Motor Insurers` Bureau: Lump-sum benefit provision rules to come into effect under bonus/malus system on 12 Dec 2016

ArmInfo. The lump-sum benefit provision rules will come into effect under the bonus/malus system on 12 Dec 2016 by minimizing 4 malus classes. The rules apply to the motor third party liability (MTPL) insurance contracts concluded after December 12. The Board of the Central Bank of Armenia (CBA) has already registered the relevant decision of the Armenian Motor Insurers' Bureau.   

The press office of the Armenian Motor Insurers' Bureau has told ArmInfo that the matter concerns malus class insurers that have more than one transport vehicle in the field of public transport and taxi services.  Further information about the rules of lump-sum benefit provision is available on the Motor Insurers' Bureau website at http://paap.am/datas/zdocs/5da8d25a91c8bae411305ff2154726c1.pdf. The Bureau has taken this decision with due regard for a number of social problems, as well as public opinion about the critical condition of the public transport and taxi car fleet. 

Based on the five-year statistics in the MTPL segment and taking into account the transition to the bonus/malus system in September 2016, the Bureau has adjusted the risk ratios: some ratios have been increased, others have been reduced or left unchanged. Some factors have been neutralized in the tariff calculation. The result of the changes is as follows: the size of the basic insurance premium for 80% of the public transport has not changed, with the annual basic premium for the remaining 20% reduced to 28,000 AMD; for 71% of taxis the annual basic insurance premium has been increased to 28,600 AMD, for the remaining 29% the premium has been reduced to almost 17,000 AMD. The introduction of the bonus/malus system has revealed that in the field of the public transport and taxi services the owners of more than one transport vehicle have found themselves in the high malus class due to the big number of accidents. The final insurance premium has been increased for them and this has created some tension. In fact, the final picture of the transition to the bonus/malus system is unbiased, fair and grounded, because it reflects the problems in the given field and the real statistics of the accidents and the inefficiency of the process management. In particular, high insurance premiums are set for the high risk category, and low insurance premiums - for the low risk one.

According to the Ranking of Armenian Insurance Companies by the Agency of Rating Marketing Information (ArmInfo), as of 1 October 2016, the premiums of the Armenian insurance companies grew by 2.6% y-o-y, while the payouts increased by 2.4%. By 1 October 2016, the aggregate amount of insurance premiums made up 23.2 bln AMD, with the amount of payouts exceeding 9.8 bln AMD.  In the structure of insurance premiums, the share of motor third party liability insurance (MTPL) was the biggest - 55.7%, or 13.2 bln AMD (up 1.4% versus Jan-Sep 2015). The share of MTPL in the payouts was also the biggest - 59.82%, or 6.01 bln AMD (down 1.5%). According to the Motor Insurers' Bureau, as of 1 Oct 2016, the number of applications for MTPL indemnities grew by 26% to 4336, satisfied applications - by 25% to 4056, repaid indemnities - by 13% to 786 mln AMD, with further growth to 852 mln AMD by 1 Nov 2016.

To note, there are 6 companies in the insurance market of Armenia, which operate in 17 classes (out of 19) of insurance. INGO Armenia (the only company insuring water transport) is licensed to provide services in 16 classes of insurance, and Rosgosstrakh Armenia (the only company providing credit risk insurance) provides services in 15 classes of insurance (as of 30 Sep 2016, the AMD/USD exchange rate was 474.46 AMD/$1).