So far, 2020 is a rather challenging year both for the businesses and for people in general. The year kickstarted with a spread of global pandemics that stressed every aspect of human life. While some enterprises easily acclimated to the new order, Covid-19 prompted economic difficulties across all sectors of business environment. Insurance industry was no exception. Considerable influence is seen in CMTPL market: its premiums, claims and shift of trends.
Though the number of insured cars1 gradually rose from 2017 to 2019, by the September 30th of 2020 it actually decreased. The change of 2018 (less than 5%) was the ordinal course of development that was connected with more people owning more cars. However, the 14% or 72,000 unit increase of 2019 was a result of the grace period of Armenia’s EAEU membership. People, who otherwise had no intention of buying cars, found themselves at the online auctions looking for the latter. In 2019 alone, Armenia imported 208.5 thousand cars2. For the contrast, the imports were 65.1 thousand for 2018 and 37.7 thousand for 2017. In the first half of 2020, the imports of cars drastically decreased to just only 2,400 due to increased import tariffs. In 2020 the quantity of insured cars became less as most of the imported cars were no longer in Armenia (most of which were moved to Kazakhstan3, some to Russia and other EAEU countries).
The same speculation holds when comparing the quantity of CMTPL contracts entered into force, the written gross premiums and average premium per contract during the first 9 months of the years. The former two figures exhibit the same behavior as the number of cars insured: increasing from 2017-2018 and 2018-2019, but decreasing during 2019-2020. On the contrary, the average premium per contract was at its lowest at 2019, as more contracts were short-term and had lower premium. The chart below reflects the yearly percentage change of the mentioned records during the first 3 quarters of discussed years.
Even though the effects of Covid-19 on the insurance contracts was marginal, it is much more evident in the dynamics of claims and compensations. The quantity of presented claim applications and approved compensations decreased in 2020, which is conflicting as more cars cause more traffic collisions. However, due to lockdown the car utilization rate dropped in urban areas and triggered less road accidents.
| Yearly Figures | Regulated Claims | Gross Compensations Incurred |
|---|---|---|
| 2017 | 42,263 | 8,163,884,600 |
| 2018 | 47,961 | 9,990,008,050 |
| 2019 | 56,467 | 11,242,060,534 |
| 2020 | 49,559 | 10,795,407,591 |
In these past months, Armenian Motor Insurers Bureau changed the limit of damages possible to process through agreed declaration to 200,000 AMD to even further reduce traffic congestions. Although this change is going to save the driver’s time, it is expected to increase the compensations of insurers. Previously, the latter compensated up to 100,000 AMD, even if the actual damages exceeded it and accumulated some savings on this regard. With the changed limit, insurers are going to pay out the otherwise retainable savings leaving the new limit change having negative impact on them.
By the end of 2020’s 3rd quarter, a full-scale war started at the border of Artsakh. Almost a month has passed, but still it is not possible to have viable estimates of its impact on Armenian economy. Generally, insurance contracts have special clause of wars being an exclusion. CMTPL also does not cover war risks that is any damage originating from the latter. This is as far as is possible to say regarding the impact of war on CMTPL and vice versa.
The near future of CMTPL and overall insurance market stays unclear, as current business environment is comprised of elements the modern world has never seen. With this in mind, insurance stays one of more stable industries that has sufficient controls to ensure its successful operations.
