TIRANA, May 14 – Albania’s Financial Supervisory Authority has finalized a draft law on compulsory insurance in the transport sector that is expected to introduce a long-awaited bonus-malus system, a World Bank proposed risk-based pricing under which drivers with a clean driving record will pay less.
Car owners in Albania currently pay fixed compulsory motor insurance rates based on vehicles’ age and engine capacity no matter what their driving record is.
The proposed legal changes envisage that the annual insurance fee that a car owner pays will be initially based on their driving record for the past five years and be divided into 18 categories under which one can benefit lower rates if they had no accidents or pay more if they were to blame for accidents.
The initial 13th category has been assigned a 1 coefficient, meaning a driver will pay a standard fee, currently at about 16,000 lek (€125) for a passenger car.
Under the proposed changes, car owners who are to blame for at least one accident a year will pay 30 percent more in the next year and will be forced to pay double if they cause two or more car accident.
If having a clean record, drivers will initially benefit a 6 percent discount and can have their fees halved if they move up to the top category, but that could take them 12 consecutive years with no accidents.
The Financial Supervisory Authority says the draft law is aimed at offering better protection to consumers and reducing the number of drivers travelling with no compulsory insurance.
The bill, which will have to be approved by the government and Parliament, before apparently becoming effective by late 2018, is key to the insurance market where more than two-thirds of income is generated from the compulsory motor insurance.
In October 2017, insurance companies started using a new electronic register on claims which together with the online sales register in the compulsory motor insurance products make up the basic infrastructure on the implementation and maintenance of the Bonus-Malus system, says the watchdog supervising the insurance market.
Albania’s Competition Authority which has often probed the market says implementing the bonus-malus system, a risk-based pricing under which drivers with a clean driving record will pay less, is the solution to the frequent controversial price hikes triggering price-fixing allegations due to all companies offering almost the same prices and increasing them almost simultaneously.
The new bonus-malus system is also expected to take into account drivers’ regular geographical area in addition to the vehicles’ age and the engine capacity.
The compulsory motor third party liability accounts for about 67 percent of the small and underdeveloped Albanian insurance market with an annual turnover of €120 million, about 1 percent of the country’s GDP.
Insurance premiums in the eight private companies operating in the market grew by an annual 5.4 percent to about 16.2 billion lek (€121 million) in 2017, in a slowdown for the fourth year in a row as the market remains overwhelmingly non-life oriented and reliant on compulsory motor insurance.
Meanwhile, paid claims in the insurance market, the overwhelming majority of which belongs to vehicle insurance, continued their upward trend, increasing by 15.8 percent to 5.5 billion lek (€41.2 million).
Drivers involved in accidents complain the amounts they receive from the compulsory motor third-party liability insurance is too small and takes a lot of time to be disbursed.
Albania has one of Europe’s highest death tolls from road accidents with an estimated 15 fatalities per 100,000 inhabitants. About 2,000 road accidents took place last year, with a death toll of 222, the lowest level for the past six years when data is available.
Albania had some 535,570 vehicles in 2017 but only 421,570 underwent the compulsory technical control, according to the country’s Institute of Transportation.
Albania’s insurance market is non-life oriented with its insurance premiums accounting for 92 percent of the total and compulsory-oriented with 61.5 percent.
Back in 2017, the Albanian government announced an initiative to make insurance against natural disasters such as flooding and earthquakes compulsory for every business and household for a reasonable rate, but the initiative has been delayed after some experts described the initiative as a new hidden tax the government is trying to impose.
