Monday, December 6 2010 19:25
Increasing authority of insurance business on agenda of insurance companies
ArmInfo. Interview with Gagik Grigoryan, Executive Director of Rosgosstrakh-Armenia Insurance Company
Mr. Grigoryan, we have been recently observing a certain tendency of consolidation of insurance companies in the country. Rosgosstrakh-Armenia did not remain aside of those trends and amalgamated London-Yerevan insurance company earlier this year…
Actually, that deal was of different nature. It was not amalgamation, but transfer of the insurance portfolio of London-Yerevan Company. In Armenia such deals are not on standard schemes. Therefore, we received also the staff of London-Yerevan and no one has been dismissed.
Is your company studying possibility of such deals at present?
Today speaking of insurance company with its network and customer base is certainly “far-fetched.” Transactions on merger or amalgamation imply certain input vectors – acquisition of the customer base and many others. In the given context, it will be possible speaking of merger or acquisition deals only after establishment of the motor third party liability insurance institute in the country when all the insurance companies in the market will have their own customer base and insurance portfolio and it will be possible to evaluate it properly.
Mr. Grigoryan, introduction of Motor Third Party Liability Insurance (MTL) is very expensive for insurance companies. Don’t you think that they may face difficulties with fulfillment of their liabilities? After all, the product requires big expenses besides being lossmaking…
ROSGOSSTRAKH spends nearly $37 million dollars weekly on indemnification. At present the insurance market capacity in the country is a bit more than US$20 million inclusive of the aviation insurance and exclusive of MTL. Even if MTL leads the market to financial distress, ROSGOSTRAKH’s potential is more than enough to get out of that situation.
We will receive relatively exact answers to the question on profitability or lossmaking of the given product at the end of 2011. However, insurance companies have made their own actuarial calculations and believe that MTL tariffs should have been at least 30% higher than today.
Does it mean that insurance tariffs may grow in future?
In case of significant lossmaking, there will be need for revision of tariffs.
What is your assessment of the lossmaking level?
Assessments are very subjective at present because we have no data to make calculations on. Variability of this indicator is very big - from 65% to 85%, as there are no certain data on the number of the road accidents. These are just "pure" payments without expenses on MTL.
How many contracts have you made already? Will that figure change till the end of the year?
We hope we will gain at least 20% of MTL market. We have made over 8,000 contracts already as of the last week.
What about the number of CASCO vehicle insurance contracts? Has it changed significantly?
Not yet, but the interest of drivers is growing seriously.
Has the company enough surveyors for MTL contracts?
The institute of surveyors should undergo serious changes. In Armenia all the insurance companies worked under complex conditions and despite the existing laws. All honor to them! Why didn’t insurance companies initiate institutional changes, make long-term investments or any long-term projects, because, from the point of view of business, all that would be uninteresting and economically inefficient? Look at the mess around the MTL and the changes it has led to. With introduction and establishment of that institute in the country all the insurance companies will draw up and create the necessary infrastructure, including evaluating companies. All the insurers have their own development strategy. Therefore, the market will change to better. All the processes in the market must be aimed at increasing authority of the insurance business in general. This is the task of all the actors in the market. I am very happy to see that insurance companies have realized that fact and began displaying certain team-spirit, which will help increasing image of the insurance sector.
What insurance lines have a big potential for development in the country?
Yet two years ago just 0.4% of all potential risks were insured in Armenia by our calculations. MTL will just give rise to the insurance market. At the initial stage it will fuel the market, but in future the growth of MTL market will be rather limited because the number of cars in the country cannot increase endlessly. Therefore, all the insurance lines have a big potential for growth especially that their development will help forming “long-money” so necessary for development of economy.
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