Understanding OSAGO pricing and its impact on short term policies
The cost of a single month of OSAGO coverage typically amounts to about one fifth of the yearly premium. This perspective comes from Evgeny Popkov, who leads product management and marketing at IC MAKS. A bill considered by the State Duma aims to reduce the minimum insured usage period to one month, and it passed its first reading on April 18. When a policy covers only part of a year, the price tends to be higher on a per month basis compared with a full year. The reasoning rests on loss experiences: the early months of a policy carry a higher probability of claims than later months, according to the expert.
In OSAGO, a discount factor of 0.7 applies to policies with a validity of six months or less. This means the annual policy price is not cut in half but by about 30 percent. Consequently, the pricing logic for short term policies follows a similar approach, making a monthly policy roughly 20 percent of the annual premium. This view aligns with observations from other insurers about the relative profitability of shorter terms.
Both Ingosstrakh and AlfaStrakhovanie concur that one month of OSAGO is not simply the annual cost divided by 12, and it tends to be less advantageous than renewing on a yearly basis. In contrast, Sergey Demidov, vice president of auto insurance at Renaissance Insurance, notes that the monthly price for a typical vehicle policy would be only slightly below the three month option, driven by the short term loss rate. He also highlights that term programs have higher costs and that the specific monthly rate depends on the insured vehicle use, including seasonal demand and other temporary factors.
If the bill advances, there could be several nuances in contract terms should the minimum usage period be altered. The current arrangement allows a policy purchased for one year with a three month usage window to remain eligible for compensation directly through the insurer, even if the usage period has lapsed but the contract remains active. Conversely, a policy with a three month validity that is not renewed in time could lead to injury claims being directed to the offender’s insurer after an accident caused by another driver. This observation was shared by Pavel Yakovlev, who works in the retail insurance department of RESO-Garantia.
Under the present framework, a customer who buys a one year policy with a three month usage period and then experiences an accident can still file a claim with their own insurer through the established compensation system, provided the contract is still in effect. If the policy is valid for three months and renewal slips past, the claimant may face limitations when seeking compensation from the other party involved in the incident. These practical outcomes illustrate how shifting minimum terms could influence consumer experience and insurer responsibilities.
Recent discussions have also touched on repair standards under OSAGO. There is ongoing consideration about whether repairs may be completed with used spare parts, a point raised by industry officials in the context of policy flexibility and cost efficiency. This topic remains a point of debate among regulators, insurers, and consumers seeking clarity on coverage and claims handling. Attribution for these insights is provided by industry experts and representatives involved in the current policy discussions.