Report on the introduction of mandatory drivers insurance

From that date, insurance companies have been able to sell mandatory drivers insurance policies to drivers and vehicle owners. From 1 October 2012, drivers and vehicle owners without the appropriate insurance contracts can be required to pay a penalty for lack of insurance. From 1 January 2013, a 'Drivers Insurance Fund' (the insurer of 'last resort') will be in operation. Considerable progress has been made by the Financial Regulatory Commission (FRC), the Association of Mandatory Insurers (AMI), insurers, and other stakeholders to support the implementation of the Law. Twelve of 16 general insurance companies in Mongolia have been licensed by FRC to offer mandatory drivers insurance, 12 regulations have been approved, leadership positions in the AMI have been filled, and a 12-month workplan has been submitted by the AMI to the FRC. A public education campaign is well underway. However, there are many challenges ahead in implementing the Law, including the ongoing development of the AMI, including all the systems and processes required to act as an 'insurer of last resort' and developing a comprehensive database to service the many needs of stakeholders in the system. Additionally, the development of a strong regulatory function at the FRC, including monitoring performance of the mandatory insurance system, ensuring insurer compliance in paying compensation, establishing dispute resolution systems, minimum solvency requirements, and the capacity to set premiums and ratings factors each year, is also a challenge. The Business Plus Initiative (BPI) sponsored a visit from Kirsten Armstrong during February 2012, to provide support to the FRC and the AMI on the implementation of the Law. A review of the Law and 12 Regulations already passed led to the following key recommendations. Only vehicle owners should be required to obtain insurance – professional drivers should not be required to also obtain insurance. The FRC should develop Regulations or Guidance to help all parties agree who is 'at fault' and compensation for health costs and personal injury. The insurance contract period should be fixed at one year, consistent with the registration period of vehicles. The FRC should also develop clear guidance about which drivers are 'uninsurable' and consider a 'risk equalization' reserve or a national reinsurance arrangement, to manage the cost of high-risk drivers. The AMI should monitor use of the Drivers' Insurance Fund, and adjust the percentage which is required to go to compensation, as required. The FRC should monitor the appropriateness of ratings factors and total premiums, compared to total compensation. The rating factor for previous insurance events should be based on insurance events in the previous year, rather than the previous contract period. The incentive to list drivers should be reduced, and compensation should be payable regardless of who is driving the vehicle.