Category: Automakers

On The “loss-making” Of The MTPL Business

Video: On The “loss-making” Of The MTPL Business
Video: Kozmynykh Olga Valerievna 2023, February
On The “loss-making” Of The MTPL Business
On The “loss-making” Of The MTPL Business

On the one hand, motor third-party liability insurance is called business, which means full-fledged net profit that allows businessmen to earn money from bread and butter. On the other hand, they are trying to prove to us from all angles that OSAGO is a loss-making business, and insurance companies do it only to attract customers for other types of insurance. But, as it turns out, this business is conditionally unprofitable due to the "tightening of the federal legislation on the provision of OSAGO services." Why, one wonders, is federal law so frightening of these conditions? Obviously, in order to ensure that citizens are maximally protected from financial disasters in the form of non-payment of insurance compensation, and, ultimately, to improve the quality of life of people in our democratic state.

At the same time, compulsory motor third-party liability insurance is a prerequisite for driving on Russian roads, which in itself is no longer quite democratic. In addition, when it comes to obtaining compensation, motorists suffer - sometimes it comes to knocking out their money from insurance companies. Interestingly, the perpetrator of the accident as a result feels most at ease, and the victim is forced to upholster the thresholds, spend time and nerves to get compensation.

But insurance companies, too, seem to be not sweet. MTPL is a business that seems to be unprofitable. In addition, the insurer is obliged to organize an examination within 15 working days from the date of filing the whole package of documents, and then make a payment within five days. In Europe, terms of the order of 1.5–2 months are allowed. Again, the hassle, complaints and dissatisfaction of citizens.

And, actually, what does a “loss-making" business mean? Guided by the accounting concept of balance, this should mean that as a result of all the measures taken, insurance companies remain “in the red” for the CTP service. However, this is not quite true. Only in some European countries, insurance companies knowingly go to the "minus", lowering tariff rates to really attract fastidious customers. We have large companies, which conventionally do not face bankruptcy, are clearly in the black. The term “loss-making” here means a specific thing: this is money that, in addition to current expenses such as employee salaries, utilities, communications, transportation, printing, advertising and so on, does not fall into the insurer's pocket.

Let us explain the figures that we received at a seminar for the regional press held on November 23 at the Journalist’s House, “Civil Liability in Russia: Experience, Problems, Development Prospects,” initiated by the Russian Union of Auto Insurers (RSA). Over the passed period of 2005, Russian insurance companies collected insurance premiums totaling 38.7 billion rubles. Insurance payments amounted to 19 billion rubles - this is 49% of the "revenue". Remains 51%. Insurers, by definition members of a professional association, are obliged to contribute another 5% of their income to the guarantee funds (two of them) formed by the RSA, which the Union already uses to make insurance payments in cases of insurer bankruptcy or license revocation, hiding the perpetrator of the accident from the scene of an accident, the culprit’s lack of an insurance policy. Remains 46%. Further, according to paragraph 2 of Article 22 of the Federal Law "On Compulsory Third Party Liability Insurance of Vehicle Owners", insurers have the right to put in their pocket no more than 5% of income. Remains 41%. Current expenses for agents' salaries, utilities and other services are about 20-23% (according to the SAR). 18% remains, which is approximately (taking into account possible errors) 6.96 billion rubles. It is this money that is spent on the formation of a certain insurance reserve. Literally, this line of the law (Article 22, Clause 2) reads as follows: “If, when applying compulsory insurance, the difference between the insurer's income and expenses for the year exceeds 5 percent of these incomes, the excess amount is sent by the insurer to form an insurance reserve to compensate for expenses to make insurance payments in subsequent years. " That is, this must be understood in case of bankruptcy or a condition close to that. This amount, as you might guess, settles in the safe. And it is assumed that this money should lie there dead weight waiting for their time.

Over the past 10 months, about 21 million contracts have been concluded. The average insurance premium according to SAR information today is 1858 rubles. What are these hints for? And to the fact that if you take 6.96 billion rubles, which are deducted for the formation of some reserve funds (in addition to PCA funds), and divide it into 21 million contracts … follow your hands … you get 331.4 rubles, for which insurance premium in any situation could be less. This is about the client-oriented approach in business, about democracy, about social programs to improve the quality of life, and so on.

In short, than to insure future cataclysms at the expense of citizens, it would be quite possible to really use this money to form a normal OSAGO system and attract customers, which civilized (and, apparently, well-fed) European insurers sometimes do to their own detriment.

Do you know …

… that each insurance company in order to obtain a license to provide OSAGO services must be a member of the relevant professional association. In our country, the Russian Union of Auto Insurers has become such an organization. The RSA has the right to exclude unscrupulous insurers from its ranks, and similar precedents have already taken place. At the same time, the Union is obliged to pay compensation under those agreements that the “expelled” companies have already concluded and which continue to operate at the time of exclusion.

… that, having found himself in a difficult situation related to compulsory motor third-party liability insurance (lack of insurance policy, the perpetrator of the accident fled the scene of an accident, etc.), the driver can call the RSA reception office by phone 7 (095) 771-69-44 (or any insurance company, member of the RSA), where he will be consulted in detail and, if possible, will provide professional assistance.

… that many problems associated with the bankruptcy of insurance companies stem from the incorrect formation of regional ratios. For example, in some northern resource-producing regions, where motorists can afford to drive expensive cars and where they have to drive SUVs, the tariff rates are unreasonably small, while the insurance payments for accidents of expensive SUVs are disproportionately high. And since the cost of repairs and spare parts in remote regions is high, this leads to bankruptcy of companies.

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