Law of the Republic of Kazakhstan "On Mutual Insurance" of 05.07.2006 No. 163-3.

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What mutual insurance is

Mutual insurance is a form of insurance protection in which persons with similar risks join together and themselves form a common fund to compensate each other's losses. Here the policyholder is at the same time a member of the mutual insurance society: they pay contributions, take part in management and receive protection on terms approved within the society. Unlike a commercial insurance organization, the main task of such an association is not profit for shareholders but the protection of the property interests of the participants themselves.

The Law "On Mutual Insurance" establishes the legal basis for the creation and operation of mutual insurance societies in the Republic of Kazakhstan: their legal status, the procedure for membership, the principles for forming funds, management requirements and the specifics of state regulation.

Purpose of the law

The law gives enterprises and citizens a lawful mechanism for collective protection against risks where classic insurance is inconvenient, expensive or does not take account of the specifics of the industry. Typical examples are associations of agricultural producers, carriers, owners of similar property, and participants in a single professional community. At the same time the law sets a framework so that mutual insurance does not turn into hidden commercial insurance activity without supervision and without guarantees for participants.

Who the law applies to

  • individuals and legal entities that want to create a mutual insurance society or join one that already operates;
  • the management and supervisory bodies and employees of such societies;
  • the authorized body for regulating the financial market — these functions are currently performed by the Agency of the Republic of Kazakhstan for Regulation and Development of the Financial Market (ARDFM);
  • insurance intermediaries and consultants who compare mutual insurance with the classic products of insurance organizations.

Main provisions of the law

Organizational form

A mutual insurance society is created by its members as a non-profit organization. The law regulates the procedure for establishment, the requirements for the charter and for the insurance rules that the society approves, as well as reorganization and liquidation.

Membership

Insurance protection in the society can be obtained by its member. Membership arises in the manner established by the charter and is accompanied by an obligation to pay contributions. The internal documents determine the procedure for joining and leaving, the right to vote and the participant's liability for the society's obligations.

Contributions and funds

The funds for payments are formed from members' contributions. The law provides for the formation of insurance reserves and other funds, as well as requirements for the placement of funds, so that the society can meet its obligations. The internal documents may provide for additional contributions if the funds collected are insufficient — this is important to take into account before joining.

Management and control

The highest body of the society is the general meeting of members. Day-to-day activity is run by the executive body, and financial discipline is monitored by supervisory bodies and audit. Members are entitled to receive information about the society's activity and to take part in key decisions.

Restrictions on activity

The society operates in the interests of its members and is not entitled freely to engage in commercial insurance of outside persons or in activities unrelated to insurance. The specific list of permitted types of insurance and restrictions should be checked in the current version of the law.

Rights and obligations of society members

  • the right to an insurance payment when an insured event occurs, within the terms approved by the society;
  • the right to take part in the general meeting and vote on matters within its competence;
  • the right to see the society's statements and documents in the manner established by the charter;
  • the obligation to pay contributions on time, including additional ones where provided for;
  • the obligation to provide accurate information about the risk and to give timely notice of an insured event;
  • the obligation to comply with the society's charter and insurance rules.

Mutual insurance or a contract with an insurance company

Before joining a society, it is useful to compare its terms with the offers of licensed insurance companies in Kazakhstan. Pay attention to:

  • the scope of cover and exclusions — they are set by the society's rules and may be narrower than an insurer's;
  • the possibility of additional contributions if there are insufficient funds for payments;
  • the financial stability of the society and the existence of reinsurance for large risks;
  • the claims settlement procedure and payment deadlines;
  • the terms of leaving the society and the fate of contributions already paid.

If any concepts in the text of the law are unclear, look at the glossary of insurance terms.

What matters in practice

The file on this page reflects the text of the law at the time of publication. Since then, changes may have been made to the law and related regulatory acts, including in connection with the transfer of supervisory functions to the ARDFM. Before making decisions, check the current version in the "Adilet" legal information system (adilet.zan.kz) and take into account the regulator's subordinate acts.

Frequently asked questions

Can I be insured in a mutual insurance society without joining it?

As a general rule, no: the point of mutual insurance is that the policyholder is a member of the society and takes part in forming its funds.

Does mutual insurance replace compulsory types of insurance?

Compulsory types, such as MTPL or OSRNS, are arranged in the manner established by special laws. Whether a mutual insurance society is entitled to carry them out is determined by current legislation, so you should rely on the current version.

Who supervises mutual insurance societies?

State regulation and supervision in the financial market is carried out by the ARDFM. Internal control is provided by the society's own bodies and its members.

If you are choosing between mutual insurance and a classic contract, you can get a consultation from a broker and compare the terms.