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Motor insurance market in Azerbaijan: evolution for last 2 years.

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Presentation on theme: "Motor insurance market in Azerbaijan: evolution for last 2 years."— Presentation transcript:

1 Motor insurance market in Azerbaijan: evolution for last 2 years

2 GENERAL INFORMATION Compulsory Insurance Bureau (CIB) deals with the protection of interests of suffering insured persons and third parties, provision of stability and development of compulsory insurance system with regard to the following types of compulsory insurance. Compulsory real property insurance Compulsory third party liability insurance of motor vehicles (CMTPL) Compulsory third party liability insurance associated with the use of the real property Compulsory personal accident insurance of passengers. Compulsory insurance against loss of professional work capacity as a result of labor accidents and occupational diseases Compulsory Insurance Bureau of Azerbaijan2

3 GENERAL INFORMATION According to the applicable legislation of Azerbaijan, with respect to CMTPL, CIB is a: MOTOR BUREAU COMPENSATION BODY GUARANTEE FUND INFORMATION SYSTEM Currently, CIB has 14 member insurers and 11 of them are eligible to run CMTPL In the future, CIB shall also operate as a Green Card Bureau after being accepted for membership to the Green Card System Compulsory Insurance Bureau of Azerbaijan3


5 MONTHLY AVERAGE CMTPL PREMIUM in AZN for ,77 AZN 78,40 AZN ,63 AZN ANNUAL AVERAGE CMTPL PREMIUM Compulsory Insurance Bureau of Azerbaijan5 1 EURO = AZN 19/03/2014 Official Exchange Rate

6 Legal and Physical Persons Vehicle types Compulsory Insurance Bureau of Azerbaijan6

7 INSURANCE PAYMENTS MADE BY MEMBER INSURERS PAID CLAIMS UNDER CMTPL INSURANCE Damage to vehicles Damage to property Damage to health Death of the person TOTAL Quantity17, ,447 Amount (AZN) 23,403,167822,079443,934661,000 25,330, times COMPARE to ,330,180 AZN 6,823,630 AZN Compulsory Insurance Bureau of Azerbaijan7 1 EURO = AZN 19/03/2014 Official Exchange Rate

8 COMPENSATION BY CIB Compensation shall be covered by CIB in the following cases: in case an insurer is not able to meet its obligations due to its insolvency; in case of a third person’s injury by an unknown motor vehicle; in case of a third person’s injury as a result of use of a vehicle operated by a person, who had no CMTPL insurance agreement TERMS OF COMPENSATION of CIB Damage to health Death of the person TOTAL Quantity Amount20,191.5 AZN34,200 AZN54,391.5 AZN Compulsory Insurance Bureau of Azerbaijan8

9 TRANSIT POLICIES 9 Compare to 2012, average premium is lower due to amendment to the compulsory insurance legislation providing for decrease of the premium for monthly CMTPL agreements for foreign vehicles from 25% to 20% of the amounts of the annual premiums. Another reason is that under the old legislation foreign vehicle owners were allowed to obtain only monthly CMTPL agreements. However by the same amendment to the legislation, foreign vehicle owners may chose to obtain monthly or annual CMPTL agreements. In insurance accidents took place with participation of cars that are registered abroad and entered the territory of Azerbaijan with the aim of transit. Total insurance payment in the amount: 300,215 AZN Number of VehiclesTotal Premium AmountAverage Premium ,5277,098,461 AZN31,6 AZN ,8966,991,715 AZN28,4 AZN Statistics on transit vehicles entered Azerbaijan during 2012 and 2013 Compulsory Insurance Bureau of Azerbaijan

10 CIB INFORMATION SYSTEM 10 CIB information system has been developed in accordance to the provisions of the Law “Compulsory Insurance” and has the following goals: centralized system of CMTPL policy issue & registry centralized depository of claim associated documentation automatic system of bonus-malus calculation and associated premiums centralized database of insured persons and vehicles facilitate statistics and reporting information Achieving the above mentioned goals significantly minimized the room for potential fraud in the field. In addition to achieving the goals it was managed to add more value to CIB’s IT system: Modern equipment and licensed software of world leading IT producers was used for the IT infrastructure of CIB Protection of intellectual property is one of the main aspects of Bureau`s IT policy. Therefore CIB requested European IT security company Akhela (Italy) to penetrate the Network Security of CIB for auditing purposes. The safety of CIB’s IT system was positively evaluated by Akhela. SMS notification during policy transactions In 2013 total of 749,594 SMS notifications were sent to CMTPL policy holders regarding the important status changes and notifications Compulsory Insurance Bureau of Azerbaijan

11 CIB INFORMATION SYSTEM 11 The CIB’s IT system integration with the state authorities The compulsory insurance legislation mandates the integration of the CIB’s IT system with the state authorities like Ministry of Taxes, Ministry of Internal Affairs, and etc. The aim of this integration is to increase efficiency of data flow and simplify the data entering process into the CIB’s IT system. This will help to decrease system user errors upon issuance of compulsory insurance policies to insured entities by using the necessary data already existing in the systems of the relevant authorities (e.g., personal ID data, details of legal entities and individual entrepreneurs and etc.). During past periods, numerous measures have been implemented in order to organize the required infrastructure and framework for such integration. The integration process is in the finalization stage and should be completed during forthcoming months. Compulsory Insurance Bureau of Azerbaijan

12 CLAIMS HANDLING SOFTWARE 12 CIB has been conducting preparatory works to develop a complex software solution for the member insurance companies. CIB put together a working group consisting of highly skilled claim handling personal of each member insurance companies. Working group was tasked to cooperate with CIB on this software development process by sharing their experience and knowledge. They visited Turkish Motor Insurers’ Bureau, Swedish Motor Insurers, AXAMBASK Azerbaijan, Baltic countries and other countries and gained valuable knowledge and experience which was used during the business process development CIB, member insurance companies and other related parties are highly interested on investing to finalize the development of better claim handling system. Project description was offered to following companies for proposal: Nexum in Latvia, Cybersoft in Turkey, NTT Data in U.S. and Gratex in Slovakia Gratex in Slovakia proposed the most cost affective and shortest project implementation time, therefore CIB decided to award the project to Gratex Compulsory Insurance Bureau of Azerbaijan

13 GREEN CARD COMPLEX PREPARATORY WORKS WITH RESPECT TO EXPECTED JOINING GREEN CARD SYSTEM: 13 STUDY OF THE INTERNATIONAL EXPERIENCE - established high professional relationships with motor bureau of various countries implementing Green Card system, and getting acquainted with their work experience LEGAL ASPECTS - harmonization of the Azerbaijani compulsory insurance legislation with the requirements of the system, as well building necessary legal grounds for implementation of the system in Azerbaijan and for the proper activities of CIB and insurance companies within the system in the future FINANCIAL ASPECTS - dealing with the banks and reinsurance companies and brokers with respect to the required financial guarantee to the Council of Bureaux (Managing Organization of the Green Card system), and dealing with formation of reserves necessary as a guarantee for the future liabilities arising out of the activities within the system OTHER PREPARATORY WORKS- addressing various technical and organizational issues that would arise due to implementation of the system like building the necessary infrastructure and etc. Compulsory Insurance Bureau of Azerbaijan

14 GREEN CARD 14 MEMBERSHIP WITH THE GREEN CARD SYSTEM: CURRENT STATUS Preparatory works carried out during short period of time were highly assessed by the Council of Bureaux; Preliminary consent was given and membership of CIB was expected for settlement in 2014 General Assembly to hold in the late May – beginning of June with the activation date of January 1, 2015; Since the required legal work to amend the Law “On compulsory insurance” and the CIB’s Charter have not been yet adopted, considering time shortage till the 2014 General Assembly, the CIB’s membership postponed to 2015 General Assembly. Currently, the expected activation date for membership is January 1, 2016 Compulsory Insurance Bureau of Azerbaijan

15 PROBLEMS& SOLUTIONS PROBLEMS & SOLUTIONS Evaluation of damages of motor vehicles for the purposes of MTPL is one of the current important problems in the insurance sector. Currently, there are no unified rules and regulations in place providing advanced solutions in this area, and therefore, insurers apply different approaches and rules for evaluation of damages to motor vehicles. Numerous disagreements take place between policy holders, insurers and body shops with respect to the amount of damage. Lack of the advanced solutions on this problem negatively affects the overall insurance sector CIB has been conducting negotiations with various well-known international suppliers of IT solutions in the field of evaluation of damages including Audatex. Audatex expressed its interest to the Azerbaijan market based on the results of its business and investment analysis Currently, the negotiations with Audatex are continued Evaluation of damages Compulsory Insurance Bureau of Azerbaijan15

16 PROBLEMS & SOLUTIONS Unfortunately one of the biggest problems of insurance market in Azerbaijan is the lack of knowledge about insurance among the citizens. In most cases insurance contracts are signed by the citizens without the clear understanding of each party’s legal responsibilities. CIB invested a lot on informing the population about the insurance business and the benefits of having an insurance. Through out the 2013 series of TV and radio advertisements have been broadcasted to promote the awareness among the population about the importance of compulsory insurance and its benefits. Building the trust and promoting awareness about compulsory insurance business in Azerbaijan Compulsory Insurance Bureau of Azerbaijan16

17 PROBLEMS & SOLUTIONS Due to complete change in the CMTPL rules, regulations and practices in 2011 and subsequently establishment of CIB not only positively affected the compulsory insurance sector it also created significant dynamic in the insurance market One of the main directions of CIB’s activities for the past 2 years was to identify the problems and undertake the continues measures to solve them CIB shall continue to investigate the problems and its solutions also by studying and implementing the best international practices Overall Compulsory Insurance Bureau of Azerbaijan17

18 Thank You İİF 2014 The International Insurance Forum

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