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Actual problems of car insurance in Azerbaijan

Economy Materials 4 March 2020 15:21 (UTC +04:00)
Actual problems of car insurance in Azerbaijan

BAKU, Azerbaijan, March 4

By Yusif Aghayev – Trend:

The fees in all sectors related to car insurance in Azerbaijan in January 2020 greatly increased, Trend reports referring to a report of the Azerbaijani Central Bank.

“The collection of premiums on voluntary motor vehicle insurance (CASCO) amounted to over 7 million manat ($4.1 million) in January 2020, which is over three times more than in January 2019 (2.4 million manat that’s $1.4 million), while the premiums on compulsory liability insurance of motor vehicle owners amounted to 6.7 million manat ($3.9 million), increasing by 3.4 percent compared to January 2019,” the report said.

“The fees on voluntary liability insurance of vehicle owners amounted to 144,400 manat ($84,941) in January 2020, which is 2.3 times more than in January 2019 (67,300 manat that’s $39,588),” the report said.

“At the same time, the amount of compensation paid on voluntary motor vehicle insurance amounted to 974 million manat ($572 million) in January 2020, which is 102 million manat ($60 million) or almost 12 percent more than in January 2019,” the report said.

“The amount of compensation paid on compulsory liability insurance of vehicle owners amounted to 5.9 million manat ($3.5 million) in January 2020, increasing by 465 million manat ($273 million) compared to January 2019 (an increase of 8.5 percent),” the report said.

“Thus, the loss in compulsory liability insurance of vehicle owners exceeded 87 percent in January 2020, while in January 2019 it amounted to 83 percent,” the report said. “The loss in voluntary motor vehicle insurance in January 2020 decreased sharply compared to January 2019, amounting to about 14 percent. However, this figure does not fully reflect the realities of the market as a sharp increase in the number of contracts concluded on this type will demonstrate loss-making in the next months.”

“According to the experts, as a result of the high loss in compulsory liability insurance of vehicle owners, some companies that actively promoted this type were forced to reduce their turnover,” the report said. “While realizing that compulsory insurance does not cover many risks, many car owners began to actively draw up voluntary motor vehicle insurance contracts.”

“However, some problems with this kind of insurance remain relevant,” the report said.

“The main problems in this sphere are associated with high loss ratio in the voluntary motor vehicle insurance of used cars,” Chairman of board of Standard Insurance company Kamran Babayev said.

“The reason is that in most cases, these cars are purchased for using as taxi and for renting,” Babayev said. “A long period of stay on the roads during the day, tiredness and nervous tension of a driver often cause the accidents with these cars, as a result of which insurance companies suffer big losses. Therefore, many insurers refuse to insure cars which were produced more than 12-14 years ago.”

“Another problem is that voluntary insurance of vehicles owned by individuals is carried out on the basis of the unified insurance rules,” the report said.

“In accordance with these rules, a unified list of grounds for refusing to pay insurance indemnity has been established,” the report said. “They are related to driving while intoxicated, having committed an accident intentionally, misusing of a vehicle in military, terrorist operations and some other risks. Insurers are not entitled to independently expand the list of these exclusions from insurance coverage.”

“To prevent the growth of losses on voluntary insurance of used cars, many insurers set a franchise for insurance of cars which are used as a taxi or for renting at a rate of 50 percent or more than the cost of the car,” Underwriting Director of ATA Insurance Company Nigar Ibrahimova said.

In total, the Azerbaijani insurance companies collected insurance premiums in the amount of 111.5 million manat ($65.5 million) in January 2020, which is 23.3 million manat ($13.7 million) or 26.4 percent more than in January 2019.

The Azerbaijani insurance companies paid 26.2 million manat ($15.4 million) of insurance claims. The amount of the paid insurance claims reached over nine million manat ($5.2 million) or 34.4 percent more than in January 2019.

Today, 22 insurance companies and one reinsurance company operate in Azerbaijan.

(1 USD = 1.7 AZN on March 4)

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