Tashkent, Uzbekistan (UzDaily.com) -- An increase in tariffs for compulsory civil liability insurance of vehicle owners (MTPL) in Uzbekistan will improve the financial position of insurers, Moody’s Ratings notes.

The National Agency for Prospective Projects of Uzbekistan (NAPP), the country’s insurance industry regulator, announced the start of a review of compulsory motor liability insurance tariffs, which were set at 56,000 soums (about US$4.4) and have not been revised since 2019.

Moody’s emphasized that the increase in tariffs will have a positive impact on the profitability of Uzbek insurers, will encourage them to promote this product in the market and increase competition, which will affect the higher quality level of services provided.

According to NAPP, premiums for compulsory motor liability insurance in Uzbekistan remain among the lowest in the world and do not cover losses incurred by insurance companies when providing this service. In Uzbekistan, compulsory motor liability insurance is mandatory and occupies a significant share of the insurance market.

“MTPL limits the profitability of insurers due to regulatory restrictions and market conditions. Being a socially important product, compulsory motor liability insurance is subject to stricter regulation compared to other types of insurance, and tariffs for compulsory motor liability insurance are under state control and fixed,” noted Moody’s experts.

The low level of premiums does not allow insurers to cover their costs, which leads to unprofitability of this product (the ratio of payments to premiums was above 100%). In particular, in Tashkent, the level of losses under compulsory motor liability insurance was 146% in 2023.

Due to the unprofitability of MTPL, some Uzbek insurers have shifted their focus from Tashkent to regional markets with lower levels of losses. Some are also trying to minimize their risks by cross-selling MTPL insurance with related products, such as motor and credit insurance on car loans.

Moody’s noted that the unprofitability of MTPL pushed many insurers away from promoting and advertising this product, which limited the growth of MTPL premiums, reduced competition in this segment and led to a deterioration in the quality of service in auto insurance cases - partial payments or significant delays in payments.

According to NAPP, complaints from car owners about late payments and insufficient coverage have increased in recent years. Moody’s believes that more adequate pricing for compulsory motor liability insurance, taking into account the increased costs of payments for insurance claims, will improve the quality of service for car owners and reduce insurers’ exposure to the risks of sanctions from the regulator.

Uzbekistan’s economic recovery from the coronavirus pandemic has boosted consumer spending and increased car sales by 150% over the past two years. At the same time, prices for new and used cars have increased significantly.

Moody’s expects Uzbek auto insurers to face rising claims costs in 2024-25, driven by high inflation, increased vehicle repair and replacement costs, and higher accident rates due to more vehicles on the road.