Insurance market under pressure
By Nigar Orujova
Changing in Azerbaijan's car market is affecting the insurance market of the country.
The growth rate of the Azerbaijani insurance market has declined
in comparison with previous years after reducing of imports,
tightening of car loans and the changes in terms of inspection, the
statistics of the State Insurance Supervision Service under the
Ministry of Finance says.
"All these factors have undermined the insurance market. First,
restrictions in bank lending served to reduce by half charges from
voluntary motor insurance CASCO. Second, the elimination of
maintenance for new cars has led to a sharp decline in fees for
compulsory car insurance OSAGO", expert in the field of insurance
Khayal Mammadkhanly believes.
It is unlikely that the cars owners who received an insurance
policy a year ago to update it until the next technical inspection.
So, significant growth in the market before the end of 2014 can
hardly be expected.
Although with the rise of the administrative penalty for the
lack of a new insurance policy [50 AZN] this summer an increase is
expected in the fees for this type of insurance, Mammadkhanly
said.
According to the rules approved by CBA at the end of March 2014 on
regulating of credit risks of one or a group of borrowers related
with each other, the initial payment on car loans cannot be less
than 40, 50 and 80 percent of the value of the purchased car,
depending on its price and age at the time of sale.
The decision was made due to increased volumes of overdue loans
most of which are car loans. Following this decision, the issuance
of the loans, provided mostly from the car insurance policy sales,
was actually stopped.
In January-July 2014, fees for compulsory insurance of vehicles
totaled 37.8 million (20.1 percent of the fees for non-life
insurance) with payments of 16.3 million (22.3 percent of the
payments of non-life insurance), and voluntary motor insurance
premiums reached 21.2 million (11.3 percent) with payments of 15.8
million (21.6 percent).
Fees for insurance declined by 0.4 percent with an increase in
payments by 16 percent. CASCO premiums saw a 34.6 percent decrease
compared to January-July 2013, and payments increased by 4.96
percent compared to the same period of last year.
During the first seven months of 2014, the insurance market grew as
a whole by 9.9 percent compared to the same period of last year. In
2012, the market grew by 60 percent and last year its growth
reached 18.44 percent.
In 2012, the main driver of market growth was compulsory insurance,
while last year the market growth was mainly made by voluntary
insurance.
In the past year, the volume of voluntary insurance market grew by 26 percent, while the growth for compulsory insurance totaled 5.64 percent. It has become one of the main differences of 2013 from the previous one.