An incentive program for drivers in Armenia might backfire says one insurance expert if the system used to check a driver's history is not improved.
The incentive program, called "Bonus-Malus," was introduced on January 1, 2013, though it was formalized only this year. The program rewards drivers with a good track record by making them pay less for automobile insurance (the "bonus" part of the program's name) and punishes accident-prone drivers by making them pay more (the "malus" part). The program is in conjunction with compulsory third-party liability motor vehicle insurance (more often referred to and known by its acronym in Armenian: APPA), which was introduced in Armenia on January 1, 2011.
The Bonus-Malus program operates in Armenia according to the rules of the Armenian Motor Insurers' Bureau: every driver in Armenia, the first time he obtains motor vehicle insurance, is categorized in class 10 (see table). If at least 345 days after registering with APPA, the driver does not get into any accidents, when he renews his insurance, he is categorized in class 9 and pays 3% less for his car insurance. In this way, 9 years later, he can pay 50% less insurance if he continues to maintain a clean driving record. The reverse is also true: if a newly insured driver gets into an accident in which he is at fault, the next time he renews his insurance he will be categorized in class 14 and will have to pay 16% more for his insurance — that is, each car accident actually costs him 4 classes, not 1. This way, a driver who was in 3 accidents in a single year in which he is at fault will have to pay twice as much insurance (as each accident will cost him 4 classes, bringing him up to class 22) the next time he renews his APPA. Օnly after a clean driving record of 4 years will this driver return to paying his initial, regular insurance rate (class 10).
All companies in Armenia offering APPA send driving accidents to the Armenian Motor Insurers' Bureau. If a driver renews his insurance with either the same or a different company, an inquiry is sent to the bureau to determine the driver's class category. The bureau checks these inquiries against the driver's passport serial number and, if there's one on file, his social insurance card. Though the Bonus-Malus incentive program was introduced in 2013, due to technical issues, inquiries were not processed at the bureaus and insurance companies simply asked drivers if they were involved in any car accidents in the past year.
According to APPA expert Hayk Melkonyan, there is a shortcoming in this system. Since the inquiry is based on one's passport number, previous data on a driver doesn't appear once he renews his passport. The only identity document that is not renewed is the social insurance card, but this is not an obligatory document. This way, a driver who's been involved in several accidents can simply renew his passport and register as a new driver when applying for insurance and those drivers who've acquired "bonuses" will lose them once they renew their passports.
According to Melkonyan, there are 40,000 automobile accidents on average in Armenia per year, for which insurance companies pay. If the data of 10,000 of these drivers is erased, then 2,500 AMD (this is the 16% added to the insurance of those drivers in accidents) won't be collected per driver involved in an accident — that's 25 million AMD less to insurance companies per year.
To address this problem, Melkonyan offers two solutions: either make social insurance cards mandatory for APPA-insured drivers (that is, all drivers) or have the bureau conduct its inquiry into drivers' history based on their driver's licenses. Though driver's licenses also need to be renewed once every 10 years, Melkonyan suggests not changing the serial number, as was the case in the Soviet years when driver's licenses did not need to be renewed.