Drivers Express Discontent Over Rate Hikes Following Liberalization of Mandatory Auto Insurance

As of April 1, 2023, mandatory automobile liability insurance (MALP) in Armenia has transitioned to a liberalized rate system. The Central Bank (CB) presented this move as a measure to encourage a reduction in insurance premiums and enhance market competitiveness.

CB President Martin Galstyan noted in March 2023 that if vehicle owners choose the minimum proposed rates, premiums would decrease for 56% of policyholders, remain unchanged for 21%, and increase for 23%.

However, recently, drivers have often expressed dissatisfaction with significant increases in insurance premiums. One citizen told Radar Armenia that the insurance for his car cost 28,000 drams in 2023, 34,000 drams in 2024, and this year it is already 39,000 drams. He stated that this is a relatively affordable option, as other insurance companies have offered prices above 50,000 drams.

The Central Bank responded, stating that the liberalization of rates was a logical phase of system development aimed at ensuring fair pricing corresponding to each insurer's risk. According to the CB, the liberalized system incorporates individualized approaches that take into account the driver’s behavior and insurance history. Therefore, rates have increased for some drivers while decreasing for others.

“The liberalized system implies fair pricing; rates are not fixed and can both increase and decrease. Since April, a decrease in the average size of insurance premiums has been observed, but an increase is expected for the following year,” the CB noted.

The bank also informed that alongside the expected increase in average premiums by September 30, 2025, there has also been an increase in average payouts.

The MALP system continues to operate the Bonu-Malus mechanism, whereby drivers' rates are determined based on their insurance history: bonuses are granted in the absence of accidents, while maluses can increase the insurance premium in the event of accidents.