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

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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 Azerbaijan

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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 Azerbaijan

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STATISTICS FOR 2013 AND 2012

COMPARATIVE ANALYSYS 2012 AND 2013

NUMBER OF CMTPL INSURANCE CONTRACTS:

AMOUNT OF CMTPL INSURANCE CONTRACTS:

3,69%

2013

0,53%

2013

2012

2012

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

Compulsory Insurance Bureau of Azerbaijan

slide5

MONTHLY AVERAGE CMTPL PREMIUM in AZN for 2013

ANNUAL AVERAGE CMTPL PREMIUM

75,77 AZN

2013

2,63 AZN

78,40 AZN

2012

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

Compulsory Insurance Bureau of Azerbaijan

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Legal and Physical Persons

Vehicle types

Compulsory Insurance Bureau of Azerbaijan

slide7

2013- INSURANCE PAYMENTS MADE BY MEMBER INSURERS

COMPAREto 2012

25,330,180 AZN

2013

3.7 times

6,823,630 AZN

2012

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

Compulsory Insurance Bureau of Azerbaijan

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TERMS OF COMPENSATION of 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

2013- COMPENSATION BY CIB

Compulsory Insurance Bureau of Azerbaijan

slide9

TRANSITPOLICIES

Statistics on transit vehicles entered Azerbaijan during 2012 and 2013

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

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.

Compulsory Insurance Bureau of Azerbaijan

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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 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

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CIB INFORMATION SYSTEM

  • The CIB’s IT system integration with the state authoritiesThe 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

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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

Compulsory Insurance Bureau of Azerbaijan

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GREENCARD

  • 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.

Compulsory Insurance Bureau of Azerbaijan

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GREENCARD

  • 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

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PROBLEMS& SOLUTIONS

  • Evaluation of damages
  • Evaluation of damages of motor vehicles for the purposes of MTPLis one of the current importantproblems 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

Compulsory Insurance Bureau of Azerbaijan

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PROBLEMS & SOLUTIONS

  • Building the trust and promoting awareness about compulsory insurance business in Azerbaijan
  • 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.

Compulsory Insurance Bureau of Azerbaijan

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PROBLEMS & SOLUTIONS

  • Overall
  • 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

Compulsory Insurance Bureau of Azerbaijan

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Thank You

İİF2014

The International Insurance Forum