Will new municipalities face a new feature - checking for property insurance?

The Law of the Republic of Azerbaijan “On Compulsory Insurance” was adopted on June 24, 2011 (!) and entered into force one month after publication. That is, already 8 years ago, Azerbaijani citizens who have deeds for residential buildings, houses and apartments, should begin their compulsory insurance.

The process went very slowly and was not controlled by anyone.

But on May 21, 2019, the Cabinet of Ministers issued an order to integrate the electronic information system of the Compulsory Insurance Bureau with electronic information systems of state bodies in order to simplify the insurance process, increase penetration and correctly assess insurance risks in accordance with the “Plan of measures for the development of the insurance sector for 2019-2021 years."

This decision shook the process a little, and at the end of the year, insurers themselves added fuel to the fire, and began to frighten property owners with the fact that they will face fines from the New Year.

Thus, the Compulsory Insurance Bureau of Azerbaijan explained to us that in accordance with the Law of the Republic of Azerbaijan “On Compulsory Insurance”, the local executive authorities carry out control over the compulsory insurance of residential buildings, houses and apartments, together with the relevant control body. As for the compulsory insurance of other real estate and civil obligations related to the operation of real estate, the Ministry of Emergency Situations of Azerbaijan controls this.

In order to ensure compulsory insurance of real estate, an extract from the state register of real estate and an identity card should be submitted to any insurance company dealing with this type of insurance.

The standard price of real estate insurance is 50 manat in Baku, 40 manat in Ganja, Nakhchivan and Sumgait, and 30 manat in other places.

You can, of course, insure real estate for a large amount, but then the amount of insurance increases.

In real estate insurance, the subject of insurance includes the building itself, including walls, floor, and ceiling. That is, the property inside the apartment does not apply to the contract.

It is important that according to the Law on Compulsory Insurance, according to the Civil Code of the AR and the Code of Urban Planning and Construction of the AR, real estate subject to demolition, which is unfinished, in disrepair, or considered to be a high-handed structure, is not involved in compulsory insurance.

Insured events that may be covered by real estate insurance may include: fire, lightning strike, household gas explosion, short circuit in electric wires, explosion of steam boilers, lines or other similar devices, accidents in water supply, heating, sewage and fire fighting systems, floods, natural disasters such as earthquakes, volcanic eruptions, hurricane, tornado, rainfall, typhoon and landslide, or actions by third parties.

In order to draw up an insurance contract, the client can take out insurance online (on the website of the selected insurance company or through social networks), for which he needs to provide screenshots of his ID and deed of purchase. He can also pay for insurance online using the link sent, where his name, address and purpose of payment will be indicated. Another option is to take out insurance with the help of an insurance agent who will also come at his place of residence. In this case, he can pay the amount of the premium through POS terminals or payment terminals.

It is noteworthy that in 2019, when concluding transactions on the sale of real estate, notaries began to insistently demand that citizens have real estate insurance.

PENALTIES

Starting in January 2020, penalties begin to apply if the property owner does not have an appropriate insurance contract before this time.

The first fine is 30 manats, but the amount of the fine will be charged again every 20 days for the same amount (if the first fine is not paid or if the repeated recommendation on concluding an insurance contract is not fulfilled).

In Azerbaijan, compulsory real estate insurance can be provided by insurance companies that have a license to carry out insurance activities and have received appropriate permission to conduct certain types.

According to the Decree of the President of Azerbaijan (No. 795) dated February 15, 2015, local executive authorities (art. 5.57) are charged with fines for cases of non-conclusion of compulsory insurance contracts, but the mechanism for levying these fines is not clear.

In an interview with ASTNA, many Baku residents said they were not going to do real estate insurance, as the law on compulsory types of insurance was adopted by the old parliament (Milli Majlis - MM). However, such a statement of the question is fundamentally wrong.

Many people believe that property insurance is voluntary and there is no trust in insurance companies.

However, according to the head of the Azerbaijan Insurers Association Azer Aliyev, it was precisely in 2019 on mandatory insurance of real estate, on voluntary medical insurance and on hull insurance that there was an increase.

“However, there are a lot of legislative restrictions for the full deployment of compulsory real estate insurance. Today the coverage of this type of insurance is scanty. Yes, there are some large enterprises that conclude contracts. But the population today is not normally covered by this type of insurance, although it is mandatory. First of all, it is necessary to separate legal entities and individuals. In the first case, coverage by compulsory insurance is about 80%, and in the second case, less than 1%. We are more interested in reaching individuals because it is a social product. There are a lot of earthquakes, floods, fires, or flooding from the neighbors and this all leads to serious financial stress for ordinary average citizens of the country. They redirect this burden to the state, for which it is unforeseen expenses. Unnecessary precedents are created. But there is a very good inexpensive insurance product (contract) and you need to use it,” A. Aliyev believes.

The beginning of 2020 will show whether all the above arguments will convince ordinary citizens.