By Atom Markarian
The Armenian government is embarking on a gradual introduction of mandatory healthcare and car insurance as part of its efforts to promote the financial service which is still underdeveloped in Armenia, officials said on Friday.
A framework bill on insurance approved by the ruling cabinet on Thursday is the first step in that direction. “We hope that this bill will foster the development of insurance companies and create a competitive environment for their activities,” said David Avetisian, a deputy minister of finance.
According to Avetisian, the government will soon draft separate, more specific legislation regulating health and car insurance and hopes that it will be approved by the parliament by next May.
Armenian employees will be required to make monthly contributions to a state health fund, while car owners will have to insure their property. They are not obliged to do so under the existing legislation.
The government hopes that the mandatory arrangement will give a strong boost to the development of fledgling insurance business in Armenia which accounts for a tiny percentage of economic activity. There are currently 23 officially registered insurance companies operating in the country. Seven of them are branches of foreign firms.
Government data show that they have issued some 30,000 insurance policies covering real and other property worth approximately 500 billion drams ($854 million). The total own capital of Armenian insurance firms is just 3 billion drams, suggesting that they are unable to insure large business entitles against various emergencies.
Avetisian said this is why the authorities plan to increase the minimum capital requirement for a single insurer from the current 50 million drams to 500 million drams within the next five years. He said larger companies will be better placed to turn the sector into an important component of the country’s financial system.