FORMER SOVIET REPUBLIC LEGISLATES MANDATORY AUTO INSURANCE

The Auto Insurance

May 25 2010

Not all countries – or even U.S. states – have mandatory auto insurance
requirements, but those that have not are beginning to see the wisdom
in such laws.

Case in point – Armenia.

A Tragic History

In late antiquity, Armenia was one of the most powerful kingdoms in
the Middle East. After serving as a “buffer state” between the Romans
and the Persians for centuries, the country fell to the Sassanids.

Over subsequent centuries, Armenia was invaded by Arabs, Byzantine
Greeks, Seljuk Turks, Persians and Russians. Under Ottoman rule,
the people of Armenia initially enjoyed some autonomy, but were
nonetheless treated as second-class citizens. This status caused their
relationship with the Turks to deteriorate, culminating in wholesale
attempted genocide between 1894 and 1896, and again in 1915.

After the First World War, Armenia was briefly independent before
being annexed by the Soviet Union in 1922. Under Stalin, Armenians
were again subject to oppression and mass executions during the
“purges.” Meanwhile, Soviet industries ran roughshod over the
local environment, leading to protests in the 1980s and attempts
at independence.

After the collapse of the Soviet Union in 1990, Armenia emerged as an
autonomous successor state, but the early years of independence were
marred by regional conflicts with neighboring Azerbaijan as well as
corruption in the government.

Emerging Economy

Today, Armenia still struggles, but has managed to make some progress;
having made the transition to a free-market economy and a parliamentary
democracy, Armenians are beginning to enjoy an increased level of
prosperity. One of the signs of this new prosperity is increased
automobile ownership.

Today, there are approximately 400,000 cars in Armenia, the population
of which is just under 3.25 million. Although automobile owners
represent just over 12% of the population, Armenia is beginning
to experience the problems that come with an automobile society –
namely, expensive liability, serious property losses, devastating
injury accidents – and of course, the litigation that goes with them.

According to the deputy governor of the nation’s Central Bank, Vache
Gabrielian, the increasing number of vehicles on Armenian roads has
led to a corresponding rise in accidents and injuries, which could
negatively affect the country’s emerging economy. Mandatory auto
insurance, he says is the best solution.

Last week the Armenian Parliament approved a new law that would
require operators of automobiles in that country to carry insurance.

The new law is expected to take effect sometime next year. Insurance
premiums will start out at between 31,000 and 38,000 drams a year –
approximately $90 – $100 a year in U.S. dollars. (If this seems like
an incredible bargain, keep in mind that the average income in Armenia
is about a tenth of that in the U.S.) Those rates will be adjusted
every year under what is technically known as the bonus-malus system,
and will be based on whether or not the driver filed any claims the
previous year.

From: A. Papazian