BANKS TO MAKE IT UP TO INSURERS
The insurance companies are an extremely useful human invention, which has proved such for banks as well. The question is that both insurance companies and pension funds are the biggest institutional investors. They operate with considerable money funds (insurances and premiums) which have to be deposited somewhere in order to guarantee revenues and resource for future payments. The Insurance Act obliges these companies to invest their reserves in special kinds of assets and interrelations. They include bank deposits as well (up to 50%), but no more than half of their money can be deposited in one bank. The limit for mortgage bonds comes up to 25% of the reserves and no more than 15% of the bonds can be part of one bank's issue. This means that one insurance company, one of which owners is a bank or a bank-related entity, can make this bank a favour and provide the so important resource for long-term credits. This is especially valid for the life insurances because the insurers receive payments on them in at least five years' and up. Till then the banks can make use of the life insurance companies' reserves, deposited with them. At the same time a vice-versa situation is also possible - treasuries which are working for the insurers. One of the options is the so-called insurances of credit-borrowers which are required by the banks from their clients at the time of crediting. When drawing a credit for the purchase of housing for example, it must be insured. The same holds true about credits for the purchase of vehicles. Consumer credits are necessarily accompanied by a life insurance. In some cases the bank offers such products as bonuses (and the credit institution is the one to pay the insurer's premium), but the client can pick up the insurance company at his own discretion and insure there his life or his property. The sense of the policy accompanying the consumer credits is to guarantee to the credit institution that in case the borrower dies or suffers a permanent disablement, there will be someone to pay up the credit or the remaining part of the credit. The credit-borrower in his turn frees his heirs from paying up the credit in case he suffers an accident.There is no official information provided by the Insurance Supervision Department about what part of the general premiums of the companies is covered by this product. Yet it's a well-known fact that the life insurance business in Bulgaria is far from the dreams of the managers working in this sector. Especially after all tax preferences provided by such insurances were eliminated as of the beginning of 2003. Keeping in mind the aggressive bank crediting on the other hand, it can be said that insurers' revenues do grow up, though at a slow pace. And every insurance company makes all efforts to convince a certain bank to pick up and offer its services to protect the bank's clients. Thus insurers aim at attracting new customers for their other products as well. Not long ago the insurance company Bulgarian Estates won the battle to provide life insurances for credit-borrowers from Biochim Commercial Bank. This result came out after a competition, although one of the insurer's main shareholders - Wiener Stadtische, is a partner of Bank Austria (Biochim's owner) for Central and East Europe.The insurance company Vitosha Life has signed an agreement for co-operation with ProCredit Bank and TEXIMBANK. The insurance company Victoria works with Corporate Bank (of which it is a fresh shareholder). Bulgarian Post Bank is among the banks with which AIG Life does business with. In fact for its consumer, housing and scheme credits Post Bank works with AIG, DZI - General Insurance, BulIns, EuroIns and Allianz - Bulgaria. Since the beginning of July the insurance company Orel Life has put hand on the clients of HEBROSBANK. Bulstrad DSK Life co-operates with many banks, but works especially with DSK Bank when consumer and housing credits are concerned. Bulstrad partners with United Bulgarian Bank on mortgage and car credits and with ING Bank - on mortgage credits. Under the conditions of the group agreements on life insurances provided for the clients of DSK Bank, the insurer pays the monthly deposit on the credit in case of long-term disablement, and in case of permanent disablement or death covers the rest of the credit. The other insurance companies pay up in a similar way.Plamen Yalamov, Executive Director of the second biggest life-insurance company in Bulgaria, Allianz Bulgaria Life, explains that for the time being the revenues from this activity are small for the reason of low premiums. The premium for death from accident accompanying a five-year credit for BGN10,000 for example is around BGN20-30 for the first year and drops in the second and the other years to come. BGN50-100/month is paid on the saving life insurance, Mr. Yalamov specifies. Allianz Life offers this insurance to everyone who is willing, but it is also a group insurer of the consumer credits' borrowers of Bulgaria Invest (which is part of Allianz Bulgaria Holding). As usually the coin has two sides - revenues are guaranteed, but small, Mr. Yalumov adds. Of course, the insurers estimate the risk they undertake. For instance, regarding the consumer credits Bulstrad DSK Life covers the risk of death and long-term disablement, including such from general illnesses. Only people under 65 years can be insured. Generally, when working not only with DSK Bank, but also with the other credit institutions, the insurance company excludes such risks as suicide, deliberately caused states of incapability, wars, military operations and terrorism. No compensations are paid in case of event which has come as result of earlier acquired illnesses, nuclear explosions or attempted crimes. To this restrictions Vitosha Life adds the eventual consequences or drug addiction, criminal abortions ot hidden illnesses. The company pays for permanent disablement when it exceeds 75 per cent.The insurance company Bulgarian Estates insures people between 16 and 67 years of age. The company covers the main risks like death and the additional ones - like death from accident and permanent disablement and temporary incapacity for work of more than 50% as a result of accident or illness. Generally, most companies don't pay compensations in case of accident after use of alcohol or in case of professional illneses. When the client has had an accident when practicing winter or extreme sports he should not count on compensation from this company, either.