Government caps third-party motor insurance prices
The government stepped in to mitigate the crisis in the country's vehicle insurance market
Roxana Vasile, 23.03.2023, 14:00
The Romanian finance ministry made public a draft resolution capping and freezing the price of third-party liability insurance policies for 6 months. This is the temporary solution identified by the Financial Supervisory Authority (ASF), after withdrawing the license of Euroins, an insurer that held one-third of the countrys relevant market.
The decision was made in order to protect car owners from skyrocketing prices, in an attempt to avoid a crisis similar to the one witnessed 2 years ago, when another company, City Insurance, also a market leader at the time, ended up in the same situation.
The finance minister Adrian Câciu: “There will be a government resolution in this respect and I expect it to be passed next week at the latest. This resolution aims at protecting consumers temporarily, enabling the ASF to come up with an action plan so that at the end of this intervention the market may function to the benefit of consumers.”
The resolution on freezing the price of compulsory vehicle insurance policies will take effect 5 days after its publication in the Official Journal. Specifically, insurance companies will be bound to keep policy prices at the level reported for March 1, 2022, provided that level is below the current one, in which case the lower price will apply.
The explanatory memorandum to the draft government resolution includes data illustrating the disrupting impact of the previous incident on the market. In 2022, prices for individual consumers went up by an average one-third compared to the previous year. But if we compare the average figures for February 2023 with the first half of 2021, i.e. before City Insurance lost its license, prices went up 98%.
The head of the Competition Council, Bogdan Chiriţoiu, warns however that during the 6 months when the capping applies, measures must be taken to ensure the third-party liability insurance market functions properly. In his opinion, there are well-known flaws in the relevant legislation, which need addressing, but tackling them requires courage.
One of these is that the insurer has to cover the costs of repair works regardless of the prices charged by automobile repair shops. Another is that current regulations fail to set reference levels for the elements on which policy prices are based.
Bogdan Chiriţoiu also said that the Competition Council has issued the largest number of fines against insurance companies, most recently in December, and that all the companies selling third-party liability insurance policies have been fined a combined EUR 20 mln. (AMP)
