Beware of counterfeits!
11 June 2011 Reading: 5 min Views: 6 246
In the first quarter of 2011, the insurance market recorded an 18% increase in insurance premiums for compulsory motor third-party liability insurance (MTPL) compared with the same period of the previous year. One of the factors behind these results was the decline in the share of counterfeit policies after the introduction of a single insurance policy. However, the problem of counterfeit policies still exists.
In the first quarter of 2011, the insurance market recorded an 18% increase in insurance premiums for compulsory motor third-party liability insurance (MTPL) compared with the same period of the previous year. One of the factors behind these results was the decline in the share of counterfeit policies following the introduction of the single insurance policy. However, the problem of forged policies still exists.
"The largest number of counterfeit policies was recorded precisely in the crisis years of 2008-2010. This was due to the generally unfavourable economic situation in the country, rising unemployment and the higher cost of the insurance policy, as well as consumers cutting their spending on insurance. Many vehicle owners knowingly bought counterfeit policies," said Askar Baimukhanov, Chairman of the Management Board of Kazakhinstrakh JSC. He also noted that it is still too early to draw conclusions about how the introduction of the single policy has affected the MTPL insurance market. All the results will be visible at the end of the year.
The single policy should help considerably in the fight against counterfeit policies, but insurers continue to carry out the measures that proved effective in 2010. These include active cooperation between companies to identify dishonest insurance agents, as well as with road police departments, the media and vehicle owners themselves.
"The problem of fake policies was actively discussed in the media, among insurers and, of course, in the competent government bodies. Together with the road police department, our staff took part in raids to detect counterfeit policies. Training was also provided for road police inspectors, and leaflets were produced on how to tell a forged policy from a genuine one. Regional newspapers published articles explaining the consequences of buying a counterfeit policy. A 'hotline' was set up through which road police inspectors can verify a policy's authenticity by giving the driver's TIN and the policy number," noted the head of Kazakhinstrakh insurance company.
To protect clients from fraud, insurance companies draw attention to the distinctive features of genuine policies. The MTPL insurance policy form contains microtext and an invisible element that can be detected under ultraviolet light. The paper of the form has a guilloche mesh and "KAZ" watermarks that are visible against the light. Insurance policy forms are produced at the banknote factory in accordance with the requirements and standards of the National Bank of Kazakhstan. All forms filled in by hand will be invalid. In addition, each policy has a unique number reflected in the unified insurance database. This step will allow road police officers to identify forgeries quickly.
"In order to protect consumers' interests, we recommend buying MTPL insurance policies from companies that have permanent points of sale and a proven track record on the market," said Daniyar Kuzhakhmetov, head of security at BTA Insurance. "If a policyholder has doubts about the authenticity of their insurance policy, they should first of all check for the printed security features." If doubts remain, the policyholder can contact the insurance company, and any manager will check the registration of the policy in the unified insurance database (UID). Strict-accountability forms are recorded by the insurance contract administration unit. "Every contract concluded is registered in the UID on the day it is concluded. Any discrepancy in numbers and codes triggers an internal investigation," he added.
MTPL is the type of insurance most prone to forgery, as it is considered the most popular product on the insurance market. "It is a compulsory type of insurance, so it is the most popular among the population. That is why insurance policies of precisely this type were forged," said Askar Baimukhanov. According to unofficial data, the largest percentage of counterfeit insurance policies is in South Kazakhstan Region. After fines for driving without an insurance policy were raised to 20 MCI, and thanks to the work of the road police in the South Kazakhstan region, the volume of insurance premiums grew 2.5-fold in 2010.
According to insurance companies, the shortfall in insurance premiums due to counterfeit policies exceeds 20%. Another factor that may also have contributed to the rise in forgeries on the insurance market is the sharp reduction in insurance agents' commissions. This, in turn, may have pushed policy distributors to sell fake forms in order to maintain their former income. Previously, an agent's income was about half the cost of the insurance policy; now the agent receives 10%.
Using a counterfeit policy brings the owner no benefit whatsoever. In this case the well-known proverb "The miser pays twice" applies. Firstly, when an insured event occurs, the party at fault cannot count on an insurance payout to the injured party from their insurance company. The injured party can demand that the party at fault pay for the damage through the courts. Secondly, owners of forged policies are held administratively liable. Distributors of such policies do not escape liability either.
"If a counterfeit insurance policy is found on a vehicle owner, they are subject to administrative penalty under Article 470 of the Code of the Republic of Kazakhstan "On Administrative Offences", the sanction of which entails an administrative fine. If an insurance agent is found concluding insurance contracts using counterfeit policies, they are subject to criminal penalty under Article 325 of the Criminal Code of the Republic of Kazakhstan "Forgery, manufacture or sale of forged documents", which provides for imprisonment for up to two years"
"The largest number of counterfeit policies was recorded precisely in the crisis years of 2008-2010. This was due to the generally unfavourable economic situation in the country, rising unemployment and the higher cost of the insurance policy, as well as consumers cutting their spending on insurance. Many vehicle owners knowingly bought counterfeit policies," said Askar Baimukhanov, Chairman of the Management Board of Kazakhinstrakh JSC. He also noted that it is still too early to draw conclusions about how the introduction of the single policy has affected the MTPL insurance market. All the results will be visible at the end of the year.
The single policy should help considerably in the fight against counterfeit policies, but insurers continue to carry out the measures that proved effective in 2010. These include active cooperation between companies to identify dishonest insurance agents, as well as with road police departments, the media and vehicle owners themselves.
"The problem of fake policies was actively discussed in the media, among insurers and, of course, in the competent government bodies. Together with the road police department, our staff took part in raids to detect counterfeit policies. Training was also provided for road police inspectors, and leaflets were produced on how to tell a forged policy from a genuine one. Regional newspapers published articles explaining the consequences of buying a counterfeit policy. A 'hotline' was set up through which road police inspectors can verify a policy's authenticity by giving the driver's TIN and the policy number," noted the head of Kazakhinstrakh insurance company.
To protect clients from fraud, insurance companies draw attention to the distinctive features of genuine policies. The MTPL insurance policy form contains microtext and an invisible element that can be detected under ultraviolet light. The paper of the form has a guilloche mesh and "KAZ" watermarks that are visible against the light. Insurance policy forms are produced at the banknote factory in accordance with the requirements and standards of the National Bank of Kazakhstan. All forms filled in by hand will be invalid. In addition, each policy has a unique number reflected in the unified insurance database. This step will allow road police officers to identify forgeries quickly.
"In order to protect consumers' interests, we recommend buying MTPL insurance policies from companies that have permanent points of sale and a proven track record on the market," said Daniyar Kuzhakhmetov, head of security at BTA Insurance. "If a policyholder has doubts about the authenticity of their insurance policy, they should first of all check for the printed security features." If doubts remain, the policyholder can contact the insurance company, and any manager will check the registration of the policy in the unified insurance database (UID). Strict-accountability forms are recorded by the insurance contract administration unit. "Every contract concluded is registered in the UID on the day it is concluded. Any discrepancy in numbers and codes triggers an internal investigation," he added.
MTPL is the type of insurance most prone to forgery, as it is considered the most popular product on the insurance market. "It is a compulsory type of insurance, so it is the most popular among the population. That is why insurance policies of precisely this type were forged," said Askar Baimukhanov. According to unofficial data, the largest percentage of counterfeit insurance policies is in South Kazakhstan Region. After fines for driving without an insurance policy were raised to 20 MCI, and thanks to the work of the road police in the South Kazakhstan region, the volume of insurance premiums grew 2.5-fold in 2010.
According to insurance companies, the shortfall in insurance premiums due to counterfeit policies exceeds 20%. Another factor that may also have contributed to the rise in forgeries on the insurance market is the sharp reduction in insurance agents' commissions. This, in turn, may have pushed policy distributors to sell fake forms in order to maintain their former income. Previously, an agent's income was about half the cost of the insurance policy; now the agent receives 10%.
Using a counterfeit policy brings the owner no benefit whatsoever. In this case the well-known proverb "The miser pays twice" applies. Firstly, when an insured event occurs, the party at fault cannot count on an insurance payout to the injured party from their insurance company. The injured party can demand that the party at fault pay for the damage through the courts. Secondly, owners of forged policies are held administratively liable. Distributors of such policies do not escape liability either.
"If a counterfeit insurance policy is found on a vehicle owner, they are subject to administrative penalty under Article 470 of the Code of the Republic of Kazakhstan "On Administrative Offences", the sanction of which entails an administrative fine. If an insurance agent is found concluding insurance contracts using counterfeit policies, they are subject to criminal penalty under Article 325 of the Criminal Code of the Republic of Kazakhstan "Forgery, manufacture or sale of forged documents", which provides for imprisonment for up to two years"
