Azerbaijan's AIA: Local Bonus-malus system needs serious review

Azerbaijan's AIA: Local Bonus-malus system needs serious review

BAKU, Azerbaijan, May 26

By Yusif Aghayev - Trend:

The Bonus-Malus system, accounting for increasing and decreasing coefficients, related to safe driving within compulsory motor-vehicle liability insurance (OSAGO), requires a serious review, Chairman of the Supervisory Board of Azerbaijan Insurers Association Azer Aliyev told Trend.

In insurance, a bonus-malus system (BMS) is a system that adjusts the premium paid by a customer according to their individual claim history. Malus is an increase in the premium if there is a claim in the previous year. Bonus-malus systems are very common in vehicle insurance.

In general, there are 17 classes of Bonus-Malus, the first 5 of which are classes of Malus (fines) that increase the insurance premium, and levels from 7 through 17 represent Bonus classes (discounts) that reduce insurance premiums. The 6th class of the system is applied during conclusion of the first compulsory insurance contract with respect to the vehicle and does not affect the amount of the insurance premium.

The coefficient of each policyholder in the Bonus-Malus system is determined once a year, January 15, and is valid until the same date next year.

“It should be noted that often citizens who sell their cars on the basis of a power of attorney do not cancel the OSAGO agreement that applies to the motor vehicle being sold, which in turn can lead to undesirable consequences associated with compulsory insurance in the future,” he said. “So, Malus class coefficients (fines) accrued under the Bonus-Malus system for traffic accidents happening due to the fault of the new car owner before the expiration of the OSAGO policy will be registered in the name of the previous owner.”

Aliyev pointed out that in the future, when acquiring a new OSAGO policy for another vehicle, the former owner will have to pay a higher insurance premium due to the previously assigned penalty factors (Malus).

“For example, if the new owner of the car makes several accidents on it, then the Malus coefficients accrued in the name of the former owner can reach the highest penalty group, which will triple the amount of the premium for the future OSAGO insurance policy,” Aliyev said. “But, on the other hand, car owners, who have been in several accidents whose Malus coefficient is quite high, 're-register' the car to another owner who is characterized by break-even driving and who has a Bonus coefficient registered in the system, and then continue to drive this vehicle on the basis of a power of attorney for driving.”

“As a result, the average premium of the insurance certificate for OSAGO has decreased over the past few years from 110 manat [$64.7] to 65 manat [$38.2] per policy, and the loss ratio for this type demonstrated very high rates. According to the results of 2019, the loss ratio was approximately 67 percent, while in the first quarter of 2020 it reached 84 percent, despite the fact that insurance premiums decreased by 4 percent compared to the 1st quarter of 2019,” he said.

“At the same time this coefficient does not consider for such expense items of insurers as calendar payments to the Compulsory Insurance Bureau (in the amount of 5 percent of the total premiums collected under this type), as well as business expenses and commissions to agents, which, amid the severe competition in the market, are quite high,” Aliyev pointed out. “As a result, the real loss ratios within this type are so high that many insurers refused active sales for this type of insurance, which was reflected in a decrease in the amount of premiums collected.”

“The system of accounting for increasing and decreasing coefficients (Bonus-Malus) should be reviewed in such a way that the cases of abuses by unscrupulous vehicle owners, as described above, would be excluded, and the information on the arising losses would reflect the real situation,” Aliyev said.

The AIA was established in 2006 as a voluntary association of professional participants in the insurance services market. AIA includes 20 insurance companies, one reinsurance company and five insurance agencies.

The compulsory insurance in Azerbaijan is carried out by insurance companies licensed for a certain type of compulsory insurance, included in the Compulsory Insurance Bureau. There are currently 15 such companies, 4 of which operate in life insurance, and 11 in non-life insurance segments.

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

(1 USD = 1.7 AZN on May 26)

---

Follow the author on Twitter: @Yusif62610338

Subscribe to Trend in Google News! Subscribe
Volume of loaded and unloaded cargo in Iran’s Noshahr Port down
Volume of loaded and unloaded cargo in Iran’s Noshahr Port down
Iran looks to improve transportation of goods from Khuzestan Province
Iran looks to improve transportation of goods from Khuzestan Province
Czech Republic eyes to support improvement of Georgian air transport infrastructure
Czech Republic eyes to support improvement of Georgian air transport infrastructure
Loading Bars
Latest
Uzbekistan to fund startups in various sectors
U.S. lawmaker blames Boeing leaders for culture that led to crashes
Turkmenistan to purchase agricultural machinery from foreign manufacturers
Iran Energy Exchange shares data on sales of Iran’s Jam Petrochemical Company
Azerbaijan names gymnasts to perform at World Championships in Japan
During former occupation of Sugovushan, Armenia deprived vast lands of water - aide to Azerbaijani president
Volume of loaded and unloaded cargo in Iran’s Noshahr Port down
Georgia shares data on COVID-19 cases for October 16
Kazakhstan boosts trade with Turkmenistan over 8M2021
Exports of steel manufacturers in Iran increase
Georgia, EU, and Turkey enter into "diagonal cumulation" agreement
Azerbaijani sees increase in oil prices
Iran raises ceiling on housing loans
Uzbekistan’s FEZ creates good basis for deepening co-op with Azerbaijan
Turkmenistan’s private enterprise eyes building dry cargo vessel
Trade turnover between Russia, US may hit record this year, says Deputy PM Overchuk
Iran to launch several shipping lines to Russia, Kazakhstan
Iran looks to improve transportation of goods from Khuzestan Province
Russia’s Korona Pay eyes expanding money transfers via Azerbaijan's mobile banking apps
Gas prices in Europe to remain high over next 6 months
Iranian currency rates for October 16
Turkmenistan's electric potential rises after commissioning new capacious power plants
Iran to increase fuel production
UK MP killing was terrorist incident, Met Police say
Representatives of diplomatic corps in Azerbaijan begin visit to Sugovushan
Czech Republic eyes to support improvement of Georgian air transport infrastructure
1,900 more COVID-19 cases reported in Kazakhstan
Biden says those who refuse to testify in Jan 6 probe should be prosecuted
ISIS claims responsibility for mosque attack in Afghan city of Kandahar
Fully vaccinated foreign visitors can enter U.S. starting on Nov. 8
China's Shenzhou-13 crewed spaceship docks with space station module
UK records more than 40,000 COVID cases for third day in a row
Biden says Clinton will be released ‘shortly’ from California hospital
Amazon-owned Twitch says source code exposed in last week's data breach
Israel's annual inflation up 2.5 pct, highest in nearly decade
Africa's COVID-19 cases surpass 8.41 mln: Africa CDC
US shares specific data on cybercrime with Russia, awaits its actions, White House says
Saudi Arabia appoints Al-Rabiah as new Hajj minister
Chronicles of Victory: President Ilham Aliyev interviewed by Turkish A Haber TV channel on October 16, 2020 (PHOTO/VIDEO)
Chronicles of Victory: October 16, 2020
Czech PM Babis pledges smooth power handover to opposition
UK MP dies after being stabbed at constituency meeting
China’s Shenzhou-13 manned spacecraft successfully reach orbit
Four migrants dead, 21 missing off Spanish coast
FIA approves schedule for Azerbaijan Grand Prix in 2022
COVID-19 kills 197 more Iranians over past 24 hours
Georgian FM meets Slovenian counterpart
Armenia trying to prepare ground for new provocations against Azerbaijan by spreading fake information - MoD
Azerbaijani FM discusses mine threat in liberated territories with French CNEMA delegates (PHOTO)
Azerbaijan lifts flight restrictions for number of countries
Azerbaijani President signs law "On Independence Day"
EBRD to allocate loan to Turkmen beverage company
Azerbaijan records decline in fixed capital revenues for 9M2021
Turkmenistan, WB talk new areas of co-op
Uzbek-Korean JV announces tender to buy clarifier
Gasoline prices in Georgia increase
Money transfers to Azerbaijan via Golden Crown service grow for 9M2021
Iran looking to develop renewable energy - SATBA
Azerbaijani MoD discusses mine clearing in liberated territories with French delegation (PHOTO)
Iran eyeing increase in trade with Spain
Export-oriented local Georgian company to get benefits within USAID program
Saudi Arabia to ease coronavirus curbs from Oct. 17
Russia, Venezuela developing secured messenger — Rostec
Kazatomprom to look for new ways to bolster nuclear energy for peaceful purposes
Turkmenistan discloses area allotted for sowing winter barley in Dashoguz region
Agreement with Azerbaijan on additional gas supplies aimed at ensuring Turkey's gas reserves – Erdogan
First container train on its way to Azerbaijan's Karabakh (PHOTO/VIDEO)
Uzbekneftegaz receives gas flow from well at Khojikazgan field
Kazakhstan to exempt Caspian oil exports from customs duties
Kazakhstan unveils data on trade with other EAEU states
Volume of financial assets of non-financial corporations in Georgia increases
LUKOIL Uzbekistan to buy ceramic balls for catalysts via tender
Azerbaijan, as victorious country, is ready to normalize relations. We hope that Armenian leadership will not pass up on this historic opportunity - President Aliyev
U.S. administers 405.4 mln doses of COVID-19 vaccines
Кazakh national telecommunications operator opens tender to buy spares
Geostat shares data on revenues of Georgian enterprises for 2020
Azerbaijan shares data on number of vaccinated citizens
Netherlands’ FMO is open to new investments in Uzbek financial sector (Exclusive)
Azerbaijan confirms 1,850 more COVID-19 cases, 735 recoveries
Student of Baku Higher Oil School: ‘I am proud to bear the name of such a historical figure!’
French Renault begins production and commercial activities in Uzbekistan
NEQSOL Holding supports ADA University’s project to restore Gazakh Seminary (PHOTO)
Azerbaijan's agrarian agency discloses volume of issued subsidies in 9M2021
Money transfers to Georgia exceed investments
Russian peacekeepers - guarantors of peace in Karabakh - President Putin
Georgian air cargo transportation decreases
Azerbaijan ready to start talks with Armenia on delimitation of borders - President Ilham Aliyev
TAP helped in reducing European gas market volatility
Armenia has destroyed 16 of the 17 mosques in Shusha - President Aliyev
President Ilham Aliyev: Armenia refuses to provide us with full maps of mined areas
For about 30 years, Armenia, together with Iran, used former occupied territories of Azerbaijan for drug trafficking to Europe - President Aliyev
Illegal Armenian armed forces attempt new provocation against Azerbaijani units
Azerbaijan's State Employment Agency to launch project on financial support of entrepreneurs
President Ilham Aliyev hailed special role of President Vladimir Putin in cessation of hostilities in Karabakh
City of Aghdam was called “Hiroshima of the Caucasus” - Azerbaijani president
Karabakh conflict has been consigned to history - President Aliyev
Azerbaijan takes part in meeting of heads of security and intelligence agencies of CIS
Brent oil price on the ICE exchange up over $ 85/barrel
Iran seeks to transform its ports to transshipment hubs
Microfinance sector in Georgia hopes to rebound from COVID-19, shares forecast
All news