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. Last Updated: 07/27/2016

Car Insurance to Boost Sector by $2Bln

VedomostiMoscow motorists will pay higher car insurance rates than anyone else in Russia.
Moscow drivers would have to pay up to $130 per year in compulsory third-party car insurance, according to the Finance Ministry, which would swell the insurance market by an estimated $2 billion.

The tariff rate, which the ministry announced Monday, is 6 1/2 times greater than the $20 originally forecast.

All car owners have to insure their accident liabilities as of July next year under a new law signed by President Vladimir Putin in April.

The liability limit will be 400,000 rubles ($12,570). Maximum payout for injury will be 240,000 rubles, while for damage to property it will be 160,000 rubles.

There are about 27 million privately owned vehicles in Russia.

Under the law, the insurance rates must be calculated by the Finance Ministry and approved by the Cabinet. About a year ago, State Duma Deputy Vladimir Tarachev, one of the authors of the law, said the policy should cost the same as a tank of gas -- about $20. Insurance companies then presented their calculations, by which the basic cost of a policy for a private individual would be $22.70, but loadings for Moscow and St. Petersburg residents would boost premiums to $78.80 and $72, respectively.

Nevertheless, the Finance Ministry's initial calculations -- yet to be approved by the government -- exceeded the hopes of even the insurers themselves. The basic cost of the insurance policy is 2,100 rubles ($66), climbing to 2,950 rubles for enterprises and organizations. Officials propose a loading starting at 2 for Moscow and dropping to 0.6 for smaller towns. For St. Petersburg, the loading would be 1.6.

The cost of mandatory private car insurance in Moscow would be $132. A young, newly qualified driver would have to pay $237. With driving experience of less than two years, the basic cost is expected to increase by 1.2 times and 1.5 times if the driver is younger than 23.

"This is a little less than the commercial cost, but it isn't critical," said Nadezhda Martyanova, general director of insurance company MAKS.

Konstantin Pylov, head of the Finance Ministry's insurance supervisory department, said the final version would be ready only by Dec. 1.

The ministry's proposals, which were sent to the government on Nov. 15, are far from final and will most likely be returned to the ministry for additional work, Interfax quoted a government source as saying Tuesday.

"There are a number of serious questions remaining in connection with the proposals presented," said the source, citing a lack of agreement between the ministry and other departments, including the Interior Ministry, as well as the question of insurance for government vehicles.