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Azerbaijan to increase volume of insurance market by improving legislative basis

Business Materials 21 January 2011 18:31
It is important to adopt the law on compulsory insurance to improve the insurance market in Azerbaijan and to protect the population, Parliamentary Economic Policy Committee Chairman Ziyad Samadzade said at a meeting today.
Azerbaijan to increase volume of insurance market by improving legislative basis

Azerbaijan, Baku, Jan. 21 / Trend I. Khalilova /

It is important to adopt the law on compulsory insurance to improve the insurance market in Azerbaijan and to protect the population, Parliamentary Economic Policy Committee Chairman Ziyad Samadzade said at a meeting today.

"The current level of premiums amounting to 16-17 manat per capita does not correspond to the level of income of the population. This is a very low figure compared to the level of insurance market developments in other developing European countries," Samadzade said.

The world average index of insurance premiums exceeds the level of premiums in Azerbaijan by 15 times.

Samadzade said that the legislative basis in the insurance area in Azerbaijan can be brought to a medium level of development by adopting the law on compulsory insurance.

It is planned to conduct several measures to promote insurance to develop the market for compulsory insurance, the head of the parliamentary committee said.

Deputy Finance Minister Azer Bayramov said after the law on insurance activity was adopted in 2007, there is a need to improve regulatory mechanisms within other legislative acts because of inconsistency.

"We are dissatisfied with the current level of premiums. The amount of the insurance market hits 0.4 percent of GDP. This index is less not only in developing European countries but also in CIS countries. However, we expect to increase this figure several times with the improvement of legislative base, the expansion of propaganda," he said.

As opposed to voluntary kinds of insurance, compulsory kinds are regulated by the state, so, the attention will be paid to developing and improving the legal basis in this type of insurance, deputy minister said. The previous law regulating the compulsory kinds of insurance was adopted in 1996.

"After analyzing the existing problems in this area, following the adoption of a perfect law on insurance activity in 2007, we improved the legal basis for compulsory insurance law and submitted the new version," Bayramov said.

This draft law regulates the four types of compulsory insurance - real estate, liability of owners of motor vehicles, passenger insurance, and liability insurance while exploiting the real estate.

According to the bill, compulsory insurance of real estate will include all types of buildings, houses and apartments belonging to physical entities, offices of legal entities, and public property. In this case, the insured cases will be the facts related to damage to this property as a result of fire, explosion, lightning, short-circuit in the electrical system, an accident in the sewer or water system, and natural disasters.

Compulsory insurance of civil liability associated with the exploitation of real estate provides insurance protection for third parties from harm caused by using this property. This kind of insurance will apply to legal and physical entities engaged in entrepreneurial activity. The rate of insurance coverage for this type of insurance for damage to health will hit 50,000 manat (per person, 5,000 manat), property - 50,000 manat.

Compulsory insurance for passengers will relate to people using the vehicles, regardless of its form. The amount of the insurance coverage will hit 5,000 manat per person. Until now, this type of insurance is regulated by the law adopted in 2003, but the acting form is unacceptable today and creates problems in obtaining compensation.

The bill provides for a differentiated approach while determining the insurance rate, depending on the vehicle. The rate of insurance coverage on property will amount to 5,000 manat (1,000 manat today) and 50,000 manat (5,000 manat today) for health. This activity is regulated by the law dated 1996.

The bill was recommended for the first reading at a plenary session of the Azerbaijani parliament.

The official exchange rate is 0.7974 manat to $1.

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