Exclusive interview of London-Yerevan insurance company’s executive director, Aram Piruzian, to ARKA news agency
ARKA: How would you assess Armenia’s insurance market?
Aram Piruzian: Armenia’s insurance market is underdeveloped and this is why it is very difficult to predict now how it would develop and what direction it might take. I would divide the market development process into three phases: before the Central Bank took control of it, after it went under Central Bank’s control and the current phase.
The last phase is characterized by changes connected with insurance companies’ passage to a new level when they develop their strategies, including pricing strategy, at the market, take up certain niches seeking to consolidate their positions. I think the right thing for this phase to do is to lead to increase of prices, not the contrary.
ARKA: When was your company founded and what types of insurance do you offer?
Aram Piruzian – The company began to work at Armenia’s insurance market in 2000. It was founded by British Londongate Group which holds 100 percent in it. Londongate comprises companies working in Great Britain, Eastern Europe, CIS and Africa.
In terms of collected insurance premiums our company has been rated among first three leaders at the local market. We offer a variety of insurance services, such as insurance of property, vehicles, liability, cargo, accidents, health and travels abroad. Our company does not deal with aviation risks insurance.
ARKA: What are the company’s major indices in the first 11 months of 2009?
Aram Piruzian: According to November 30 data, the company paid 207 million Drams in insurance payments. This figure represents a 70 million Dram growth from a year before. As for our authorized capital, it grew by 44.5 million Drams to total 575 million Drams as of November 30, 2009.
The company’s assets stood at 1.384 billion Drams, rising by 264.8 million year-on-year. Our liabilities stand at 595.5 million, by 7 million less than in the same period 2008.
ARKA: Did the global economic crisis have a negative effect on the insurance market of Armenia in general and on London-Yerevan in particular?
Aram Piruzian: The global crisis has had adverse effect on financial-banking sector rebounding on insurance market. Insurance volumes dropped resulting in decrease of insurance premiums. In terms of collected premiums for the entire 2009 the drop will not be beyond 10 percent as opposed to the previous year.
ARKA: Are there any forecasts about when this market may began to recover?
Aram Piruzian: In the long run that will be depending on the banking sector, and, which is no less important, on passage of a law on mandatory insurance. To the best of my knowledge, a relating bill was passed by the parliament in two readings.
Introduction of mandatory insurance is a complicated and painful process, but it is a must. In this sense the government will have to do a great deal of work to create backing infrastructures and institutions of evaluators, road police, judicial bodies and so on.
Otherwise insurance companies will encounter a string of very complicated and costly problems. The mandatory insurance contains a big risk- on the one hand it may cause discontent of bona fide insurance policy holders and on the other hand the potential frustration of insurance companies (i.e. investors in insurance companies).
ARKA: What are the major problems insurance companies face in Armenia?
Aram Piruzian: Major problems are related to absence of culture and previous record of insurance. People very often sign insurance contracts without reading carefully its terms. As a result later they face problems which cause their discontent.
ARKA: What are the most popular types of insurance in Armenia?
Aram Piruzian: The biggest demand is for insurance of property, cargo and vehicles. Medical insurance is also getting popular, especially corporate packages.
ARKA: Do you think there is a healthy competition at the local insurance market?
Aram Piruzian: In my opinion, there is not. Until now it has been reflected in lowering of insurance tariffs. Healthy competition is a complex policy aimed at improving the quality of services, introduction of well-devised marketing which lead to expansion of the market embracing new segments of economy and consumers.
Now the competition is boiled down to winning over clients of rival companies by lowering tariffs. This leads to unjustified low prices making insurance business senseless. Thus, the trend to lower health and vehicle insurance prices acquires a scaring scale.
However I would like to finish the conversation on a positive note and express confidence that the market will be able to solve all problems independently for the sake of its participants and consumers with a carefully planned and cautious intervention of the government.-0-
