Motor Insurance: Prospects for the Development of Market Technologies

1. What has changed in motor insurance
2. The original analytical material
3. Key technologies of the modern market
4. MTPL and CASCO serve different purposes
5. Development prospects
6. Which data matters to the insurer

What has changed in motor insurance

Electronic compulsory motor third-party liability (MTPL) insurance for vehicle owners has operated in Kazakhstan since 2019. Since 2024, citizens have had access to online claims settlement for compulsory classes and to simplified handling of certain road accidents through the Euro Protocol. These tools reduce paper documentation but do not remove the obligation to record the circumstances accurately.

The original analytical material

A round table on the topic "Motor Insurance: Prospects for the Development of Market Technologies" was held in Almaty as part of the 5th International Conference "Insurance in Central Asia". At present, compulsory insurance of the civil liability of vehicle owners (MTPL) is the most widespread and, moreover, compulsory class of insurance, and it therefore provokes heated debate among market participants. That is how the organisers of the round table defined the motive for the discussion. The experts gathered discussed two major topics from the world of motor insurance: the activity of insurance agents and questions of damage assessment.

The agent is the face of the company

The discussion was opened by Sofia Moskalenko, managing director and acting chair of the board of the Association of Insurers of Kazakhstan. In her speech she noted that vehicle owners' liability insurance is in effect an indicator of the problems that arise in the work of insurance agents. These points were most clearly manifested in the activity of the liquidated insurance company "Altyn Polis": its agents issued forged policies and policies with the same number in double and triple copies, and the company also kept no record of policies. All this became the impetus for tighter regulation of the activity of insurance agents and for the introduction of certain requirements, which took place last year.

Thus, one of the changes concerned insurance premiums. From 2012, restrictions on accepting cash payments from clients come into force; at present the situation is regulated as follows: organisations must either hand the money to the cashier's desk or transfer it to a bank account within one day, and from remote points within a week. This has created a serious problem for companies: if service takes place on weekends or public holidays, it is impossible to meet these conditions. Hence the question of introducing such additional requirements as the insurer having a cash desk on non-working days, or the possibility of all insurance companies being served by a single bank.

Another problematic issue caused by the changes that have taken place is the training and certification of insurance agents. At present the companies themselves handle this. Ideally, however, in Ms Moskalenko's view, the agent should be an independent market participant and should bear responsibility for their own unlawful actions, whereas at present the insurance company is fully and entirely responsible for them.

In the opinion of Yergali Begimbetov, chairman of the board of the insurance company "London-Almaty", there is no problem in the insurer being responsible for the activity of its agents: if it recruits them indiscriminately and cannot administer policies, let it answer for this in full. If an agent has issued a policy and has not brought the money to the company, the company is still obliged to pay under that policy, because this issue should not concern the client. The company, for its part, in that case has the right to demand that a criminal case be opened against the fraudster. Although, of course, some part of the responsibility should also lie with the agents, so the measures regulating their activity should become tougher in future, the expert believes.

Murat Kylyshbay, deputy chairman of the board of JSC "NSK", said that the certification process not only allowed the company to test the agents' knowledge and weed out those who did not meet the requirements, but also revealed some problems. It turned out that not all agents have a higher education, so certain difficulties arose with a requirement such as the presence of higher education documents.

In the expert's opinion, the decision to give certification to the insurance companies themselves was correct. It is another matter how thoroughly each organisation approaches the issue, because today not everyone is able to set up professional training centres in all regions, in the remote districts of the country.

As for the situation with insurance premiums, according to Mr Kylyshbay the changes made did not prove difficult for the company, because its agents already hand the money in directly to a bank account; this scheme has already been worked out here.

Dilyara Karakulova, director of the department for supervision of insurance market participants and other financial organisations of the Agency for Financial Supervision (AFN), said that tougher measures had initially been proposed, namely licensing of agents, but they did not receive the support of market participants. The reason is that nobody wants to lose their agents.

According to Ms Karakulova, the AFN understands and acknowledges that in many cases the requirements of the certification law were met only formally: some companies did not train their agents and simply issued them certificates. However, every organisation must approach this issue seriously, because the agent is the face of the company and their work affects its image.

The AFN proposed creating a single centre where the agents of all companies would receive training and be certified, and, in addition, a dedicated website with data on all certified agents would be created, like the one that exists for appraisers.

Unfortunately, a paradoxical situation has developed in Kazakhstan today: the cost of damage is determined only by the appraiser, while contractors, the service stations that carry out the repairs, are left entirely outside this process. As a result, the client who has handed their car to a service station either does not have enough of the money paid out or is left with a surplus. Moreover, there is the notion of the extent of damage: it also happens that an appraiser takes into account damage unrelated to the particular road accident, and it too is included in the calculations.

The current situation is wrong and must be changed. Mr Verevkin sees the way out as follows. Two parties should be given the right to sort things out between themselves: the company, to look at, as a mandatory step, what it is paying for, and the client, to confirm that this damage was actually sustained within a particular insured event. At the same time the insurer must be given the right to draw up certain calculations using specific technical tools, and to have contractual relations with several service stations, on the basis of whose invoices it will pay. On the other hand, the consumer cannot be deprived of the right to protect their property interests either, since they may disagree with the monetary conclusions of the insurer or the service station. That is what the institution of appraisal exists for: an independent party that will help to resolve the dispute. In a word, we need gradually to move away from the practice in which the appraiser reigns supreme within compulsory insurance, Mr Verevkin believes.

Oleg Kuznetsov, chairman of the council of the Chamber of Professional Appraisers of Kazakhstan, proposed distinguishing between the concepts of "damage assessment" and "cost of restoration". What does the concept of "damage" include? Suppose a person has bought a car and expects to use it for eight years. As a result of a road accident and restoration repairs, its period of use is reduced to six years, because, as is well known, a car after being taken apart and reassembled loses up to 30% of its value and functional capacity. But nobody takes this difference into account. Certainly, the insurer must offer the client a sum sufficient to restore the car's functional properties. But another aspect is forgotten: the safety of the driver, other road users and the environment, when the car is repaired in "Uncle Vasya's backyard", sometimes for a bottle and sometimes at the cheapest prices. Nobody monitors these issues, although they are raised in court practice. Another concept, "loss of marketable appearance", is likewise not taken into account by insurance companies. It turns out that if a person has insured their civil liability, they will receive a deliberately smaller sum than they could count on. These legal aspects need work, Mr Kuznetsov is sure.

As for the dominance of appraisers, in the expert's opinion such specialists are needed precisely in cases where the damage has to be calculated. When it comes to the cost of restoration, however, the policyholder and the insurer can manage on their own, without involving an appraiser.

This topic is closely linked to another problem: the lack of the tools needed to determine the scope and technology of repairs. According to Mr Verevkin, in his practice he very rarely sees assessment reports (as a rule, they belong to the leading companies) in which proper tools are used. In 99.9% of cases, VAZ and GAZ standards are applied here to foreign-made cars. The time has come, Mr Verevkin is sure, when we must stop using improper tools for our own ends, whether to enrich ourselves at the client's expense or at the expense of the insurance organisation that gives one appraiser or another certain volumes of work.

Speaking of tools, according to Dilyara Karakulova, the AFN is inclined towards "Audatex". And the point here is not a vested interest but the fact that this particular company has the fullest database of Soviet-made cars, of which we still have more than foreign makes. In addition, this tool makes it possible to solve another important problem connected with damage: installing, during repairs, instead of the old part, either an old or a new one, especially in the case of a used car. As Alexey Kruglov, commercial director of LLP "Audatex", commented on this issue, the programme allows different price catalogues to be used in the calculations.

Yergali Begimbetov supported the idea of giving "Audatex" legal status. If this is done, the car service stations will have nowhere to go and will install it themselves, he believes. The proposal to give it legal status is a good one, but radical, Vitaly Verevkin is sure, and we will not be able to do it tomorrow. Nevertheless, even now conscientious insurers and service stations can agree with one another on the use of this software package; there are no obstacles to it.

An expert from Ukraine, Vadim Zagrebnoy, chairman of the board of the insurance company "BROKBUSINESS", took part in the round table. He shared with participants his country's experience in motor insurance. In Ukraine, for example, there are accredited dealers and service stations that carry out brand-approved repairs using the appropriate equipment and systems, and garage cooperatives also operate. The payment procedure is as follows: if the client wants the money to be paid to them directly rather than to the service station, they will receive it net of VAT; if the person provides documents from the service station on the repair of the car, they are paid the VAT in addition. The country has a system of unified identification codes for all citizens, and the insurance company, when paying compensation, submits data in a set form on the money credited to the client. After the financial year has passed, the citizen will certainly receive a request from the tax authority and will have to provide documents confirming that, having received the money, they carried out the repair.

As for loss of marketable appearance, as Mr Zagrebnoy noted, in international practice motor third-party liability insurance never takes this into account; that is what motor CASCO is for, and there is the "loss of marketable appearance" option: pay extra, receive compensation. This scheme is adopted in Ukraine.

That country has also adopted another foreign practice relating to motor third-party liability: the motor insurers' bureau. It is a voluntary association of insurance companies that is a self-regulatory organisation; it is responsible for its members and also bears financial responsibility for the performance of obligations in the event of bankruptcy. Quite large contributions go into two funds, the victims' protection fund and the guarantee fund. Today considerable sums are accumulated in the motor bureau, about 1 billion hryvnia. At the same time the insurance companies themselves perform their obligations, and the motor bureau, having survived the bankruptcy of several insurance companies, has been able to ensure the performance of the obligations of those companies that left the market.

In Kazakhstan, certain functions of a motor bureau are performed by the Insurance Payments Guarantee Fund (IPGF), says Dilyara Karakulova. At the time of its creation this was the optimal option, but perhaps now, when the insurance companies are ready, the time has come to think about creating an independent motor bureau with functions different from those of the IPGF.

Key technologies of the modern market

Electronic policy

The contract is concluded remotely, and the data is transferred to a unified insurance database. It is important for the client to check the exact name of the insurer, the accuracy of the vehicle and driver details, the period of validity and confirmation of payment. Do not give an intermediary a password, a confirmation code or an electronic digital signature.

Online claims settlement

A claim application, documents, photos and bank details can be submitted through the insurer's digital service. The advantage appears only when the status of the request is clear and it is possible to confirm the date and the list of materials received.

Euro Protocol

The simplified procedure applies when the established conditions are met: a road accident without injuries, two vehicles with valid policies, no disagreement between the parties and damage within the established limit. In the case of injuries, a dispute or more complex circumstances, the standard procedure is required.

MTPL and CASCO serve different purposes

MTPL covers the vehicle owner's civil liability to injured parties within the limits of the law. It does not pay for repairs to the at-fault party's own car. CASCO is a voluntary product and may protect the car against damage, theft and other risks within the chosen programme.

Market development depends on how clearly the client understands this difference. Selling CASCO as "extended MTPL" without explaining the exclusions and the deductible creates inflated expectations.

Development prospects

• automation of simple claims with verification of data and documents;
• integration of photo and video materials, telematics and repair services;
• personalised risk assessment under a non-discriminatory and transparent approach;
• combating fraud without unjustified complication of payments to honest clients;
• clear comparison of coverage and digital agreement of contract amendments;
• use of analytics to prevent accidents, not only to calculate the rate;
• improved cybersecurity and protection of personal data.

Which data matters to the insurer

To assess risk, the type and characteristics of the car, the region of use, insurance history, driver details and the purpose of the vehicle are analysed. In voluntary insurance, the value of the car, storage conditions, anti-theft systems, the deductible, the list of risks and the method of repair are taken into account.

Algorithmic assessment must be verifiable. It is important for the client to understand which data influenced the offer and how to correct an error in the data.

Quality of claims settlement matters more than speed of issuance

A policy can be bought in a few minutes, but the market's reputation is formed when an insured event occurs. A good digital service shows the status of the application, reports missing documents, allows high-quality materials to be uploaded and provides a reasoned calculation of the payment.

If the client disagrees with a refusal or the amount, they have the right to use the internal complaints procedure and to apply to the insurance ombudsman. Since 1 January 2024, applying to the ombudsman has been a mandatory pre-trial stage before going to court in an insurance dispute.

Risks of digitalisation

• phishing sites and fake payment links;
• errors in personal data and vehicle details;
• leakage of documents and photographs;
• opaque automated decisions;
• advice replaced by aggressive selling;
• digital exclusion of clients who need an offline channel.

What a vehicle owner should check

1. The insurance company's licence and details.
2. The validity of the electronic policy.
3. Coverage, exclusions, limits and the deductible.
4. The procedure in a road accident and the insurer's contacts.
5. The conditions of the Euro Protocol before an event occurs.
6. How to submit an application and obtain confirmation.
7. The procedure for appealing a decision.

Conclusion

The future of motor insurance is not only a fast electronic policy but also clear, provable and fair claims settlement. Technology should shorten the client's path, improve data accuracy and strengthen trust, while preserving the possibility of getting human help in a difficult situation.

This material is for information purposes. The original text has been preserved as analysis of its period; current decisions should be taken on the basis of the laws in force and the terms of the contract.