Chart 1).
The experience of foreign countries shows that the insurance market in all economically developed countries is regulated by the competent authorities of the state.

Drawing 1

Forms of control of insurance activity

For example, in Great Britain, the Department of Trade and Industry oversees insurance, in Japan, the Insurance Department of the Ministry of Finance, and in the United States, special insurance commissariats. The state, while carrying out such control work, is primarily based on the country's laws and other normative documents related to the insurance sector. Insurance and reinsurance companies, intermediaries specializing in insurance are the objects of state insurance control.
5. State regulation of the insurance market is carried out in various forms, in particular, through the adoption of special laws, taxation, introduction of compulsory insurance by separate government decisions and establishment of an authorized insurance control service.
Issuing licenses (permits) to organizations engaged in insurance is one of the main tasks of the insurance control service. In the process of issuing a license (permit), the insurance control conducts a preliminary examination of the future activity of the insurer. That is, the state of the statutory fund and own funds and the relationship of these funds to the obligations of the organization are considered. It should not be forgotten that the need to issue a license (permit) for insurance activities comes from the very essence of insurance. Because the insurance organization must pay the amount specified in the contract to the insured in time when the insurance event occurs. The work of the insurance supervisory body in this regard is not only in the interest of the insured, but also serves the interests of the entire state.
It should be recognized that today the procedure for issuing a license (permit) to engage in insurance activities has been developed in the country. A license (permit) issued to an insurance organization is issued for each type of insurance or groups of insurance types close to each other. Because the operation of some types of insurance requires the insurer to have sufficient funds. In addition, it is necessary to pay special attention to the correct calculation of insurance tariff rates in the business plan developed by the insurance company. After all, a wrongly calculated rate will ultimately lead to the financial instability or solvency of the insurance company. In our opinion, the introduction of licensing of activities of not only insurance companies, but also organizations specializing in reinsurance and intermediary offices has become of great importance.
In our country, the insurance market is regulated by the state
while thinking about ways to organize and improve it, it would be useful to dwell a little on the work being done in this field in the neighboring countries, in particular, in the Russian Federation.
Today, there are more than 1500 insurance organizations operating in the Russian Federation, and most of them have licenses from the Federal Service that supervises insurance activities. This insurance regulatory organization was established in 1992, it has gained enough experience in regulating the Russian insurance market, it has developed dozens of regulatory documents. The most important of them are "Procedure for issuing licenses to insurance organizations operating on the territory of Russia", "Procedure for placement of insurance reserves", etc. This organization has great influence in the socio-economic life of Russia due to its strictness and other actions. The most important thing is that every year, the insurance control service identifies sufficiently strong insurance companies operating on the territory of Russia based on the rating and informs the general public.
In accordance with the Law of the Republic of Uzbekistan "On Insurance Activities", when insurance organizations fail to fulfill their obligations to the insured, the state insurance control service must take measures that take into account the interests of customers. . Many insurance organizations operate on the market, naturally, this situation leads to increased competition among them to attract potential customers. As a result, some insurance companies that could not withstand the competition will leave the "insurance space". Examples of this can be given from world experience. In particular, at the beginning of 1993, it was announced that 103 companies specializing in life insurance in the USA had lost their ability to pay. Interestingly, among these companies there is also a financially reliable company "Executive Life Insurance". His assets have been estimated by experts at several billion US dollars. Here, such a reasonable question may arise. So, what measures can the state take to prevent the above situation from happening in the international insurance market?
First, the government, through its relevant supervisory body, ensures that insurance companies strictly comply with the requirements of the Law of the Republic of Uzbekistan "On Insurance Activities", including the correct maintenance of insurance reserves. it is important to control the location. Secondly, it is necessary to regulate the entry of financially strong foreign insurance companies into the emerging insurance market of Uzbekistan. After all, this situation has a negative impact on the competitive tolerance of local insurance companies and can lead to their bankruptcy.
It is appropriate if insurance organizations establish a centralized insurance fund by allocating a certain percentage, depending on the size of their obligations. Funds from this fund are given to insurance companies in a difficult situation or to fulfill their obligations when they are declared bankrupt. In our opinion, this fund should be managed by the newly established state insurance control service, involving representatives of the insurers' association.
Article 15 of the current Law of the Republic of Uzbekistan "On Insurance Activities" specifies the issues of insurance activity licensing. Insurance activities of insurers and insurance brokers are carried out on the basis of licenses issued by a specially authorized state body in the order determined by the Cabinet of Ministers of the Republic of Uzbekistan.
The license is issued to the insurer to carry out insurance activities in the field of life insurance or in the field of general insurance. An insurer carrying out insurance activities in the field of life insurance does not have the right to carry out insurance activities in the field of general insurance, with the exception of certain types (classes) of the general insurance field determined by the Cabinet of Ministers of the Republic of Uzbekistan. An insurer carrying out insurance activities in the field of general insurance does not have the right to carry out insurance activities in the field of life insurance.
The license specifies the types (classes) of insurance that the insurer intends to implement.
Based on the decision of the Cabinet of Ministers of the Republic of Uzbekistan "On measures to further develop the market of insurance services", the classification of insurance activities was approved. It shows that the life insurance network consists of 4 classes and the general insurance network consists of 17 classes.
The suspension of the insurer's license will cause him to be prohibited from concluding new insurance contracts, including the prohibition of extending existing insurance contracts. In this case, the insurer is obliged to fulfill its obligations under the previously concluded insurance contracts in the prescribed manner. Within five days from the date of termination of the validity of the license, a specially authorized state body must apply to the court with an application for termination of the insurer in accordance with the procedure established by law.
The powers of the previously acting management bodies of the insurer are suspended and transferred to the temporary administration of the insurer appointed by the specially authorized state body. The temporary administration performs its activities until the court issues a decision. The report of the temporary administration of the insurer shall be submitted to the specially authorized state body and to the court to which the application of the specially authorized state body on liquidation of the insurer was sent. The temporary administration of the insurer does not have the right to carry out cost operations during the period of its activity, management expenses (administrative expenses) of the insurer, recording of money coming to the insurer and insurance under previously concluded insurance contracts. except for cases related to payment of insurance compensation (insurance money) in case of accidents. The working procedure of the temporary insurance administration is determined by a specially authorized state body. The provisions of this article do not apply to cases where the license is revoked according to the application of the insurer, as well as reorganization or termination according to the decision of its founders (participants) or the management body of the insurer authorized to do so in the founding documents.
At least ninety percent of the insurer's charter fund is formed from the funds of the founders. It is not allowed to use loans, pledged funds and other borrowed funds to form the authorized fund of the insurer. The authorized fund of the insurer must be paid by the founders of the insurer before the license is obtained.
6. The Cabinet of Ministers approved the Regulation on licensing of insurance activities of insurers and insurance brokers. According to it, licensing of insurance activities of insurers and insurance brokers is carried out by the Ministry of Finance of the Republic of Uzbekistan. Legal entities registered in the prescribed manner can be license applicants for insurance activities of insurers and insurance brokers. As a rule, the term of validity of the license to carry out insurance activities of the insurer and insurance broker is not limited. The validity of the license starts from the date of license issuance.
In order to obtain a license, insurance organizations must meet the following requirements and conditions:
- Compliance with the legislation of the Republic of Uzbekistan on insurance activity;
- to ensure the confidentiality of the information obtained during the implementation of insurance activities in accordance with the requirements of legal documents;
- to provide the information specified in the legislation on the implementation of insurance activities at the request of the licensing body;
- the head of the license applicant must have a higher education and at least two years of work experience in the insurance sector;
- the head of the license applicant (licensee) has no right to hold the position of head in other insurance organizations.
a) for insurers:
existence of the minimum amount of the charter fund established by law;
b) for insurance brokers:
ensuring compliance with the contractual obligations of the insurance broker in the performance of insurance activities;
drawing up and executing the insurance contract under favorable terms for the licensee's client;
to carry out mediation activities related to insurance as the main type of activity.
In order to obtain a license, the insurance company submits the following documents to the licensing authority:
a) for insurers:
the name and organizational legal form of the legal entity, its location (postal address), the name of the banking institution and bank account number, the type of licensable activity that the legal entity intends to carry out and the period during which the specified type of activity will be carried out are indicated license application;
a notarized copy of the certificate of state registration of a legal entity;
information about the supervisor (a copy of the diploma of higher education and an extract from the work book);
a document confirming that the license applicant has paid the fee for the consideration of the license applicant's application by the licensing body;
documents confirming the payment of the authorized capital, which is not less than the specified minimum amount of the authorized fund (bank reference, deeds of acceptance and transfer of property and other documents);
economic substantiation of insurance activity, which includes a business plan for the insurance class to be licensed, including a forecast of the development of insurance operations, a plan of possible reinsurance negotiations, a plan for the calculation of insurance reserves;
rules (conditions) on the types of insurance for which a license is required, the license contains the following: defining the scope of insurance subjects and restrictions on concluding an insurance contract, defining insurance objects, insurance events determining the list — when these situations occur, the insurer's obligations regarding insurance payments arise (basic and additional conditions), withdrawal (of risk-holders or property) in which insurance the lessee is released without fulfilling his obligations, insurance premium tariffs (rates), the maximum (minimum) term of insurance, the procedure for concluding insurance contracts and paying insurance premiums, the insurance contract of the parties mutual obligations and possible cases of refusal of payment under insurance contracts. Samples of insurance contracts must be attached to the rules. Insurance rules (conditions) approved by the head of the license applicant are submitted in duplicate, the pages of which must be sewn and numbered. Applicants for a license whose type of activity consists only of reinsurance shall submit the documents specified in this paragraph, except for the letterhead regarding insurance rules (conditions).
b) for insurance brokers:
the name and organizational legal form of the legal entity, its location (postal address), the name of the banking institution and bank account number, the type of licensable activity that the legal entity intends to carry out (part of it), and the specified type of activity an application for issuing a license with an extended term;
a notarized copy of the certificate of state registration of a legal entity;
a document confirming that the license applicant has paid the fee for the consideration of the license applicant's application by the licensing body;
documents confirming that the authorized capital has been paid (bank reference, deeds of acceptance and transfer of property and other documents).
The specified documents are submitted in one copy.
A fee in the amount of five times the minimum monthly salary established in the Republic of Uzbekistan is charged for the consideration of the license applicant's application. The amount of the fee for the processing of the application is transferred to a special account of the licensing authority. If the license applicant withdraws from the application, the paid fee will not be refunded.
Licensing of insurance activities of insurers and insurance brokers is carried out according to the scheme presented in the appendix (see Appendix 1). As can be seen from the attached scheme, the process of licensing insurance activities of insurers and insurance brokers includes 6 stages, initially the license applicant prepares the necessary documents and submits it to the Ministry of Finance for review. At the next stage, the documents are accepted by the Ministry of Finance and given to an expert commission for consideration. The expert commission, after studying the submitted documents in detail, makes a decision to issue a license to an insurer or an insurance broker or to refuse to issue a license.
Thus, it can be concluded that the power to license insurance activities entrusted to the state body of insurance supervision in Uzbekistan is ultimately aimed at protecting the legal interests of all policyholders, that is, clients of insurance companies. The creation of such a system is in the interests not only of the insured, but also of the state.