1

CMTPL insurance market in Azerbaijan:current trends,

bonus-malus system,problems, claims, expectations

AIIF - 2013 Azerbaijan International Insurance Forum

2

CMTPL INSURANCE MARKET IN AZERBAIJAN

Compulsory Insurance Bureau (CIB) started to operate since December 2011 and

CMTPL insurance under the new Law “On compulsory insurance” are issued effective

from 16 December 2011.

It is required by the Law that an insurance company intending to operate under

CMTPL insurance must be member of the CIB.

Currently, CIB has 12 members.

3

CURRENT CIB PARTICIPANTS

1. “ATESHGAH”

2. “STANDARD Insurance”

3. “ATASIGORTA”

4. “XALQ Sigorta”

5. “PASHA Sigorta”

6. “AXA MBASK”

7. “Azsigorta"

8. “ALFA Insurance” *

9. “AZERSIGORTA”

10. "MEQA Sigorta"

11. "İPEK YOLU Sigorta"

12. "AZERBAIJAN Senaye"

* Permission to issue a CMTPL has been withdrawn effective 03.07.2012

4

CMTPL INSURANCE PREMIUM (ANNUAL)

Physical (AZN) Legal (AZN)

CARS AND OTHER VEHICLES MADE ON THEIR BASE; min 50- max 250 min 60- max 300

LORRIES AND OTHER VEHICLES MADE ON THEIR BASE; min 150 – max 250 min 180 – max 240

MINIBUSES, BUSES AND OTHER VEHICLES MADE ON THEIR BASE; min 150 - max 200 min 180 – max 300

MOTORCYCLES AND MOTOR SCOOTERS; 50 60

TRACTORS, THE VEHICLES USED IN ROAD-BUILDING WORKS, WOOD AND RURAL FARMS 50 60

TROLLEYBUSES AND TRAMS. 100 AZN

For vehicles registered abroad entering the Azerbaijani Republic for the purpose of transit (for one month) – coefficient 0.25

5

AMOUNTS OF COVERAGE UNDER CMTPL INSURANCE

5 000 AZN - for the damage caused to health of the individual -

50.000 AZN - in total per case

5 000 AZN - on a damage caused to property of the third parties

6

TOTAL AMOUNT OF CMTPL INSURANCE

PREMIUMS – 72,134,846 AZN

DECEMBER 2011- 2012:

A TOTAL OF 917,622 CONTRACTS OF

CMTPL INSURANCE POLICIES

HAS BEEN ISSUED BY 12 PARTICIPANTS OF CIB

CMTPL INSURANCE STATISTICS

7

NUMBER OF CMTPL INSURANCE CONTRACTS:COMPARATIVE ANALYSYS FOR 5 MONTHS OF 2012 AND 2013

Yanvar Fevral Mart Aprel May -

20,000

40,000

60,000

80,000

100,000

120,000

140,000

26,227

39,323

79,274

122,618 118,075

49,284 50,366

60,205

114,413

96,450

2012 2013

January February March April May

385 517

370 718 3,9%

January-May 2012

January-May 2013

Pursuant to the amendments to the Law “On Road traffic” effective from April 2013, the requirement for annual technical expertise of all auto vehicles was canceled and replaced by different regularity for different categories of vehicles. This can be shown as one of the reasons for the decrease in the number of CMTPL insurance policies for the 5 months of 2013

8

AMOUNT OF CMTPL INSURANCE CONTRACTS:COMPARATIVE ANALYSYS FOR 5 MONTHS OF 2012 AND 2013

Yanvar Fevral Mart Aprel May0 man.

1,000,000 man.

2,000,000 man.

3,000,000 man.

4,000,000 man.

5,000,000 man.

6,000,000 man.

7,000,000 man.

8,000,000 man.

9,000,000 man.

10,000,000 man.

1 921 900

3 062 224

5 871 725

8 981 503 8 876 171

3 618 659 3 880 588

4 365 164

8 363 665

6 942 742

2012 2013

28,713,523 AZN

27,170,818 AZN 5,4%

January February March April May

January-May 2012

January-May 2013

9

AVARAGE CMTPL PREMIUM:COMPARATIVE ANALYSYS FOR 5 MONTHS OF 2012 AND 2013

During the first 5 months of 2013 in comparison with the corresponding period of 2012 there have been an increase of 1,6% in average CMTPL insurance premium.The same indicator with respect to the insurance contracts concluded for a year was increased by 0.03%The increase in the number of CMTPL policies obtained by legal entities by 8.3% as well the increase by 7.1% in the number of trucks with higher premiums were the reason for the increase in the average CMTPL insurance premium for 5 months of 2013.

yanvar fevral mart aprel may 69.00 man.

70.00 man.

71.00 man.

72.00 man.

73.00 man.

74.00 man.

75.00 man.

76.00 man.

77.00 man.

78.00 man.

79.00 man.

73.28 man.

77.87 man.

74.07 man.

73.25 man.

75.17 man.

73.42 man.

77.05 man.

72.51 man. 73.10 man.

71.98 man.

20132012

January February March April May

10

BONUS-MALUS SYSTEM

Bonus-Malus system is applied on 15 January 2013. There are 17 BM classes. Class 6 is taken as the default. Classes 7-17 are Bonus, and Classes 1-5 are Malus.

The BM class decreases only with respect to a small portion (0.4%) of policy holders. BM class is increased with respect to 14.6% of policy holders, and significant portion (85%) of policy holders maintains status quo. So in general, the CMTPL policies become cheaper – next year majority of customers will pay less for CMTPL policy.

85.0%

14.6%

0.4%

Policy holders vs. BM Class changes

no change increase decrease

11

CMTPL INSURANCE STATISTICS

Number of vehicles registered abroad entering the Azerbaijan Republic during 2012 for the purpose of transit – 224 527 (total number of countries 115)

12

PAID CLAIMS UNDER CMTPL INSURANCE

Damage to property

Damage to vehicles

Death of the person

Damage to health TOTAL

Quantity 92 4064 24 47 4227

Amount 175,158 AZN 6, 489,472 AZN 120,000 AZN 39,000 AZN 6, 823, 630 AZN

On the basis of official statistics, during 2012 there were 2892 road accidents in Azerbaijan resulting in 2997 damages to health, and 1168 death. In comparison with the number of road accidents and associated damages to health and cases of death, the number of paid claims thereunder is much more less.

2012 January - December

13

PAID CLAIMS UNDER CMTPL INSURANCE

Damage to property

Damage to vehicles

Death of the person

Damage to health TOTAL

Quantity 181 6135 36 106 6458

Amount 315,066 AZN 8, 400,635 AZN 180,000 AZN 96,600 AZN 8,992,301 AZN

• This is 52% more than total number of paid claims in 2012, and 31% more than the

amount of paid claims .

• 90% of the paid claims are in respect to insurance contracts concluded in 2012, and

10% in respect to contracts concluded in 2013.

2013 January - May

There were 1148 road accidents in Azerbaijan during 2013 January – May resulting in 1247 damages to health (claims paid are only with respect to 8.5% of cases of damage to health), and 443 death (claims paid are only 8.1% of death cases)The number of road accidents has increased by 10%, number of dead persons by 41% and injured persons by 9%.

14

TERMS OF COMPENSATION of CIB

Pursuant to the requirements of the Law “On compulsory insurance”,

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 contracts for civil liability of owners of

vehicles (provided that, despite a claim being put forward by a victim against

the owner of the car to remedy the damage, this claim was not satisfied)

15

COMPENSATION BY CIB

Damage to health Death of the person TOTAL

Quantity 0 1 1

Amount 0 5,000 AZN 5,000 AZN

2012 January - December

Damage to health Death of the person TOTAL

Quantity 6 4 10

Amount 6,691 AZN 20,000 AZN 26,691 AZN

2013 January - May

Note: Rejected Claim – 3, Claims under consideration - 4 and Subrogation Opened Claims - 2

16

«CIB INFORMATION SYSTEM»

CIB information system has been developed in accordance with the provisions of the Law “On 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 SMS notification during every transaction

• While creation of infrastructure there was used the modern equipment and licensed software of world leading IT producers. The protection of intellectual property is one of the main directions of Bureau`s IT policy.

• The information system of CIB was subject to checking on foreign interventions and finding out the weak points by IT audit company. The safety of assessed information system was positively evaluated and at the moment the technical works continue in the field.

17

DEVELOPMENT PERSPECTIVES

Integration of electronic information system with information systems of the Ministry of Internal Affairs, State Traffic Police, State Migration Service and the Ministry of Taxes.

Integration will enable elimination of paper blanks

Inclusion of other types of compulsory insurance into CIB information system

Ensuring integration of electronic information system between participating insurance companies and the CIB

Entry of the CIB into the “Green card” system

Developing current claims registration system to the advanced claims management information system

Implementation of high end systems and procedures for control over and fighting against uninsured auto vehicle owners

18

Thank You!

AIIF - 2013 Azerbaijan International Insurance Forum