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vol. XVII no. 3
One of the biggest developments in insurance in Russia in recent years was the 2003 enforcement of mandatory third-party liability (TPL) auto insurance. Since then TPL has resulted in the sale of more than $1.5 billion in policies. Today in Russia there are more than 35 million vehicles registered.
According to Andrey Kigim, who heads the Russian Association of Motor Insurers, a federal professional body responsible for developing the motor third-party liability (MTPL) insurance market in Russia, the adoption of MTPL has been a very positive step forward. For many years drivers in Russia were virtually on their own to settle disputes related to car accidents. That system, says Kigim, was "uncivilized, resulting in many conflicts over who was required to pay. It sometimes led to criminal situations."
With the new law, the third party - the insurance carrier - takes responsibility. To show how effective this new form of insurance has been, Kigim noted that there were about 530,000 accidents in Russia in 2004, and of that total his office received only about 1,000 complaints from citizens.The association also acts in a similar way to the Federal Deposit Insurance Corporation (FDIC) in the United States. According to Vassily Balog, adviser to the president of the Motor Insurers group, "Each insurance company pays 3 percent of its TPL revenues annually to a fund which is administered by the association and provides a guarantee of payment to policyholders should a company be unable to live up to its obligation."
Adds Kigim, "
Opinion polls in Russia show that 60 percent of the population believe that mandatory third-party liability insurance is the right way to go."
Not only is MTPL meeting with acceptance, it appears to be one of the better outcomes of the new market economy. In Soviet days, the Ministry of Social Affairs was there to help motorists and pedestrians, but when the free market was unleashed, they were on their own. There was no transitional mechanism as there was in banking, for example, where five state banks were privatized, providing a bridge to a new system. Until the new MTPL law
was enacted, motorists were still floundering. That law and the service provided by the Russian Association of Motor Insurers have eased motorist and pedestrian concerns over what would happen if they found themselves in an accident on one of Russia's crowded thoroughfares. |
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