OSAGO Between Market Forces and Social Function: Why Some Regions Subsidize Others

OSAGO Between Market Forces and Social Function: Why Some Regions Subsidize Others | Аргумент Медиа

Russia's OSAGO system continues to suffer from regional imbalance: in a number of regions, insurance payouts significantly exceed the volume of premiums collected. In 2025, insurance companies collected approximately 329 billion rubles in OSAGO premiums and paid out 294 billion rubles, yet in some regions the loss ratio exceeds 100% and even reaches multiples of that figure.

Some regions effectively become donors for others, compensating for their losses. The system itself remains stable for now, but experts warn that the imbalance in certain regions requires systemic solutions.

How OSAGO works and why it's not ordinary insurance

OSAGO is mandatory civil liability insurance for vehicle owners. The policy covers damage that a driver may cause to other road users. The maximum payout limit is 400 thousand rubles for property damage and up to 500 thousand rubles for personal injury.

Unlike comprehensive insurance, where insurers can independently set rates and choose clients, OSAGO is tightly regulated by the state. Companies are obligated to sell a policy to any driver, and rates are limited by a tariff corridor established by the Central Bank.

As a result, insurers cannot always fully compensate for risks by raising prices—even when a region demonstrates high loss ratios.

Why payouts can exceed premiums

According to the Russian Union of Auto Insurers (RSA), the excess of payouts over premiums in certain regions arises from a combination of factors: high accident rates, active litigation, insurance fraud, and characteristics of the vehicle fleet.

As RSA explained in a conversation with Argument Media, regions with heavy traffic and poor driving culture show elevated accident frequency, which increases the burden on the system. An additional factor is legal disputes initiated by auto lawyers, which often lead to increased payout amounts.

According to industry experts, the share of fraudulent payouts in problem regions can reach 20% of total payouts.

Director of the Mandatory Insurance Department at AlfaStrakhovanie Roman Lobodin notes that in most problem regions, a combination of factors is at play.

"In different regions, factors carry different weight, but in most 'problem' regions all factors converge together: high accident rates, legal costs, and so on. Vehicle fleet composition mainly plays a role in the country's eastern regions."

A similar position is held by RESO-Garantia vice president Igor Ivanov. According to him, the imbalance forms due to a combination of different factors. He also notes:

"A significant impact comes from the actions of fraudsters, the rampage of so-called 'auto lawyers' who exploit loopholes in the legislation."

Cross-subsidization of regions

Despite regional imbalances, the OSAGO system as a whole remains balanced thanks to risk redistribution. Rosgosstrakh's OSAGO portfolio development director Yury Strekalov emphasized in a conversation with Argument Media:

"The OSAGO system as a whole is stable and fulfills its social function — protecting motorists' civil liability."

However, this stability is maintained not only by market mechanisms.

"The flip side is that this stability is maintained partly because motorists from regions with normal loss ratios are overpaying to subsidize those with higher losses."

Regional factors: fraud and judicial practices

Fraudulent schemes remain one of the reasons the system operates at a loss. According to insurance market representatives, their nature has changed little in recent years. Igor Ivanov from RESO-Garantia lists the most common scenarios.

"Perhaps the most common type of fraud involves accidents while reversing—backing into a stationary vehicle."

According to him, such accidents are often staged by organized groups.

"The perpetrators purchase old cars whose spare parts sometimes cost as much as the OSAGO payout limit."

Another scheme involves provoking accidents at roundabouts, where proving the fraudsters' intent can be extremely difficult. As SOGAZ notes, the scale of the problem remains significant. In 2025, the company's divisions referred 64 cases of insurance fraud to law enforcement, with total damages amounting to 230.9 million rubles. And in the second half of 2025, criminal groups responsible for more than 400 staged accidents were shut down.

The press service of SK Soglasie LLC also noted that its security division promptly identifies fraudulent schemes, minimizing losses from dishonest actions and helping to reduce loss ratios.

Economic constraints for insurers

Despite the mandatory nature of OSAGO, insurers face economic constraints in problem regions. According to Roman Lobodin, companies cannot completely abandon operations in such regions, but opportunities for business development there are significantly limited.

"In some regions with difficult situations, insurers have no opportunity to pursue development. The mandatory nature of this type of insurance means we sell everywhere, but we no longer have the ability to develop sales or open new points of sale."

The RSA also notes that operating in high-risk regions is accompanied by increased operational expenses and legal costs.

The regulator and tariff policy

In recent years, the Central Bank has been gradually liberalizing OSAGO tariffs. In December 2025, the regulator expanded the tariff corridor by 15% up and down for passenger cars and by 40% for motorcycles, and also adjusted territorial coefficients. Yury Strekalov from Rosgosstrakh believes the market is already capable of adapting to this model.

"The first three months of the new tariff corridor for OSAGO have shown that the insurance market is already ready for self-regulation of prices."

At the same time, the increase in tariff flexibility has not led to a sharp rise in policy costs.

"The growth in average OSAGO premiums in February nationwide was just under 2% compared to the same period in 2025."

AlfaStrakhovanie also considers the corridor expansion an effective measure. According to Roman Lobodin, the tariff increases primarily affected high-risk drivers.

"After the corridor was expanded by 15%, the average tariff didn't rise all that significantly, which suggests that only clients with poor insurance histories saw their premiums increase."

Can the system be stabilized?

Experts agree that tariff changes alone aren't enough to solve the problem. The RSA believes a comprehensive approach is needed, involving cooperation between insurers, law enforcement agencies, and regional authorities. According to Roman Lobodin, coordination among various agencies plays a key role.

"For long-term stabilization of the situation in 'red' regions, we need coordinated work between regional governments, the Ministry of Internal Affairs, the traffic police, and, of course, insurers."

RESO-Garantia believes that deeper tariff liberalization could be a long-term solution:

"We've said repeatedly that OSAGO should have free pricing, just like KASKO."

The press service of SK Soglasie noted that further improvement of the individual risk assessment system remains a key direction for long-term stabilization of regional imbalances, while effective work by insurers' security services makes a substantial contribution to improving the situation in problem regions.

For now, no sharp increase in OSAGO costs is expected nationwide. Insurers estimate that the average premium in 2026 could rise by 3–5%, mainly due to inflation in repair costs and parts prices. By the end of 2025, the average OSAGO payout increased by roughly 17% for precisely this reason. However, the long-term outlook will depend on how effectively fraud levels and regional imbalances can be reduced.

Without systemic changes, the risk of cross-subsidization will persist—meaning careful drivers in prosperous regions will continue to partially cover losses from more problematic areas.