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UKRAINE: the National Bank of Ukraine proposes toughening mandatory insurance requirements to improve the quality of market regulation

Huge losses in mandatory insurance have made it necessary to review license conditions for companies by introducing additional requirements to their solvency in line with EU standards, the National Bank of Ukraine (NBU) has said.

Bankruptcies of companies that applied low tariffs to mandatory types of insurance, and particularly mandatory civil liability of vehicle owners (MTPL) insurance, resulted in losses of UAH 316 million in 2017. "If the state decides to oblige citizens to insure, it creates the obligation to ensure the high quality of market regulation, to shield the market from abuse, and protect the interests of policy holders," the head of the NBU's financial sector reform department, Yevhen STEPANIUK, said. In his opinion this will ensure sustainable development of the market, free tariff formation, and fair competition. "Our common task today is to update both the basic insurance legislation and to review normative and legal acts, as some of them no longer correspond to the current legislation or are irrelevant," STEPANIUK added. According to STEPANIUK, NBU is actively working on the future transition to a consolidated model of financial sector supervision, which responds to modern global trends and the interests of the final consumers of financial services as much as possible.

According to the General Director of the Motor (Transport) Insurance Bureau of Ukraine (MTIBU) Volodimir SHEVCHENKO, the motor insurance market is growing. The total number of the contracts in 2017 increased by 5.1%, premiums by 9.7%, while paid claims saw a rapid growth rate of 34.3%. This trend will continue in 2018. Such a rapid increase of paid claims' is based on an increasing number of accidents and average damage compensation amount. "We have to understand that the MTPL market has reached its maximal penetration degree, 90% of drivers have mandatory policies, thus we can improve this segment only by changing the rules - increasing insurance limits, revising the damage examination procedure, and improving the service quality. Transition to mandatory direct settlement will put service quality and customers' convenience in first place. Basically, the market is shifting from a quantity growth model to quality improvement. For such improvement we need to revise insurance tariffs as well, because the existing mechanism makes clients pay for repair by themselves in many cases (20%-50% of the compensation)."

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