In this article, we will explore the overall structure of insurance regulations in Armenia. Insurance serves as a crucial financial instrument for individuals and organizations to mitigate risks. It provides protection for their assets, investments, and anticipated income against potential losses. Moreover, insurance offers a means to shift the potential financial burden of unforeseen events onto insurance companies.
On what legal basis are insurance activities carried out in the Republic of Armenia?
In the Republic of Armenia, insurance activities are conducted in compliance with the legal framework established through insurance contracts formed through the mutual agreement between the policyholder and the insurer and (or) through the insurance certificate.
Who are the policyholder, the insured person and the beneficiary?
The policyholder (also called the proposer) is a person who signed an insurance contract with the insurer.
The insured person is the person with whom the occurrence of an insured event is the subject of the insurance contract.
The beneficiary is a person who has the right to receive the insurance compensation stipulated by the insurance contract in case of an insurance accident.
There are two possible scenarios:
- You act as the policyholder, insured person, and beneficiary simultaneously:
In this situation, you have taken measures to protect your property against unforeseen events by obtaining insurance. As the policyholder, you make regular payments known as insurance fees. If an insured event occurs as defined in the insurance contract, the insurance company, acting as the beneficiary, will provide you, as the insured person, with insurance compensation up to the predetermined limit stated in the contract. This ensures that you receive financial support during such unfortunate circumstances.
- You act as the policyholder, while the insured person and beneficiary are different individuals:
In this case, your employer assumes the role of the policyholder, insuring your health. If an accident occurs, the insurance company will offer an insurance indemnity by covering the medical expenses up to the specified insurance amount outlined in the contract. The beneficiary, in this instance, would be you, the insured person, who receives the compensation, ensuring that your medical costs are adequately addressed.
In both situations, insurance serves as a safeguard, providing financial protection and peace of mind in the face of unforeseen events.
How to get insured?
As mentioned, insurance can also be provided with an insurance certificate. An insurance certificate can be obtained in two ways:
- Directly visiting the insurance company: Individuals seeking insurance coverage can directly approach the insurance company of their choice. By visiting the insurance company’s office, they can initiate the process of obtaining an insurance certificate.
- By insurance brokers or agents: Insurance agents and brokers act as intermediaries in the insurance process. They assist in connecting policyholders with insurers. By engaging the services of insurance agents or brokers, individuals can navigate the insurance landscape more effectively and secure an insurance certificate tailored to their specific needs. These intermediaries facilitate the establishment of relationships between insurers and policyholders, streamlining the insurance acquisition process.
If you are seeking guidance on potential risks associated with insurance, acquiring a license as an insurance company, or the state registration process for your company, our dedicated legal team is ready to offer expert assistance. We are committed to providing comprehensive support and helping you navigate the intricacies of insurance-related matters.
What does the amount of insurance compensation depend on?
The amount of insurance compensation depends on the amount of insurance and the amount of damage. As for the sum insured, it is the maximum amount of possible insurance compensation payable by the insurer.
What types of insurance exist in RA?
In the Republic of Armenia, insurance can be categorized into two main types: compulsory insurance and voluntary insurance. Voluntary insurance involves signing an insurance contract with an insurance company based on the individual’s own volition. On the other hand, compulsory insurance is implemented irrespective of an individual’s consent.
As for the types of insurance, they are:
- non-life insurance;
- life insurance;
- reinsurance, both life and non-life.
In which areas can we meet the types of insurance?
Insurance is a versatile institution that finds its applications in various domains of life, addressing distinct categories of risks. Here are several areas where different types of insurance can be encountered:
Healthcare: Health insurance plays a pivotal role in the healthcare system, providing financial coverage for medical expenses. It encompasses a range of packages that cover urgent and emergency care, outpatient consultations and examinations, as well as inpatient treatments and surgeries.
Banking sector: When banks offer mortgage loans, they often require borrowers to obtain insurance, including property insurance, accident insurance, and sometimes financial/advance insurance. Some banks may also mandate Comprehensive Auto Insurance (CASCO) for car loans.
Tourism industry: Travel insurance, particularly medical expense coverage, is a crucial component of travel packages. It aims to cover the costs of medical care for accidents or sudden illnesses that occur during trips. Additionally, travel insurance may also reimburse expenses for emergency transportation and repatriation in case of death.
Agriculture sector: Insurance options are available to farmers to mitigate risks associated with different crops, promoting diversification and enabling better management of losses.
Automobile market: Third-party liability insurance is mandatory in Armenia for operating motor vehicles, ensuring financial coverage for damages caused to third parties (APPA).
Liability sphere: Liability insurance exists to protect individuals and businesses from damages they may cause to third parties. Various types of liability insurance are prevalent, including:
- Civil liability insurance: in civil life or in the case of organizations, is the insurance of property and personal damages caused to third parties as a result of their business activities.
- Professional liability insurance: insures damages caused to third parties as a result of the professional activities of a person or business, mainly financial damages. For example, liability insurance for accountants, lawyers, notaries, doctors.
- Employer’s liability insurance: for example, in this area it is possible to insure the damages caused by the employer to the employees. For example, mine workers can be injured by tunnel collapses.
- Product liability insurance: insures damages caused to third parties by any product.
- Cyber liability insurance: Cyber liability insurance was created to compensate for financial losses caused to third parties as a result of data leakage.
In each of these areas, insurance serves as a risk management tool, providing individuals and organizations with financial protection and peace of mind in the face of potential adversities.
Who can carry out insurance activities?
Insurance companies can be established exclusively as a limited liability company or a joint stock company. Our legal team has a publication on these types of companies, their registration, which you can read here. Insurance companies must be established and operate in accordance with the insurance legislation in force in the Republic of Armenia.
A company may carry out life insurance and life reinsurance or non-life insurance and non-life reinsurance at the same time. The company cannot carry out life and non-life insurance activities at the same time. A reinsurance company can carry both life and non-life reinsurance at the same time.
Can any company carry out insurance activities?
In many legal systems, the implementation of insurance activities is strictly regulated, and the Republic of Armenia is no exception. For insurance activities, it is necessary to obtain a license to engage in relevant activities.
To whom can the company apply for an insurance activity license?
An insurance activity license is a document certifying the permission to carry out insurance activity issued by the RA Central Bank. You can get acquainted with the documents submitted to the Central Bank for state registration and licensing of insurance, including foreign insurance companies, here (Section II, Chapter 4).
What criteria does the Central Bank consider when deciding to grant a license to a company or refuse to grant a license?
The license is granted based on specific criteria, such as the financial capacity of the company as well as management experience. The licensing process includes a rigorous review of the company’s business plan, financial projections, risk management practices and compliance procedures. Thus, the company must meet the requirements of the main economic norms of insurance activity, which are defined by the Central Bank of the Republic of Armenia.
How long can the company get the license to engage in insurance activity?
The license is perpetual and there are no term limits for its validity.
Thus, insurance offers individuals the assurance and confidence they seek for the future. By transferring the burden of large, unpredictable losses into manageable, predictable costs, insurance plays a vital role in modern society. Its impact is far-reaching, providing stability and protection in the face of uncertainties.
If you are seeking guidance on potential risks associated with insurance, acquiring a license as an insurance company, or the state registration process for your company, our dedicated legal team is ready to offer expert assistance. We are committed to providing comprehensive support and helping you navigate the intricacies of insurance-related matters.
