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The process of consolidation on the Armenian insurance market continues
http://www.finport.am/view-lang-eng-newsarticle-19627.html
17:52 29.11.2013
ArmInfoElita BABAYAN, Insurance Specialist, Agency of Rating Marketing
Information (ArmInfo)
XPRIMM: Starting 1st January 2013 a system of bonus was introduced,
and starting January 1, 2014 - one of malus. Was this system accepted
by the insurance market? What has been the total amount of bonuses
granted to disciplined drivers? What are the expectations of the
market since the introduction of this system?
Elita BABAYAN: The bonus-malus system, or rather one of its components
("bonus") applies to contracts signed after December 31st, 2012. Thus,
the system is already functional in Armenia; however, many drivers are
still lacking knowledge about its details.
According to estimates by the Executive Director of the Motor
Insurers' Bureau of Armenia, Anna VARDIKYAN, full implementation of
the "bonus-malus" (BMS) in the next few years will lead to a reduction
of the number of undisciplined drivers in Armenia by 6-10%.
The system, according to the Bureau will indirectly affect the
behavior of drivers that pose a potential threat to the life and
health of citizens, forcing the first to be more disciplined.
"Bonus-Malus" also prevents fraud in the field of MTPL.
Since the date of implementation of the "bonus" component, the total
amount of bonuses (3% of the premiums) issued to disciplined drivers
amounted to about AMD 350 million.
With the introduction of the "bonus-malus" system, insurance companies
are expecting to "save" the unprofitable MTPL segment, which seems to
be very unlikely to independent insurance experts, given the presence
of a number of unresolved problems related to the system of vehicle
inspection, which in Armenia is considered to be very bureaucratic. It
should be noted that the "bonus" of conscientious drivers will grow
annually, and its maximum size reaches 50% of the insurance premium
for a specific driver.
XPRIMM: Please assess the mandatory health insurance in Armenia:
results, expectations, trend
E. B.: When evaluating the status of the health insurance segment in
Armenia, it should be noted that the activity of policy holders
requests for insurance compensation (most of them are government
employees) is quite high. However, there is an extremely low level of
awareness about the cases in which they can get insurance payments and
what is not possible to be compensated. However, the government's
initiative led to a noticeable (4 time) increase in the health
insurance market in Armenia, and is intended to pave the way for the
introduction into the social life of compulsory health insurance.
According to insurers, this product will become unprofitable business
for the companies, but a good tool for the promotion and mainstreaming
of insurance in society. So, annual payments in health insurance in
Armenia increased by almost 10 times and reached, on April 1st, 2013,
AMD 1.6 billion or 33% of the total payments. Thus, seven insurance
companies collected AMD 2.052 billion premiums.
The capacity of the health insurance segment has grown rapidly after
the introduction by the Armenian authorities of the social package for
budgetary workers. Currently, the state program of "social package"
includes 150,000 budgetary workers.
For the implementation of this program, the government has allocated
this year nearly AMD 21 billion. It should be emphasized that the
premiums collected under the program accounted for over 90% of health
insurance premiums.
XPRIMM: Online sales are becoming popular in many countries. Are the
Armenian market and population ready accept this innovation? What are
the steps taken by companies towards the development of this trend?
E. B.: Online sales of insurance policies have become an ordinary
procedure in Western countries. For Armenia, this is a new sales
channel and it is not popular among the insured. The pioneer (and so
far the only company) in this segment is ROSGOSSTRAKH Armenia. They
will launch an online service for selling insurance policies for those
who were traveling abroad in early 2013. Thus, the population of
Armenia is not ready for the transition to the new (Internet)
mechanisms for concluded insurance contracts. Insurers are also
neutral to the online promotion services.
XPRIMM: The segment of agricultural compulsory insurance has become
more common in some CIS countries, particularly in relation to natural
disasters. Is Armenia, which has been affected by natural disasters,
what are the losses of the latest date? What measures have been taken
in this direction?
E. B.: about the topic of Insurance of agricultural risks is somehow
quite abstract for the rural population of Armenia. And this is
understandable, because the agricultural sector of our economy is
extremely behind the global technical progress, and the rural
population is hardly feeding the country with its gifts of their
"modest" harvest. The practice of agriculture has become economically
inefficient.
According to Ms. Babayan, in such conditions it is a bit premature for
the rural population to talk about the possible development of
agricultural insurance in Armenia, but on the other hand we are more
likely behind the schedule. The management agricultural sector of
Armenia has undergone a significant decline and is far from being
effective, that's why today it needs a wide acceptance of the
international practice of agricultural risks insurance. Such a system
in Armenia can earn acceptance through appropriate development for
agribusiness, which needs specific legislative initiatives and a
consistent policy.
In Armenia not many insurance companies practice agricultural
insurance business risks.
In practice, there are two known options of agricultural risks
insurance. First - there is a classic option, when insurance
protection guarantees a partial or full compensation for potential
losses in the insurance case - crop failure, death of livestock or
crop failures and other.
In Armenia, getting insurance for "farmers" risk without specific
legislative initiatives in the field of agriculture is very
complicated. Legislation in the field of agriculture does not
determine the legal status of small farmers engaged in animal
husbandry and cultivation of certain agricultural crops.
Beyond that, many farmers do not respect important rules for efficient
livestock management conditions. On the farms there are no special
pens and winterized facilities for cattle, no planned activities are
carried out for monitoring the vaccination of livestock, and activity
of veterinary services is not very effective. Such a system glitch
makes insurance of agricultural risks extremely inefficient for
insurers. But it also has the opposite effect - the insurance will
encourage the introduction of these basic norms and procedures of
management. Nevertheless, insurance of cattle is one of the
potentially viable areas in the field of agricultural insurance.
If insurance of major livestock product is more or less clear, the
insurance for agriculture is an even more difficult task, because it
requires a methodological approach to the assessment of the possible
risks and the probability of their occurrence.
The most likely and effective option for our market could be insurance
of risks in the agricultural production. We are talking about food
enterprises and food processing industry, especially the dairy
industry. Players in the industry are interested to get insurance
coverage, but they are also trying to reduce cost as much as possible.
In insurance they would rather see an opportunity to protect their
business from financial loss and they will often turn to insurers with
a task difficult to prove for them. Thus, the development of specific
mechanisms for these businesses requires a lot of time, the
availability of qualified personnel, material resources for the study
of the circumstances affecting the level of profits, etc. .
XPRIMM: Do you expect a merger or acquisition in the current year?
E. B.: The process of consolidation on the Armenian insurance market
continues. ArmInfo has been informed by a reliable source that the
largest insurance player, ROSGOSSTRAKH Armenia, a subsidiary of
ROSGOSSTRAKH (Russia), is acquiring GARANT Insurance, which
specializes in health insurance.
Editor: Olesea ADONEV
http://www.finport.am/view-lang-eng-newsarticle-19627.html
17:52 29.11.2013
ArmInfoElita BABAYAN, Insurance Specialist, Agency of Rating Marketing
Information (ArmInfo)
XPRIMM: Starting 1st January 2013 a system of bonus was introduced,
and starting January 1, 2014 - one of malus. Was this system accepted
by the insurance market? What has been the total amount of bonuses
granted to disciplined drivers? What are the expectations of the
market since the introduction of this system?
Elita BABAYAN: The bonus-malus system, or rather one of its components
("bonus") applies to contracts signed after December 31st, 2012. Thus,
the system is already functional in Armenia; however, many drivers are
still lacking knowledge about its details.
According to estimates by the Executive Director of the Motor
Insurers' Bureau of Armenia, Anna VARDIKYAN, full implementation of
the "bonus-malus" (BMS) in the next few years will lead to a reduction
of the number of undisciplined drivers in Armenia by 6-10%.
The system, according to the Bureau will indirectly affect the
behavior of drivers that pose a potential threat to the life and
health of citizens, forcing the first to be more disciplined.
"Bonus-Malus" also prevents fraud in the field of MTPL.
Since the date of implementation of the "bonus" component, the total
amount of bonuses (3% of the premiums) issued to disciplined drivers
amounted to about AMD 350 million.
With the introduction of the "bonus-malus" system, insurance companies
are expecting to "save" the unprofitable MTPL segment, which seems to
be very unlikely to independent insurance experts, given the presence
of a number of unresolved problems related to the system of vehicle
inspection, which in Armenia is considered to be very bureaucratic. It
should be noted that the "bonus" of conscientious drivers will grow
annually, and its maximum size reaches 50% of the insurance premium
for a specific driver.
XPRIMM: Please assess the mandatory health insurance in Armenia:
results, expectations, trend
E. B.: When evaluating the status of the health insurance segment in
Armenia, it should be noted that the activity of policy holders
requests for insurance compensation (most of them are government
employees) is quite high. However, there is an extremely low level of
awareness about the cases in which they can get insurance payments and
what is not possible to be compensated. However, the government's
initiative led to a noticeable (4 time) increase in the health
insurance market in Armenia, and is intended to pave the way for the
introduction into the social life of compulsory health insurance.
According to insurers, this product will become unprofitable business
for the companies, but a good tool for the promotion and mainstreaming
of insurance in society. So, annual payments in health insurance in
Armenia increased by almost 10 times and reached, on April 1st, 2013,
AMD 1.6 billion or 33% of the total payments. Thus, seven insurance
companies collected AMD 2.052 billion premiums.
The capacity of the health insurance segment has grown rapidly after
the introduction by the Armenian authorities of the social package for
budgetary workers. Currently, the state program of "social package"
includes 150,000 budgetary workers.
For the implementation of this program, the government has allocated
this year nearly AMD 21 billion. It should be emphasized that the
premiums collected under the program accounted for over 90% of health
insurance premiums.
XPRIMM: Online sales are becoming popular in many countries. Are the
Armenian market and population ready accept this innovation? What are
the steps taken by companies towards the development of this trend?
E. B.: Online sales of insurance policies have become an ordinary
procedure in Western countries. For Armenia, this is a new sales
channel and it is not popular among the insured. The pioneer (and so
far the only company) in this segment is ROSGOSSTRAKH Armenia. They
will launch an online service for selling insurance policies for those
who were traveling abroad in early 2013. Thus, the population of
Armenia is not ready for the transition to the new (Internet)
mechanisms for concluded insurance contracts. Insurers are also
neutral to the online promotion services.
XPRIMM: The segment of agricultural compulsory insurance has become
more common in some CIS countries, particularly in relation to natural
disasters. Is Armenia, which has been affected by natural disasters,
what are the losses of the latest date? What measures have been taken
in this direction?
E. B.: about the topic of Insurance of agricultural risks is somehow
quite abstract for the rural population of Armenia. And this is
understandable, because the agricultural sector of our economy is
extremely behind the global technical progress, and the rural
population is hardly feeding the country with its gifts of their
"modest" harvest. The practice of agriculture has become economically
inefficient.
According to Ms. Babayan, in such conditions it is a bit premature for
the rural population to talk about the possible development of
agricultural insurance in Armenia, but on the other hand we are more
likely behind the schedule. The management agricultural sector of
Armenia has undergone a significant decline and is far from being
effective, that's why today it needs a wide acceptance of the
international practice of agricultural risks insurance. Such a system
in Armenia can earn acceptance through appropriate development for
agribusiness, which needs specific legislative initiatives and a
consistent policy.
In Armenia not many insurance companies practice agricultural
insurance business risks.
In practice, there are two known options of agricultural risks
insurance. First - there is a classic option, when insurance
protection guarantees a partial or full compensation for potential
losses in the insurance case - crop failure, death of livestock or
crop failures and other.
In Armenia, getting insurance for "farmers" risk without specific
legislative initiatives in the field of agriculture is very
complicated. Legislation in the field of agriculture does not
determine the legal status of small farmers engaged in animal
husbandry and cultivation of certain agricultural crops.
Beyond that, many farmers do not respect important rules for efficient
livestock management conditions. On the farms there are no special
pens and winterized facilities for cattle, no planned activities are
carried out for monitoring the vaccination of livestock, and activity
of veterinary services is not very effective. Such a system glitch
makes insurance of agricultural risks extremely inefficient for
insurers. But it also has the opposite effect - the insurance will
encourage the introduction of these basic norms and procedures of
management. Nevertheless, insurance of cattle is one of the
potentially viable areas in the field of agricultural insurance.
If insurance of major livestock product is more or less clear, the
insurance for agriculture is an even more difficult task, because it
requires a methodological approach to the assessment of the possible
risks and the probability of their occurrence.
The most likely and effective option for our market could be insurance
of risks in the agricultural production. We are talking about food
enterprises and food processing industry, especially the dairy
industry. Players in the industry are interested to get insurance
coverage, but they are also trying to reduce cost as much as possible.
In insurance they would rather see an opportunity to protect their
business from financial loss and they will often turn to insurers with
a task difficult to prove for them. Thus, the development of specific
mechanisms for these businesses requires a lot of time, the
availability of qualified personnel, material resources for the study
of the circumstances affecting the level of profits, etc. .
XPRIMM: Do you expect a merger or acquisition in the current year?
E. B.: The process of consolidation on the Armenian insurance market
continues. ArmInfo has been informed by a reliable source that the
largest insurance player, ROSGOSSTRAKH Armenia, a subsidiary of
ROSGOSSTRAKH (Russia), is acquiring GARANT Insurance, which
specializes in health insurance.
Editor: Olesea ADONEV