What is bonus-malus? Bonus-malus… sounds like a Harry Potter spell. But do you really know what it is? It is important to understand not only how the system works and what it affects but also the main factors of the emerging reorganisation of the system.

So far, the Bonus-malus system has been a vital part of the MTPLI system. Since 2006, the system has provided an objective assessment of insurance risk and influences the calculation of the MTPLI policy price.

Previous Bonus-malus system

The system consisted of 17 classes. Each bonus-malus subject – the owner or keeper of the vehicle – was categorised according to their degree of risk. Classes 1-5 were high-risk and 7-17 were awarded to those Bonus-malus subjects who behave reasonably on the road and regularly purchase MTPL policies.

The Bonus-malus class was calculated considering the last 11 years of insurance history of the Bonus-malus subject. To determine the increased Bonus-malus class, the vehicle must have been insured for at least 275 days per year. Otherwise, the car remained in Class 6. The bonus-malus class was automatically recalculated once a year on September 15th.

The price of MTPL could vary depending on the type of vehicle, driver’s experience, Bonus-malus class and other conditions. Moreover, additional factors affecting the price were the selected insurer, the amount of extra coverage and the insurance period.

New Bonus-malus system

Starting from August 1st of this year, an upgraded Bonus-malus system will come into force to introduce a new service for the centralised provision of insurance history data to the public.

Quantitative indicators – the number of insurance days and cases – will be preserved; however, the existing Bonus-malus classes will be eliminated from the system. The insurance history of the last 11 years will not be counted; the initial starting point will be 1 May 2004, when the EU Directive was introduced in Latvia and a new MTPL law was adopted. Insurance history data will be available free of charge to all vehicle owners or registered holders on www.ltab.lv.

The new system service will ensure that there are no longer complex algorithms that determine classes in the data accounting process. However, the data will be updated daily, and you will not have to wait until September 15th.

What should drivers expect?

Although the new system will no longer apply classes, insurers will still consider the insurance history of the vehicle owner or registered holder – the number of insured events and days – as well as other factors.

The positive news for drivers is that the reorganisation of the system will not affect how insurers determine insurance premiums (policy price).

The Motor Insurers’ Bureau of Latvia also does not judge how good or bad each particular driver is. The status of the insurance can be deduced from the insurance history – the number of days and events.