MTPL Market

Situation in the Russian MTPL (Motor Third-party Liability) market is still inconsistent. On the one hand, loss ratio of this kind of insurance is increasing and this process seems not to terminate even under introduction of new territorial coefficients. On the other hand, insurance companies are discussing a possibility of reduced cost of policies, which can lead to unforeseen consequences. Who is likely to keep their positions in the market and what are the development tendencies of the market?

The Russian MTPL market is getting more civilized. In 2009 the system of direct loss settlement and the so-called ‘European Protocol’ were established. Insurers estimate willingness for these new tendencies differently. Projects of their effective operating have not been yet worked out. At the same time, insurers agree that such innovations are necessary.

Besides, territorial coefficients were corrected. But it does not infuse some market members more optimistic. Such as small insurance companies, including regional, which do not have sufficient financial resources to be used for further development or to cover losses borne.

Even large insurance companies suffer losses in several regions, but they always have an ‘airbag’ formed by more promising regions and kinds of insurance. They have not yet been affected by the situation of regional losses to a large degree. Upon the whole, loss ratio in the MTPL market, including bad regions, has reached a critical level, as it was earlier predicted by experts.

Together with new territorial coefficients, increase in main tariffs can also be useful for solving the problem of MTPL loss ratio. Insurers announced about it from time to time.

Some time before, such initiative was to a certain extent promising. But under the global crisis condition, that ordinary people, having, as a rule, not expensive cars and amounting to a greater part of population, decrease paying capacity, this measure is not likely to gain popularity.

Vice verse, it would be more profitable for an insurer to offer a customer policy at a reduced price. This idea, which seems good at first sight, is adopted by some insurance companies, trying to attract clients with large discounts and low prices. But in the occurrence of an insured event, such insurer often turns out to be unable to discharge liabilities ‘due to’ too low premium. Large insurers, who do not employ price dumping, estimate this experience rather cautiously.

What do representatives of Russian Association of Motor Insurers, which is a branch organization, and members of the MTPL market think of the current situation in the market?

	Alexey Karpitsky Head of Insurance Methodology Department by Russian Association of Motor Insurers – In 2008 36.7 mln. MTPL agreements were concluded. Volume of premiums raised amounted to 80.4 bln. roubles. During the period under consideration, 1.88 bln. Insured events were settled, an amount of money paid under the said events was 45.9 bln. roubles.
	Dmitry Markarov First deputy director general of OAO Rosgosstrah – There have been serious changes in the MTPL market for the several last months. They are mainly concern the system of direct loss settlement and the simplified procedure of a road accident formalization, the so-called, ‘Europrotocol’. These innovations have been effective for only one month and a half and are applicable for those who received insurance policies after March 1, 2009.
	Denis Makarov Manager of Compulsory Insurance Authority for OAO AlfaStrahovanie Underwriting and Methodology Department – In 2008 questions concerning the Russian MTPL market were actively discussed. On the one hand, this period can be considered a period of recovery. ‘Pyramid companies’ paying agents unbelievable fees, reaching 40 % of an agreement cost, offering great discounts etc, were leaving the market. Such organizations, offered as a rule, low insurance tariffs, including MTPL.
	Alexander Gurdus Director of OAO ROSNO Underwriting and Products for Natural Persons and Small-scale Business Management Center – Direct loss settlement and ‘European Protocol’ introduced in March became important events for the MTPL market. It should mentioned that the leading insurers are ‘morally’ ready for direct settlement. However, for creation of consistent methodological procedures, development and adjustment a general principle of innovation realization it is necessary to make major efforts.
	Gregory Ignatenko Director of ZAO GUTA-Strahovanie Auto Business Insurance Front Office — Legislation on MTPL is often changed. Since the second half of 2008 an active work on the MTPL system change was has been carried out. In July, 2008 it was planned to introduce direct settlement and ‘European Protocol’. But at that time the insurance market was not ready for such changes. As a result, a decision about shifting the date of direct settlement and ‘Europrotocol’ to March 1, 2009 was made.