Compulsory motor insurance: answers

On 20 February 2010, amendments and additions to the Law of the Republic of Kazakhstan "On Compulsory Insurance of Civil Liability of Vehicle Owners" (hereinafter, the Law) came into force.

Motor insurance and its cost

Motor insurance is the most widespread type of insurance worldwide: Compulsory motor insurance, Motor CASCO, Vehicle owner's liability, and so on: motorists call this type of insurance by many names and variants. That is precisely why we will look at the questions that most often arise when insuring vehicles and at the disagreements that occur between the insurance company and the client over insurance payouts. Of course, a single article cannot cover every issue, since motor insurance questions keep arising, situations become more complicated and the laws are constantly amended.

Question: What consequences have these legislative changes had for motorists?

Answer: As always, the law is on the side of policyholders and injured parties. Many motorists know that when an insurance policy is purchased, information about the policyholder and the insured person is entered into the unified insurance database maintained by Actuarial Statistical Bureau LLP. With the adoption of the amendments and additions to the Law, the Policyholder is entitled to apply independently to ASB LLP for information, namely for an insurance report, and to state disagreement with the insurance report. In this way, the policyholder or insured person can find out whether their details have been entered into the unified insurance database.

Question: What if the policyholder honestly bought an insurance policy and paid the full amount, but there is no information about them in the unified insurance database?

Answer: The legislation has taken this into account in light of past events with Altyn Polis Insurance Company JSC, when insurance policies were sold but the information was not entered in the proper manner. Now, if the database contains no information about the policyholder (insured person), the insurer, when concluding a compulsory insurance contract for a new
term, applies a reducing coefficient under the "bonus-malus" system if the policyholder presents the original of the previous insurance policy.

Question: What awaits motorists who evade buying compulsory insurance?

Answer: Such a motorist will have to pay a fine of 20 monthly calculation indices (MCI), i.e. KZT 28,260. I think it is more sensible to buy insurance for KZT 17-18 thousand. Moreover, an insurance organisation is prohibited from granting discounts, except for the "bonus-malus" coefficient. Therefore, an insurance policy bought at a large discount is most likely counterfeit.

Question: Are there additions regarding the persons who must insure their civil liability?

Answer: Since 20 February 2010, liability must also be insured by owners of vehicles being driven under their own power from manufacturers, repair and trading organisations or customs control bodies to the place of registration, as well as vehicles deregistered by a road police unit due to a change of the owner's place of residence or a change of ownership.

Question: Has the cost of insurance changed?

Answer: For individuals, the coefficients for calculating the insurance premium have not changed, while for legal entities there is good news. The "bonus-malus" coefficient will not be applied to legal entities: this is a system of discounts and surcharges depending on the traffic accidents caused by the policyholder.

Question: And if the policyholder wants to make changes to the insurance policy?

Answer: Under paragraph 6-1 of Article 10 of the Law, changes to an insurance policy are not permitted; insurance companies call this re-issuing the insurance policy, i.e. previously a new policy with new details but the old dates was issued free of charge. Now, if the policyholder wishes to change the insurance policy because another person is being added, or the owner of the car has changed and accordingly the car's registration number has changed, or in other cases, the policyholder comes to the insurance company and writes an application; the old contract is terminated, the insurance premium to be refunded is calculated, and then a new insurance policy is issued for the next 12 months, with the policyholder paying only the missing part of the insurance premium. Here is an example: I concluded a contract on 13 November 2009 and paid KZT 14,472 for the insurance policy. If I want to conclude a new contract with the same insurance company, the portion of the insurance premium is calculated as follows: 14,472 (insurance premium) * 102 days (actual term of the contract) : 365 days (full term of the contract) = KZT 4,044. Thus, the amount to be retained by the insurer is KZT 4,044, and the amount to be refunded to the policyholder is KZT 10,428. This means I will only have to pay the missing part of the insurance premium. If the policyholder terminates the contract and does not wish to conclude a new contract with the same insurance company, the insurance premium refunded will be considerably smaller, since in this case the calculation is made differently, which is unfavourable for the policyholder.

Question: Are there changes to insurance payouts when an insured event occurs?

Answer: The insurance payout for damage to property is made in the same amounts. When harm is caused to the life and health of the injured party, the insurer pays at least 10 MCI for each day of inpatient treatment, but no more than 300 MCI. Funeral expenses of 100 MCI are also provided for the person who arranged the funeral, i.e. they are paid in addition to the amount established for the death of the injured party. The new deadline for making an insurance payout is no later than 15 working days from the moment the insurer receives all documents.

Question: Can the policyholder or the injured party choose the expert organisation to assess the damaged car?

Answer: The injured party (beneficiary) whose property has been damaged is obliged, within seven working days from the day they or the policyholder (insured person) submit an application to the insurer to arrange an assessment, to keep the property in the condition it was in after the traffic accident and to allow the insurer to inspect the damaged property and an independent expert to assess the damage caused. Upon application, the insurer arranges an assessment of the property within 10 working days with the appraiser chosen by the injured party.

Question: What is a direct payout?

Answer: To be precise, under the legislation a direct payout is called direct settlement. Any insurance company can carry out direct settlement. The conditions for direct settlement are simple. If our company's policyholder is involved in a traffic accident through the fault of another person who has an insurance policy, our policyholder applies to our company with an application and a copy (original) of the at-fault party's insurance policy. For the insurance payout, the policyholder provides all the documents specified in the Law. The positive side of this rule is that the insurer, valuing its client, will try to make the insurance payout without red tape. However, an injured party who is not the owner of the damaged property cannot use direct settlement.

For a full consultation, contact the insurance brokers and agents listed in the association's registry.