Academic journal article Review of European Studies

Vehicle Insurance Financial Mechanism

Academic journal article Review of European Studies

Vehicle Insurance Financial Mechanism

Article excerpt

Abstract

In Russia, over the last decade, vehicle insurance is more and more urgent. This is primarily due to an increase in consumer vehicle market, both new and used. The growth of the vehicle market says about income growth of citizens and their economic well-being. In Russia, over the last decade, vehicle insurance is more and more urgent. This is primarily due to an increase in consumer vehicle market, both new and used. The growth of the vehicle market says about income growth of citizens and their economic well-being. Relevance of vehicle insurance topic is associated with the dynamically developing vehicle market. In a market economy, vehicle insurance is a guarantee of life stability of individual, business entity, and society as a whole. The aim of this work is to develop measures that can increase the profitability of the insurance portfolio of the insurer and to reduce the unprofitableness ratio for vehicle insurance. Today, vehicle insurance share for mandatory and voluntary forms of insurance portfolio in insurance companies is growing. Processes of financial mechanism organised correctly within the company directly affect insurance portfolio profitability. In turn, insurance portfolio profitability consists of the difference between the revenues and expenditures of the company, and profitability on vehicle insurance types depends on the quality and amount of claims settlement, i.e. expenditures side. The result of the "Increased vehicle insurance profitability based on client-oriented approach", which envisages reducing vehicle insurance unprofitableness, will serve as a more transparent rule for insurants of vehicle insurance, wage rates, factors affecting the value of insurance premium. Each client will be able to assess adequately the financial impact because of an insured event.

Keywords: financial mechanism of vehicle insurance, insurance reserves, insurance fund, insurance portfolio profitability

1. Introduction

Relevance of the topic is related to the rapidly developing vehicle market in the Russian Federation. In a market economy, vehicle insurance is to guarantee the stability of life of a single person, business entity, and society as a whole. Today, the share of CNC and OMI vehicle insurance in the insurance portfolio of insurance companies is growing. Processes of financial mechanism organised correctly within the company directly affect insurance portfolio profitability. In turn, insurance portfolio profitability is the sum of the difference between revenues and expenditures of the company. Return on vehicle insurance depends on the quality and quantity of unprofitableness settlement, i.e. expenditure side. In Russia, there is a situation that vehicle insurance comprises high-risk operations. Most insurance companies work with unprofitableness on the main products of vehicle insurance-CNC and OMI, reaching up to 100%, it leads and is a source of foul play of vehicle insurance entities.

Topical and controversial features of theoretical and methodological foundations of vehicle insurance, high practical importance of insurance services at the vehicle insurance market in the modern economic system determined the purpose and objectives, as well as the choice of the object and the subject of the study.

The aim of this work is to develop measures that can increase insurance portfolio profitability of the insurer and reduce unprofitableness ratio for vehicle insurance.

The stated goal demanded solving specific theoretical, methodological, and practical problems of research:

1) The study of the constituent elements of the financial mechanism and its work in the insurance companies.

2) Identification of the main features of financial policy in the management expenses of the insurance company.

3) The study of such elements formation as the financial mechanism of insurance rates and insurance coefficients.

4) The study of factors influencing the formation of insurance coefficient value. …

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