In the first quarter of 2011 the insurance market recorded an 18% growth in 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 fake policies after the introduction of the unified insurance policy. However, the problem of counterfeit policies still exists.
"The largest number of fake policies was recorded precisely in the crisis years of 2008-2010. This was linked to the generally unfavourable economic situation in the country, rising unemployment and the higher cost of an insurance policy, as well as to consumers cutting their spending on insurance. Many car owners knowingly bought fake policies," said Askar Baimukhanov, Chairman of the Management Board of JSC Kazakhinstrakh. He also noted that it is still too early to draw conclusions about how the introduction of the unified policy has affected the MTPL insurance market. All the results will be visible at the end of the year.
The unified policy should help considerably in the fight against fake policies, but insurers continue to carry out the measures that proved themselves in 2010. These are active cooperation between the companies themselves to identify unscrupulous insurance agents, and with the road police departments, the mass media and the car owners directly.
"The problem of fictitious policies was actively discussed in the mass media, among insurers and, of course, in the competent government bodies. Together with the road police department, our employees took part in raids to identify fake policies. Road police inspectors were also trained, and leaflets were produced on how to tell a counterfeit policy from a genuine one. Articles explaining the consequences of buying a counterfeit policy were published in regional newspapers. A "hotline" was set up through which road police inspectors can verify the authenticity of a policy by giving the driver's taxpayer identification number (RNN) and the policy number," said the head of the insurance company Kazakhinstrakh.
To protect clients from fraud, insurance companies draw attention to the distinguishing features of original policies. The MTPL policy form has microtext and an invisible element that can be detected under ultraviolet light. The paper of the form has a tangier grid and "KAZ" watermarks that are visible when held up to the light. Insurance policy forms are produced at a 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, every policy has a unique number that is reflected in the unified insurance database. This step will allow road police officers to identify counterfeits quickly.
"In order to protect consumers' interests, we recommend buying MTPL policies from companies that have permanent points of sale and have established themselves on the market," said Daniyar Kuzhakhmetov, head of the security service of BTA Insurance. "If a policyholder has doubts about the authenticity of his insurance policy, first of all he should look for the printed security features." If doubts remain, the policyholder can contact an insurance company, and any manager will check the policy's registration in the Unified Insurance Database (UID). Accounting for strict-accountability forms is carried out 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 insurance is the type of insurance most exposed to counterfeiting because it is regarded as 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 counterfeited," said Askar Baimukhanov. According to unofficial data, the largest percentage of counterfeit insurance policies falls on South Kazakhstan Region. After the fines for driving without an insurance policy were raised to 20 monthly calculation indices (MCI), and thanks to the work of the road police, premium volume in the South Kazakhstan region grew 2.5 times in 2010.
According to insurance companies, the shortfall in premiums caused by fake policies exceeds 20%. Another factor that may have contributed to the growth of counterfeits on the insurance market is the sharp reduction in insurance agents' commissions. This in turn may have pushed those who distribute policies to sell fictitious forms in order to maintain their previous income. Previously an agent's income was about half of the policy price; now the agent receives 10%.
Using a fake policy brings its owner no benefit at all. The well-known saying "The miser pays twice" applies here. First, when an insured event occurs, the party at fault cannot count on an insurance payment to the injured party at the expense of his insurance company. The injured party can demand that the party at fault pay for the damage through the courts. Second, owners of fakes are held administratively liable. Those who distribute such policies do not escape liability either.
"If a car owner is found to have a counterfeit insurance policy, he is subject to administrative punishment under Article 470 of the Code of the Republic of Kazakhstan "On Administrative Offences", the sanction of which is an administrative fine. If an insurance agent is found to be concluding insurance contracts on counterfeit policies, he is subject to criminal punishment 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 fake policies was recorded precisely in the crisis years of 2008-2010. This was linked to the generally unfavourable economic situation in the country, rising unemployment and the higher cost of an insurance policy, as well as to consumers cutting their spending on insurance. Many car owners knowingly bought fake policies," said Askar Baimukhanov, Chairman of the Management Board of JSC Kazakhinstrakh. He also noted that it is still too early to draw conclusions about how the introduction of the unified policy has affected the MTPL insurance market. All the results will be visible at the end of the year.
The unified policy should help considerably in the fight against fake policies, but insurers continue to carry out the measures that proved themselves in 2010. These are active cooperation between the companies themselves to identify unscrupulous insurance agents, and with the road police departments, the mass media and the car owners directly.
"The problem of fictitious policies was actively discussed in the mass media, among insurers and, of course, in the competent government bodies. Together with the road police department, our employees took part in raids to identify fake policies. Road police inspectors were also trained, and leaflets were produced on how to tell a counterfeit policy from a genuine one. Articles explaining the consequences of buying a counterfeit policy were published in regional newspapers. A "hotline" was set up through which road police inspectors can verify the authenticity of a policy by giving the driver's taxpayer identification number (RNN) and the policy number," said the head of the insurance company Kazakhinstrakh.
To protect clients from fraud, insurance companies draw attention to the distinguishing features of original policies. The MTPL policy form has microtext and an invisible element that can be detected under ultraviolet light. The paper of the form has a tangier grid and "KAZ" watermarks that are visible when held up to the light. Insurance policy forms are produced at a 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, every policy has a unique number that is reflected in the unified insurance database. This step will allow road police officers to identify counterfeits quickly.
"In order to protect consumers' interests, we recommend buying MTPL policies from companies that have permanent points of sale and have established themselves on the market," said Daniyar Kuzhakhmetov, head of the security service of BTA Insurance. "If a policyholder has doubts about the authenticity of his insurance policy, first of all he should look for the printed security features." If doubts remain, the policyholder can contact an insurance company, and any manager will check the policy's registration in the Unified Insurance Database (UID). Accounting for strict-accountability forms is carried out 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 insurance is the type of insurance most exposed to counterfeiting because it is regarded as 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 counterfeited," said Askar Baimukhanov. According to unofficial data, the largest percentage of counterfeit insurance policies falls on South Kazakhstan Region. After the fines for driving without an insurance policy were raised to 20 monthly calculation indices (MCI), and thanks to the work of the road police, premium volume in the South Kazakhstan region grew 2.5 times in 2010.
According to insurance companies, the shortfall in premiums caused by fake policies exceeds 20%. Another factor that may have contributed to the growth of counterfeits on the insurance market is the sharp reduction in insurance agents' commissions. This in turn may have pushed those who distribute policies to sell fictitious forms in order to maintain their previous income. Previously an agent's income was about half of the policy price; now the agent receives 10%.
Using a fake policy brings its owner no benefit at all. The well-known saying "The miser pays twice" applies here. First, when an insured event occurs, the party at fault cannot count on an insurance payment to the injured party at the expense of his insurance company. The injured party can demand that the party at fault pay for the damage through the courts. Second, owners of fakes are held administratively liable. Those who distribute such policies do not escape liability either.
"If a car owner is found to have a counterfeit insurance policy, he is subject to administrative punishment under Article 470 of the Code of the Republic of Kazakhstan "On Administrative Offences", the sanction of which is an administrative fine. If an insurance agent is found to be concluding insurance contracts on counterfeit policies, he is subject to criminal punishment 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"