Motor insurance market in Azerbaijan: evolution for last 2 years

Motor insurance market in Azerbaijan: evolution for last 2 years

Compulsory Insurance Bureau of Azerbaijan 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


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


STATISTICS FOR 2013 AND 2012

COMPARATIVE ANALYSYS 2012 AND 2013

YEAR NUMBER OF CMTPL INSURANCE CONTRACTS

AMOUNT OF CMTPL INSURANCE CONTRACTS

2013 911,909 69,367,582 AZN

2012 916,744 72,024,711 AZN

20122013

NUMBER OF CMTPL INSURANCE CONTRACTS: AMOUNT OF CMTPL INSURANCE CONTRACTS:

201220130,53% 3,69%

1 EURO = 1.092 AZN19/03/2014 Official Exchange Rate


MONTHLY AVERAGE CMTPL PREMIUM in AZN for 2013

75,77 AZN

78,40 AZN2012

20132,63 AZN

ANNUAL AVERAGE CMTPL PREMIUM

January

February

March

April

May

June July

August

Se

ptember

Octo

ber

Nove

mber

Dece

mber

73.36

77.02

72.46

73.06

71.84

75.7676.93

74.86

81.69 82.28

78.62

71.3



Legal and Physical Persons

Physical legal

87 %

13%

Vehicle types

Heavy Duty0.98%

Bus2.07%

Passanger car74.99%

Motorcycle0.08%

Trailer7.70%

Truck14.18%


2013- 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

Quantity 17,363 553 398 133 18,447

Amount (AZN) 23,403,167 822,079 443,934 661,000 25,330,180

2012

2013 3.7 timesCOMPARE to 2012 25,330,180 AZN

6,823,630 AZN



2013- 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 17 7 24

Amount 20,191.5 AZN 34,200 AZN 54,391.5 AZN


TRANSIT POLICIES

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 2013 - 224 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

Turkey Georgia Russia Iran Germany Others

84

73

44

95

9

Number of Vehicles Total Premium Amount Average Premium

2012 224,527 7,098,461 AZN 31,6 AZN2013 245,896 6,991,715 AZN 28,4 AZN

Statistics on transit vehicles entered Azerbaijan during 2012 and 2013


CIB INFORMATION SYSTEM

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 informationAchieving 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


CIB INFORMATION SYSTEM

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.


CLAIMS HANDLING SOFTWARE

• 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


GREEN CARD

COMPLEX PREPARATORY WORKS WITH RESPECT TO EXPECTED JOINING GREEN CARD SYSTEM:• 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.


GREEN CARD

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


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



• 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



• 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

Thank YouİİF 2014

The International Insurance Forum

Motor insurance market in Azerbaijan: evolution for last 2 years

Documents

insurance payments

cmtpl insurancedamage

monthly cmtpl agreements

green card bureau

average premium

unknown motor vehicle

persons injury

foreign vehicles