New rules in compulsory motor insurance: What will change?

Starting from 2026, new rules are introduced in compulsory motor insurance. This article explains the abolition of the Bonus-Malus system and how the insurance history coefficient is calculated.

A significant reform has taken place in Azerbaijan’s insurance market. According to the decision of the Azərbaycan Mərkəzi Bankı, the long-standing Bonus-Malus system has been abolished and replaced with an insurance history coefficient.

These changes directly affect both premium calculation and individual risk assessment.

🔄 What has changed?

Previously, the Bonus-Malus system applied discounts and surcharges based on predefined groups. However, it had a major drawback:

❗ In case of an insured event, the surcharge was applied not to the driver, but to the insured person under the policy.

That means:

• Even if another person was driving the vehicle
• And the accident occurred due to that driver’s fault
  👉 The surcharge was applied to the insured person’s record

This created an unfair situation and led to customer dissatisfaction.

✅ This issue has been eliminated

Under the new system:

✔ Risk and surcharges are assigned directly to the driver responsible for the accident
✔ The at-fault driver bears responsibility
✔ The insured person is not penalized for others’ actions

👉 Responsibility for accidents now lies with the driver, not the vehicle owner.

👉 This is considered one of the most anticipated and fair improvements in the market

📊 How does the insurance history coefficient work?

Premiums for compulsory motor insurance are now calculated based on the insurance history coefficient:

• Minimum coefficient: 0.6
• Maximum coefficient: 3.0
• Base coefficient: 1.0

✔ Safe drivers pay less
❗ At-fault drivers pay more

🎯 Key factors affecting the coefficient

✅ Discount

A 5% discount is applied if both conditions are met:

• No at-fault accidents
• At least 275 days of active insurance coverage

❌ Surcharge

• Each at-fault accident results in a +30% surcharge

👉 This encourages more responsible driving behavior

👤 For individuals

• If multiple persons are authorized to drive the vehicle via power of attorney, the highest-risk coefficient is applied
• Persons who owned the vehicle in the last month are also considered
• First-time policyholders start with a coefficient of 1.0

🏢 For legal entities

• Standard coefficient is 1.0
• Special rules apply for taxis
• In case of an accident, the surcharge is assigned to the driver

🔁 Transition period

• Existing Bonus-Malus coefficients are converted into the insurance history coefficient
• Protective mechanisms apply for low-risk individuals
• In some cases, after the first accident, the coefficient is set to 0.60

📅 When do the changes take effect?

The new rules come into force on June 21 and apply to all newly issued policies.

💡 What does this mean for drivers?

✔ Fairer pricing system
✔ Lower premiums for safe drivers
✔ Individual risk-based assessment
✔ Stronger incentives for safe driving

🧠 Conclusion

This reform marks a significant improvement in compulsory motor insurance. Drivers are now evaluated based on their individual insurance history, leading to greater transparency and fairness.

Author:
Nizami Mansimov
Insurance Specialist