Azerbaijan’s Insurance Companies Assess Long-Term Car Insurance
Azerbaijan, Baku, 13 March /corr. Trend U.Ismaylova / In Azerbaijan, the car market has actively developed in the recent period, and is the second largest market after real estate market. According to the accounts of public organization Participants of Real Estate Market, nearly 25,000 cars are sold in the country per month. The most expensive car is Porche, for which the price differs between $113,000 and $236,000 depending on the year of production and technical conditions.
Considering that the car prices are quite high in the country but the demand for them is increasing each day, the banks suggests auto-credits for a period of five years at a 20% interest rate per year. However, while providing the auto-credits, banks put obligatory conditions before the clients to insure their car. However, insuring cars for a period of five years is risky for the insurance companies because voluntary car insurance may become one of the most disadvantageous kinds of insurance, taking into consideration the rise in number of cars and road-transport incidents.
According to the information provided by Interior Ministry of Azerbaijan, in 2007, 1688 road accidents took place in the country.
The heads of insurance companies questioned by Trend approached the unprofitableness of the car insurance in their different ways.
The Chairman of Board of one of the biggest insurance companies in Azerbaijan, MBASK, Jamil Melikov, said that five years insurance of the cars may be unprofitable for the company only if the cost of the car increases within five years. According to Melikov, the insurance companies risks only if the price for the car repair increases and the increase in prices for the spare parts is covered by the insurance company in accordance with the agreement. Five years insurance of the cars requires accounting the tariffs in detail as well as the funds which will be paid to the insurant in five years, Melikov said.
Azar Aliyev- chairman of one of the largest insurance companies Atesgah believes that the five years automobile insurance is not profitable for insurance companies, as the set tariff on voluntary CASCO will be low after five years- taking into consideration the inflation rate in the country. Insurance company takes into consideration its profit, damages, insurance reserves and charges while calculation of the tariffs. All these do not meet elementary standards within the five years. "In spite of that, CASCO is one of the most expanded types of insurance, and it is also one of the most unprofitable one," Aliyev said. The five years tariff sum decrease may lead to 200% damages of the insurance company. "From the view point of increase in premiums for insurance company it is profitable, but our premiums are calculated as if there were no damages," Aliyev said.
Countless insurance companies in such cases, according to Aliyev, uses amortization method, when the rules of long-term insurance is pointed out -taking into account the difference in use of automobile during the first year and further years .
Nofal Rzayev, chairman of the insurance company Pasha Sigorta, believes that this type of insurance may bring profit through true assessment of risk and economic factors, which directly affect the insurance tariffs. The five years automobile insurance may be profitable for both the insurance company as well as the insurer, after signing of the agreement from the view point of under righting and taking into consideration the rules of amortization of mutual beneficial insurance agreement, Rzayev said.
There are 30 insurance companies in Azerbaijan. According to the Azerbaijani Finance Ministry, the total premiums of companies on automobile insurance totaled AZN 36.4mln with AZN 11.8mln as payments.