Tuesday, September 27 2011 02:11
Oppositionist MPs say MTPL (OSAGO) very profitable business for insurers and demand tariff revision
ArmInfo. Oppositionist MPs say MTPL (OSAGO) is a very profitable business for insurers and demand tariff revision, Artsvik Minasyan, Parliamentarian from ARFD, said during the parliament hearings. He said that the compulsory insurance system had a negative rather than positive social and economic effect.
The parliamentarian said that setting a price floor nullifies the content of competition and leads to surplus profits, while insurers disagreed with him. They said that the product's unprofitability will keep growing like in Russia where three-four years after introduction of MTPL, the unprofitability of the products led to depletion of a dozen of insurers from the market. For his part, Gagik Grigoryan, Director of Rosgosstrakh- Armenia Insurance Company, said that the price competition may result in various frauds in the insurance market. Insurers are sure that free price formation is possible only in 2-3 years when there is a well- functioning insurance infrastructure.
Armenian parliamentarians highlighted that traffic jams have become too frequent after introduction of MTPL. Vahan Avetisyan, Executive Director of the Bureau of Motor Insurers of Armenia, said that the given problem is discussed with the Road Police and will be settled by the end of the year.
During the hearings, parliamentarians from ARF Dashnaktsutyun and Heritage parties touched upon the issue of the agent's fee included in the cost of the policy. They said that not all drivers used the services of insurance agents but were reluctant to pay the agent's fee. The parliamentarians suggested the insurers to remove the agent's fee from the cost of MTPL policy. They think that such measure will allow reducing surplus profits of insurers. The parliamentarians suggested another measures to reduce the surplus profits of insurers: increasing the indemnity limit paid for the property damage, the technical reserve, as well as involvement of insurers in the improvement of traffic and others.
Parliamentarians and insurers had also a half-hour adjournment debate on the issue and tried to reveal the idea of the "reasonable profits". For oppositionists the profit level must not exceed 5%, while insurers demanded 10%-13%.
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