3 August 2022, Baku: The Central Bank of the Republic of Azerbaijan keeps the spotlight on a number of key strategic priorities, such as the development of the insurance market, strengthening confidence in insurance and the development of a consumer rights protection framework in the insurance sector.

The procedure of indemnification and calculation of insurance premiums for compulsory insurance of civil liability of motor vehicle owners (CICLMVO) is governed by the Law on Compulsory Insurances adopted in 2011 and other legislative acts.

With the adoption of the law, measures were taken to digitize the CICLMVO in the country, insurance certificates began to be issued electronically, and state control over insurance in this area was provided with electronic mechanisms. As a result of the measures taken, about 1.4 million motor vehicle users in the country were insured against third parties. Insurance companies paid AZN74M worth insurance compensation to individuals for 69,000 insurance events that took place in 2021 under this class of insurance.

As in other areas, the Central Bank, benefiting from successful international best experience in the field of CICLMVO, continues its reforms aimed at improving the quality of services provided to consumers, protecting consumer rights, and, as a result, strengthening confidence in insurance. In this context, the Management Board of the Central Bank approved the ‘Regulations on mutual payments settlement (direct settlement of losses) between insurers in relation to compensation for damages caused to the motor vehicle driven by a victim in a traffic accident’ and the ‘Regulations on calculation of insurance premiums for compulsory civil liability insurance of motor vehicle owners’.

The regulations developed for direct loss settlement allow victims to receive an insurance payment directly by contacting their insurers with who they have concluded a CICLMVO agreement or allow insurers to recoup payments from the at-fault driver’s insurance company in the form of subrogation in the event of a traffic accident resulting in collision of two vehicles. These regulations define a new approach to insurer-insured relations of the CICLMVO type insurance ensuring that each insurer provides direct service to its client. This will result in improved service quality.

At the same time, amendments were made to the regulations for calculating insurance premiums in accordance with international best practices as part of the reforms in the field of CICLMVO. According to these amendments, taking into account the likelihood of causing harm to property and health of third parties while driving motor vehicles, coefficients are set for risk factors, such as the age and driving experience of the driver, the number of persons with the right to drive the vehicle, the traffic intensity of the region where the vehicle is driven, and the vehicle service life.

Changes have also been made to the bonus-malus system (concessions or surcharges to tariffs depending on whether the insured has committed an accident or not) defined in the relevant regulations and intended for real-time use. The introduced new bonus-malus system encourages vehicle owners to be more responsible to avoid harming people's property and health while driving.

The envisaged changes will serve to increase the driving responsibility of vehicle drivers, and to eliminate existing problems in the field of CICLMVO by motivating insurance companies to provide better services to consumers, to increase public confidence in insurance, and to develop the insurance market in general.