Car Insurance in Russia in Comparison with EU - Research Proposal Example

 Car Insurance in Russia in comparison with EU. Table of Contents 1.0 Introduction ……………………………………………………….…… 2 1.1 Research Aim and Objectives ……………………………….………….. 3 2.0 Literature Review ……………………………………………….……. 4 2.1 Automotive Policies in Russia and the EU …………………………..… 4 2.2 Foundations for insurance rates ………………………………………... 4 2.3 Automotive coverage comparisons …………………………………...... 5 3.0 Methodology Approach ………………………………………………. 7 3.1 Data Collection …………………………………………………..…….. 7 3.2 Research Philosophy ………………………………………….……….. 7 3.3 Qualitative and Quantitative Approaches …………………………….... 8 3.4 Limitations …………………………………………………………..…. 8 4.0 Time Table ………………………………………………….………… 9 5.0 Conclusion ……………………………………………..……………. 11 References ………………………………………………………………. 12 Charts Chart 1 – Russian Mandatory versus Voluntary Liability Insurance ……………………………. 6 Chart 2 – Gantt Estimated of Project Completion Time Frame ……………………………….….. 9 1.0 Introduction This dissertation proposal will investigate the field of automotive insurance in Russia as compared against the European Union. The areas of inquiry with regard to this comparison will be set forth herein. In terms of understanding, the automotive field in the country has just 124 motor vehicles per 1,000 residents (NationMaster, 2012) compared to in excess of 600 per 1,000 in the European Union (moldova, 2012). This means the field in Russia is in its infancy. The above is important as the field of insurance relies heavily on statistics (Schmitt, 2000). These entail overall the historical calculation of accidents in the region or area the car is to be insured, number of stolen vehicles, the owner’s driving record (Pope and Ma, 2008). Other aspects include frequency of use and mileage, type and cost of the vehicle as well as driver age and sex, along with comparative claim activities (Pope and Ma, 2008).   The understanding of what determines automotive insurance rates is central to this study. In an article by Forbes Magazine (Bosari, 2012) it brought forth the complexities in the calculation of automotive insurance rates. The article revealed statistics and probability studies taken from past accident/claim records by region, city, type of car, age of the insured and other factors are what is used to determine rates (Bosari, 2012). These are disclosed in the policy papers each driver received from their insurance company.   The above are automotive insurance foundations used in the United States and Europe as set by the central governments based on applicable laws (Schmitt, 2000). This is also the case in Russia, which has come a long way from the days the State controlled and was the official insurance company under the Ministry of Finance agency termed Gosstrakh that is now known as Rosgosstrakh, and Ingosstrakh (Filatov et al, 2009). The changes in the Russian insurance sector have since opened it up to 124 companies that are presently operating (EconomyWatch, 2010a). It is the newness of the sector that represents the foundation for this study in terms of coverage, rates, laws, statistics, and coverage. 1.1 Research Aim and Objectives The above background information has been engaged to provide a basis for understanding the nuances involved in delving into a comparison of the Russian automotive insurance sector against a more established counterpart, the European Union. As such, the aim seeks to understand the reasons for the disparity in terms of rates and coverage and why it exists.   In terms of objectives, these will provide the investigative foundations to fulfill the aim through the following:   a. To identify the statues and coverage policy provisions used to arrive at how automotive insurance in Russian is formulated in comparison to the European Union.   b. To explore the state of statistical data and allied factors utilised in determining automotive insurance rates in Russia. This includes looking into if rate policies change per city, region, etc. as is the case in the EU where rates differ by country, regions and cities within countries.   c. To determine the benefits and related factors of automotive insurance coverage in Russia and the European Union.   The above objectives have been designed to explore nuances of the aim and purpose of this dissertation proposal in order to fully explore salient areas.   2.0 Literature Review The approach to the review of materials will be in keeping with the development of the objectives as the means to achieve the aim. The following represent initial sources thus far developed that will be added to as the literature search expands. The literature segment will be arranged to investigate the objectives to enhance organisation.   2.1 Automotive Policies in Russia and the EU This aspect of the research is a highly important foundational underpinning as prior to Russia’s accession to the World Trade Organisation in 2012 (WTO, 2012) its insurance sector was controlled by the state (Deloitte, 2009). Two state insurance agencies represented Ingosstrakh (International State Insurance), and Rosgosstrakh (the Russian State Insurance) (Karimov, 2002). The latter has since changed as a result of WTO membership requirements. The above plus other sources will be reviewed to provide insights concerning Russian automotive insurance coverage and related facets compared against the European Union.   2.2 Foundations for insurance rates This represents research that entails uncovering the basis for automotive insurance rates. The rapid growth of what is termed as BRIC (Brazil, Russia, India, and China) countries (Pineiro-Chousa et al, 2008) has seen a dramatic increase in automotive ownership (EconomyWatch, 2010b). This means automotive insurance in Russia is a new sector. As rates are set based on calculations taking into account driver age, sex, accident rate, accident and theft rates for a region or city, etc., the issue is compounded in Russia where statistical data is developing and changing rapidly.   The newness of the expanding automotive ownership has seen the Russian Ministry of Transport take dramatic steps to increase road safety through courses in driving, upgraded road signs and infrastructure (Cutner, 2011). As a means to understand the state of the automotive insurance sector, one needs to be aware that mandatory vehicle insurance has only been in effect since March of 2009 (RiaNovost, 2009). Under the new regulations, formalised procedures were put into place regarding forms and information taken at accident sites, illegally leaving an accident scene, etc. (RiaNovost, 2009).   In an article by Adelaja (2010) it was pointed out that the automotive insurance sector in Russia is in a high growth phase. The Comprehensive Car Insurance Policy or KASKO represent the bulk of the policy portfolios of the major insurers in the country (Stemple, 2009). This comprehensive policy coverage is approximately 96 percent of the portfolio at Rosno, 84 percent at Ingosstrakh and 75 percent at Guta-Strakhovaniye (Adelaja, 2010).   2.3 Automotive coverage comparisons As mentioned, the automotive insurance sector in most of the European Union is highly developed. The newer additions to the EU are the eight Central and Eastern European countries plus Malta and Cyprus (Bartolini, 2005). This significance is important as these countries are still in their emerging stage and automotive ownership (with the exception of Malta and Cyprus) is lower than the 600 vehicles per 1,000 resident average for the EU taken as a whole (moldova, 2012).   The reform implemented in Russia in 2003 made it mandatory for liability insurance (Bulava, 2008). In Russia, automotive insurers did not actually want this type of policy because it is not profitable (Bulava, 2008). As shall be brought out in the dissertation, the policy coverage is small thus most drivers opt to purchase additional or alternative insurance for needed coverage (Bulava, 2008). As can be seen, by the following Chart, Russian drivers purchase voluntary liability insurance in a similar trending line as the mandatory type. This reveals the attractiveness of the voluntary liability market as Russian drivers will pay more for the additional coverage.   Chart 1 – Russian Mandatory versus Voluntary Liability Insurance (Russia CEIC Database, 2012) The above is an important area of investigation that will be expanded in the final dissertation. This includes what forms of automotive insurance coverage policies are available in Russia compared to the European Union. Further exploration will be supplanted by a primary questionnaire to gather opinions and viewpoints. More on this aspect will be explained in the methodology chapter.   3.0 Methodology Approach The conduct of this study will utilise both primary and secondary research in conjunction with qualitative and quantitative methods. This will be guided by the aim and objectives during the review of literature materials.   3.1 Data Collection Primary research will entail the use of a designed questionnaire to be distributed in Russia using Temp Avto as the distribution point. The questionnaire was designed utilising Ajzen’s book (1991) “Theory of planned behavior” along with Bradburn et al (2004) work “The definitive guide to questionnaire design …” The purpose of this questionnaire is to understand consumer views of Russian automotive insurance along with identifying what type of policies they purchased. The questionnaire will also seek to elicit opinions along with insurance information experience details. The questionnaire will be distributed using the offices of Temp Avto. The details concerning how this is to be accomplished are still in negotiation. The target group will represent a comparative cross-section of the Russian driving public, if possible, or will be a random sampling of at least 60 respondents. Bias represents an issue, thus the questionnaire seeks to add depth to the secondary research with regard to responses as opposed to standing on its own as the size of the sampling will be too small. As a result, the potential for bias is understood and accepted as the purpose of the questionnaire is to uncover opinions as opposed to being representative of what the overall Russian public thinks.   The data gleaned from the above will be used to tie into secondary research concerning the Russian automotive insurance sector to provide an expanded view on the questions used. In addition, Corresponding views and information will be sought from primary and secondary studies conducted in the European Union to broaden the information content of the primary questionnaire. In these instances, the Europe studies will consist of data collected by third parties (secondary research).   Secondary research will entail collecting information on the Russian and European auto insurance sectors for comparison. This represents books, journal articles, and the Internet. As Russia’s economy has only recently emerged, Internet sources will be relied upon heavily for contemporary data. To increase reliability, two or more sources (where possible) will be used.   3.2 Research Philosophy The formulation for the philosophical approach to this study will be based on what Easterby-Smith et al (1997) states is the refinement of the process. By specifying the research methods to be undertaken Easterby-Smith et al (1997) tell us it aids in strategy formulation. Positivism is used as a core basis for the questionnaire as it seeks to gain empirical evidence to arrive at an understanding (Giddings and Grant, 2006).   Interpretivism is an approach that is particularly apt in this situation as it seeks to come to an understanding of prevailing views in a region or nation (Kellher, 2005). Whilst Christensen et al (2010) see interpretivism as being limited in a business and social context its applicability in this study is flexibility.   3.3 Qualitative and Quantitative Approaches In order to ensure a balanced research approach, qualitative and quantitative will be used (Bryman, 2004). Under the qualitative aspect a subjective approach is conducted (Payne and Payne, 2004). This will be balanced using an inductive methodology where all of the evidence shall be considered (Bryman, 2004). Quantitative studies will be used to uncover statistical data that will aid in comparative areas.   3.4 Limitations Time and the contemporary nature of the subject matter mean that more current information will need to be accessed in order to develop information. This is a potential limitation as the newness of the automotive insurance field in Russia means there is little in the way of books and articles written yet.   As a result, two or more sources will be used to ensure information integrity for Internet articles and information. The other limitation is time. The potential that newer or more applicable sources might be missed is a real concern, as information in Russian needs to be translated after being compiled. This could potentially constrain information access concerning possible materials that might be more up to date or illuminating.   4.0 Time Table The schedule to generate a completed version of this study, a time period of 15 weeks is estimated based on the following time allocations for different areas.   Chart 2 – Gantt Estimated of Project Completion Time Frame Activity / Timeline W1 W2 W3 W4 W5 W6 W7 W8 W9 W 10 Research Literature and write introduction X X X               Design Questionnaire       X X X         Write up methodology             X X X       Chart 2 – Gantt Estimated of Project Completion Time Frame Activity / Timeline W 10 W 11 W 12 W 13 W 14 W 15 W 16 W 17 W 18 Conduct Questionnaire and write up findings X X X             Write up Literature review                   Write up discussion and analysis       X X X       Complete project and proofread             X X X     5.0 Conclusion The proposal to study the automotive insurance sector in Russia is a highly contemporary subject. It is also indicative of the emergence of the country’s consumer market as developed economies have a high ratio of vehicle ownership. This is because the associated costs that are a part of vehicle ownership include operational expenses (gasoline, oil and maintenance) along with having a garage or neighbourhood where it can safely be parked.   The most obvious factors are vehicle ownership means employment prospects in a country are stable as running costs and insurance are ongoing expenses. The fact Russia is at this stage of its economic development causes a study of this type to have significance. This is said in light of the proposed study providing an interesting look at consumer and business comparative information in the automotive vehicle sector. It also offers the opportunity to gather and look at consumer opinions concerning vehicle insurance in comparison to more established European Union standards.       References Adelaja, T. (2010) Anti-Crisis Insurance. (online) Available at (Accessed on 27 January 2013) Ajzen, I. (1991) The theory of planned behavior. Organizational Behaviour and Human Decision Processes. 50(3) pp. 179-211 Bartolini, S. (2005) European Union Enlargement. Perspectives on Politics. 3(4). pp 926-927 Bosari, J. (2012) What Really Goes Into Determining Your Insurance Rates? Forbes Magazine. 1 January Bradburn, N., Sudman, S., Wansink, B. (2004) Asking questions: the definitive guide to questionnaire design--for market research, political polls, and social and health questionnaires. San Francisco: Jossey-Bass Bryman, A. (2004) Social research methods. New York: Oxford University Press. Bulava, N. (2008) Compulsory automobile insurance law and car accidents in Russia. Budapest: Central European University Christensen, L., Johnson, R., Turner, L. (2010) Research methods, design and analysis. Boston: Allyn and Bacon Cutner, H. (2011) Russian government tries to improve road safety with augmented reality. 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(online) Available at (Accessed on 27 January 2013) Kellher, F. (2005) Interpretivism and the pursuit of research legitimization: An integrated approach to single case design. The Electronic Journal of Business Research Methodology. 3(2) pp 123-132 moldova (2012) The number of cars per 1,000 inhabitants, in Europe, exceeded 600 pieces. (online) Available at (Accessed on 27 January 2013) NationMaster (2012) Transportation Statistics. (online) Available at (Accessed on 27 January 2013) Payne, G., Payne, J. (2004) Key concepts in research. London: Sage Publications. Pineiro-Chousa, J., Tamazian, A., Chaitanya, V. (2008) Rapid Economic Growth at the Cost of Environment Degradation? - Panel Data Evidence from BRIC Economies. Ann Arbor, MI. University of Michigan William Davidson Institute Pope, N., Ma, Y. (2008) The market structure – performance relationship in the international insurance sector. Journal of Risk and Insurance. 75(4) pp. 947-966 RiaNovost (2009) Russia's new mandatory car insurance regulations take effect Sun. (online) Available at (Accessed on 27 January 2013) Russia CEIC Database (2012) The Growing Russian Car Insurance Market. (online) Available at (Accessed on 27 January 2013) Schmitt, K. (2000) European Auto Insurance Pricing Considerations. (online) Available at (Accessed on 27 January 2013) Stemple, J. (2009) Insurance Policy as Social Instrument and Social Institution. William and Mary Law Review. 51(2). pp. 1489 - 1501 WTO (2013) WTO Accession Status: Russian Federation. (online) Available at (Accessed on 27 January 2013) Read More