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. Last Updated: 07/27/2016

Duma Passes Bill on Car Insurance

The times when accidentally scratching a gleaming black Mercedes in a traffic jam could mean a month-long financial and legal ordeal might be coming to an end — now that the State Duma has passed in its first reading a bill on mandatory liability insurance.

If passed into law, the new regulation might vex drivers forced to pay additional dues, but the prospect has thrilled insurance companies, which participated in drafting the bill and are gearing up to break onto a seriously underdeveloped market.

The bill provides for mandatory insurance policies covering the driver's liability for material damages and for loss of life or injuries sustained by a second party, said Igor Yurgens, chairman of the All-Russian Insurance Association, in a telephone interview from London on Sunday.

According to press reports, Duma deputies estimated that the annual premium for liability insurance would be 400 rubles ($14). The Kommersant daily reported that the bill sets the minimum coverage by insurers at 400,000 rubles — up to 240,000 rubles for loss of life and injuries and 160,000 rubles for material damages.

Yurgens called the bill a "victory for common sense," adding that Russia was "the last country in Europe not to have mandatory liability insurance."

In a country with about 40 million registered drivers, the new market should exceed $500 million.

But apart from the money, insurers are excited about a possible rise in demand for auto insurance beyond the required minimum.

According to Alexei Korolyov, head of the auto insurance department at the East European Insurance Co., or VESO, one-third of VESO's clients purchase liability policies worth $100 to $170, covering $10,000 to $30,000 in damages.

These clients, Korolyov said Friday, are "people with medium or high incomes" who are likely to continue paying for more coverage than the bill requires.

The most common way of dealing with car accidents in Russia is sorting the problem out on the spot and paying the damages in cash — a risky procedure, since the victim's and the perpetrator's assessment of damage can differ dramatically.

Another side effect of this approach is that up to 40 percent of accidents are not registered with the traffic inspectorate, making it almost impossible to collect accurate statistics or to calculate the cost of an average accident — both figures needed by insurers to set premium and coverage rates.

If passed into law, the bill could come into effect next January.