Vahan AVETISYAN: I think, Armenian Motor Insurers' Bureau (MIB) has been properly fulfilling its responsibilities conferred to it under the law since its establishment. Today we have well established MTPL insurance system in the Republic of Armenia due to the efforts of the MIB and the Central Bank of Armenia (CBA) and we can share our experience with our foreign partners as well. At the same time, since the beginning of 2016 we have started the second phase of the MTPL insurance system's improvement, which is based on the following principle: besides being stable the system must also be convenient for all the participants and in order to increase the convenience for the participants' we should make all the processes much more simple, accessible and fast.
XPRIMM: What was the evolution of the MTPL supervised by the Armenian Motor Insurers' Bureau in 2016?
Vahan AVETISYAN: From our planned projects in 2016 we have managed to implement the following changes and projects:
1. A system for self-registration of accidents by the drivers has been implemented in cases of simple accidents.
2. Besides simple accidents, registration of all other accidents has been centralized in the Road Police (RP). An agreement has been signed between the MIB and the RP, by which the list and structure of the baseline data regarding accident registration and the procedure of transferring this information to the insurance system through the united web platform has been agreed and standardized. As a result, now the injured person isn't obliged to provide the documents made by the RP to the Insurance Companies (hereafter IC). In order to properly organize this process a number of investments have been made in the RP infrastructures.
3. All the notifications in the MTPL insurance system are organized only through electronic means, by sending an e-mail to the corresponding persons. Accordingly, the e-mail address has become mandatory condition for filling the MTPL insurance policy.
4. We have passed from the mixed bonus-malus system based on both drivers and car-owners insurance history to a bonus-malus system based only on car-owners (policyholders) insurance history, which has significantly reduced the operational processes and costs, reduced the increasing fraud risk, enhanced the quality of services, as vehicles are currently considered to be properly insured in all cases when the car-owner hands over the vehicle to any person holding a driving license without having to pay additional premiums or to make changes (amendments) in the MTPL insurance contract.
5. The process of concluding MTPL insurance policies has been completely reviewed and simplified, the list of documents for concluding MTPL insurance policy has been reduced and the necessary prerequisites have been created for starting the MTPL policy on-line signing process in Armenia. Already at the end of 2016, one insurance company offered its customers the MTPL insurance policy on-line issuing service.
6. Contract concluding module of the unified information web platform within the MTPL insurance system has been fully designed during 2016. Now the implementation of the unified web platform is our biggest project, to which I will refer a bit later.
7. One of the most important projects was the implementation of direct compensation system. It was fully developed during 2016 and has been actually implemented in April 2017.
8. It was made possible to get some information by requesting them online from our website (www.appa.am). Particularly it is now possible to get on-line the following information for any date:
- The existence of the MTPL insurance contract and the insurance company which has concluded the MTPL insurance contract.
- Policyholder's bonus-malus class and some data on which the calculation is based.
- Some details of the driver's insurance history (the damage caused by the driver's fault).
Vahan AVETISYAN: Members representing the interests of all parties in the MTPL insurance system are included in the Board of the MIB: particularly representatives from the CBA, the RP, insurance companies, non-governmental organizations representing the interests of consumers and drivers. This means, that for making any decision or for implementing any regulation, it is necessary to take into consideration the interests of all parties, to present comprehensively the motives, principles and expected results for each suggested change. Accordingly, in this aspect both the management of the MIB and the regulations made by the MIB are properly-balanced. Besides, after implementation of any regulation, the Board regularly analyzes the results and ensures appropriate feedback, which is firstly carried out by mandatory involvement of the non-governmental organizations represented in the Board of Bureau. Issues pointed out by you have been discussed by maintaining the above mentioned principles. As a result, now we can mention that the bonus-malus system, the direct compensation system and the MTPL insurance contract concluding process are assessed as maximal effective by the system members. These processes were developed based on the best international experience taking into account our country's features.
We will definitely have some needs of adjustments, which we are planning to implement by the end of this year. The main thing is that the chosen direction of changes is acceptable for all stakeholders which, by the way, is a result of very long and deep discussions with the representatives of all stakeholders of the system.
XPRIMM: How do you evaluate the effectiveness of an automated MTPL database, which has been launched in the test mode? When this innovation will start working in full mode?
Vahan AVETISYAN: MTPL Information System (IS) operates since 2012. In reality, this has been one of the most important achievements of the MTPL insurance system, which, in turn, has contributed to the development of the system. The IS currently provides centralized registration of the necessary information regarding the MTPL insurance contracts, accidents and compensations, calculation of necessary information for bonus-malus system and automated transfer of the required information for concluding MTPL insurance contracts(including the necessary information from the RP online base) to the ICs.
At present, the MIB is working on the quite significant project regarding the implementation of "Armenian Single Window for Automotive" system (ASWA). As a result of it we expect to have integrated unique electronic platform, through which all the operational processes of the MTPL insurance system will be organized: starting from requesting necessary information and concluding MTPL insurance contracts to payment of insurance compensations, sending all required notifications, generating all necessary reports. As a result of the implementation of this system the insurance companies will no longer need to have internal separate software systems for organizing the MTPL process. This system will allow us to fully control all the MTPL system processes, which undoubtedly will increase the effectiveness, objectivity and adequacy of financial resources distribution.
Starting from August 1st, 2017 it is planned to launch fully contracts concluding module of this system, which has been designed in 2016 in accordance with the defined procedures. Next year we are planning to implement all modules of the system.
XPRIMM: What are the percentage of vehicles are insured by MTPL insurance? What measures are taken in order to increase the level of MTPL penetration among the drivers?
Vahan AVETISYAN: I think we never had significant problems with the MTPL insurance penetration level. The MIB cooperates with the RP quite effectively and according to our assessments the level of insured vehicles in the last 3-4 years has permanently been 98-99%.Even in the first year of introduction of the MTPL system we achieved at once more than 95% penetration level.
At this moment the RP has quite good technical equipment to take control of it and consequently since 2014 it is not necessary to have the MTPL insurance sticker on the windshields of vehicles or to keep MTPL insurance contracts in it. The RP check the existence of active MTPL insurance policies by special fixed and mobile technical devices. Besides, I believe our society is mostly disciplined in such cases, and even without such measures of control, we would have substantial involvement.
XPRIMM: What is the level of the motor fraud and the loss ratio in MTPL insurance compared to the previous period?
Vahan AVETISYAN: The problem of prevention and detection of fraud in MTPL insurance industry is constantly under the attention of the MIB. Unfortunately, at this moment we still do not have a common formula or approach to assess the level of fraud which would be acceptable for all participants in the system. We always had different expert assessments, according to which the level of fraud within the last 5 years is around 1-2%.
The temptation to carry out fraud and probably the real rate of fraud as well slightly increased as a result of recent reforms and liberalization in the MTPL insurance industry within last year, about which the insurance companies regularly concern. But I want to mention, that this is a quite manageable process and the tools that can be applied to a particular group are always available. The problem is in the assessment of the real level of fraud, so that used tools are justified and the lives of the essential groups of drivers are not complicated while fighting against the small level of fraud․
Nevertheless, within the last few months, we have intensified the work in this direction, and we present all the suspected cases to prosecution authorities and provide a high consistency toward its further process.
By the way the implementation of ASWA platform will significantly contribute our actions in this direction to be complete and effective, maximally excluding the acts of fraud. This is, of course, a constant process, because the fraudsters have always been, are and will be. Our actions should maximally prevent occurrences of such behavior in our country.
As for the loss ratio, it should be noted that since the launch the loss ratio of MTPL insurance system ranged from 53% to 77% within several years. In the first quarter of 2017 the loss ratio was 66%, which increased by about 17 percentage points compared to the same period of last year.
XPRIMM: When will Armenia become a full member of the Green Card system? At what stage Armenia is?
Vahan AVETISYAN: We applied for membership to the Green Card international insurance system in the beginning of 2016 and are currently working in this direction. We determined the list of actions necessary for the membership, which has been agreed with the Council of Bureaux of the Green card system. At present, we are implementing the actions provided in the list, the most important of which is the ratification of the 1968 Vienna Convention on Road Signs and Signals and that process has already started.
Membership also implies the implementation of certain legislative changes.
XPRIMM: What are the main advantages for Armenian drivers will bring the joining of the Green Card system? What tariffs do you expect on this line (will increase)?
Vahan AVETISYAN: The membership of Armenia to the Green Card system will let us to offer more suitable insurance services to the residents leaving abroad(especially in case they plan to cross the boards of multiple countries), promoting the free movement of transport between countries. It will also allow the foreigners enter the territory of the Republic of Armenia using Green Card contracts obtained in their countries without the need of buying the local MTPL contracts at the border.
We have not yet summarized the results of the analysis of Green Card contracts' tariffs, thus they are not yet determined. As for the possible impact of the Green Card membership on the tariffs of the local MTPL insurance policies in Armenia, I do not see any bases for significant change.