Skip to content

Obligatory Car Insurance Interested Only 30 Percent of Drivers

Starting from January 1, in Armenia, a car crash damage insurance process prescribed by law is to be implemented for the first time.

According to this law, if the insured vehicle damages the health of a citizen, a car or property, then the compensation costs will be paid by the insurance company with which the driver causing damage has signed an insurance contract.

The APPA abbreviation, which means “Obligatory Car Insurance of a Civil Liability”, is being used by everyone independent of age or driving license over the last few months.

That is the result of a propaganda campaign which the Armenian government implemented in association with about ten insurance companies, so that all of the drivers could manage to sign the contract of obligatory insurance.

The deadline was December 31, 2010. But the requirement touched only 30 percent of car owners. In other words, only 135,000 contracts were signed instead of 450,000 planned.

“Every vehicle must have APPA insurance, for it solves a social issue and insures groups with little income,” says Nane Matevosyan, Marketing Manager at “Ingo Armenia” Insurance CJSC.

Matevosyan brings the example of taxi drivers, who colliding with an expensive car will face a big problem in compensating the property and human damages.

Starting from January 1, in Armenia, a car crash damage insurance process prescribed by law is to be implemented for the first time.

According to this law, if the insured vehicle damages the health of a citizen, a car or property, then the compensation costs will be paid by the insurance company with which the driver causing damage has signed an insurance contract.

The APPA abbreviation, which means “Obligatory Car Insurance of a Civil Liability”, is being used by everyone independent of age or driving license over the last few months.

That is the result of a propaganda campaign which the Armenian government implemented in association with about ten insurance companies, so that all of the drivers could manage to sign the contract of obligatory insurance.

The deadline was December 31, 2010. But the requirement touched only 30 percent of car owners. In other words, only 135,000 contracts were signed instead of 450,000 planned.

“Every vehicle must have APPA insurance, for it solves a social issue and insures groups with little income,” says Nane Matevosyan, Marketing Manager at “Ingo Armenia” Insurance CJSC.

Matevosyan brings the example of taxi drivers, who colliding with an expensive car will face a big problem in compensating the property and human damages.

“From now on this is to undertake the insurance companies and to compensate the damage of the third party – be it a car, or a shop, a gas station, a pedestrian etc.,” says Matevosyan.

However, the driver of the insured car should not expect any compensation from the insurance company for the damage of his own vehicle in the same crash.

The annual insurance payment depends on the driving experience of the car owner, his/her age, the car engine’s horsepower and the purpose to use the car.

22-year-old Harutyun Barghutyan who has only two years’ driving licence has paid 60,000 AMD ($about 165) for APPA insurance. The young man believes that APPA is a sound initiative, but the compensation payments are rather low, he says.

According to APPA contract, in case of each accident the insurance company will pay maximum 9 million AMD (about $24,700) allocating maximum 3 million AMD (about $8,200) to each person and 1, 5 million AMD (about $4,100) maximum for property damages.

“The sum of money for property damage is small. If the damage caused by my car is more or if I collide with more than one car the maximum sum provided by the insurance company will not be enough. It is necessary to increase this amount, especially when it is not equivalent to the tariffs,” says Barghutyan.

Barghutyan’s suggestion deserves attention, as even the simplest calculations show the size of the annual cumulative fund of the insurance.

If the owners of 450,000 registered cars of Armenia pay 50,000 drams (about $135) on average the cumulative fund of insurance will be 22, 5 billion AMD (about $61,650,000) annually.

According to the statistics published by the traffic police of Armenia, during the 11 months of 2010 approximately 1,800 car accidents were registered as a result of which 258 people died and 2,462 people received injuries of various degrees.

Even in the case of 3,500 crashes annually, if maximum 5 billion AMD (about $13,700,000) is allocated for property damage and maximum 10 billion AMD for human damage out of the cumulative fund, then more than 7 billion AMD (about $17,180,000) will still remain in cumulative fund annually. However, this is the picture in case of maximal calculations. Not always a car is greatly damaged in crash and/or not always people die in accidents.

President of the Achilles Center for the Protection of Drivers’ Rights NGO Eduard Hovhannisyan, who is also a member of the Council of Bureau of Armenian Car Insurers, mentions that the compensation prices and the tariffs’ list have been formed by experts on the basis of thorough expertise taking into consideration the country’s peculiarities and mentality.

“Among the CIS countries it is in Ukraine only that the compensation price is unlimited, i.e. the insurance company pays as much as is the damage. And in Russia, where the APPA law is in force since 2003, only a certain sum of money is allocated,” says Eduard Hovhannisyan and adds that later, when the “bonus-malus” discount and bonus system is applied, probably the compensation price too should increase.

Lilit Arakelyan studies at Georgian Institute of Public Affairs.