InsurTech startups report difficulties in Kazakhstan

One hand is enough for finger-counting Kazakhstani startups focused on insurance products. Kursiv.media has tried to know what kind of obstacles InsurTech projects have been struggling with.

Waiting for harvest

The Agroinsurance startup was launched in 2020 after Kazakhstan adopted index insurance that provides coverage and compensation based on the occurrence of a predefined index, rather than individual losses. This helped Agroinsurance to launch its core product – оnline drought insurance for farmers. The product is based on a soil moisture index created with the help of a series of pictures from space. This feature is something that makes the startup unique.

«We have received satellite data from Planet, a company from the Netherlands. This helps us to avoid human factors in the assessment of damage from the drought. The entire process of drought insurance is delivered online. It is transparent, which is something that makes Agroinsurance so attractive for our clients,» Olzhas Begaly, co-founder and technical director of Agroinsurance said.

The idea of an online startup based on index insurance isn’t something unique, although not many have done the same as Agroinsurance. The company has been cooperating with Swiss Re, a reinsurance company from Switzerland, which is also one of the biggest companies of this kind. Swiss Re is a key partner of the startup, along with several Kazakhstani insurance companies.

According to Begaly, the startup has been growing by 300% a year on average. In 2020, the company issued insurance for 115,000 hectares ($438,202), 150,000 hectares ($796,732) in 2021 and 361,000 hectares ($2.4 million) in 2022. This year, Agroinsurance has insured 400,000 hectares for $3.3 million. Kazakhstan’s government used to subsidize 50% of insurance over the period from 2020 to 2022. Now the size of public subsidy is 80% of the insurance. This factor has been a powerful incentive for the business.

However, despite impressive results, the startup still struggles with sales as many Kazakhstani farmers are suspicious about the new tech product, Belagy noted. «We have to deal with the prejudice of farmers who are used to working with corrupted officials and have bad memories associated with the insurance process,» the Agroinsurance co-founder highlighted.

«Many in Kazakhstan believe that insurance isn’t something necessary for their lives and I am not just talking about agriculture. We have to promote the culture of insurance itself,» the businessman said.

On the other hand, the insurance sector in Kazakhstan had been relatively passive for 30 years, Begaly says. The lack of competition wasn’t good for the industry, but now we see how fast new innovative products like Freedom Finance Insurance can grow,” he underlined.

Despite all these problems, the InsurTech project is quite resilient. Its Swiss partners suggest that Agroinsurance should replicate its business model in Europe where digital insurance products in agriculture aren’t common.

However, Agroinsurance’s founders want to see their project on American soil because this might be helpful to find new investments and develop the product further.

Marketplace on pause

According to Rinat Kotyrtauov, founder of the Saqtandyry project, he came up with the idea of his business when he realized there were not any similar products in the market. In January 2020, he launched an online aggregator for easily finding the best insurance offer in the local market.

Unfortunately, he failed to find any partners to work with on the project.

«I contacted all insurance companies I could find in Kazakhstan. Some of them responded to me, and some did not. Either way, I failed to persuade them to cooperate. Insurance companies do not want to integrate their products with third-party companies as they focus on their own platforms. There are several leaders on the market and they aren’t eager to share their business,» Kotyrtauov said.

However, the key problem was the State Credit Bureau. This system isn’t perfect and as a result, many users were unhappy with delays and failures of the service, which heavily relied on public databases.

One year later, Kotyrtauov was forced to dismiss his team, although he doesn’t want to close the platform itself. The Saqtandyry.kz website is still working thanks to some profit from consulting services.

«Saqtandyry needs a transformation but I have no clear vision of what I have to do to rebound my business,» Kotyrtauov said.