The deal was made in February 2012 when all companies fixed motor insurance prices in a banned deal severely damaging competition, says the Competition Authority.
TIRANA, Oct. 16 – Eight insurance companies operating in Albania have been fined a total of 89 million lek (Euro 625,000) after the Competition Authority uncovered a price-fixing deal in compulsory motor insurance policy. The deal was made in February 2012 when all companies fixed motor insurance prices in a banned deal severely damaging competition.
“From February 1 to 8 2012, insurance companies increased their MTPL insurance rates, fixing their prices according to categories, thus losing the individuality of the enterprise in determining operating expenditure. By acting in a coordinated way, the companies under investigation limited competition among them and lowered the opportunity for choices by consumers.”
INSIG, which is the only 100 percent state-owned company also participated in the banned deal but did not fix prices for the insurance of cars B1/1 category cars and C1/1 buses, offering lower rates than the other companies.
Following its thorough investigation, the Competition Authority fined Sigal Uniqa Group Austria 22.5 million lek, Sigma Vienna Insurance Group 14 million lek, Atlantik with 11 milllion lek, Intersig Vienna Insurance Group 12.2 million lek, InterAlbanian 7.2 million lek, Albsign 9.3 million lek, state-owned INSIG 3.2 million lek, and Eurosig 9.1 million lek.
The Vienna Insurance Group has majority stakes in Sigma, Intersig and InterAlbanian.
Insurance companies say they will appeal the Competition Authority’s decisions at court.
Recommendations
The Competition Authority has recommended the Financial Supervisory Authority that risk premium calculations should be made by the Authority based on data obtained independently from insurance companies. “This would avoid the coordination of insurance actuaries with each other in the process. The risk premium tables are currently compiled by the Association of Actuaries where coordination among competitors is observed to set risk premiums.
The Competition Authority has also recommended that the Financial Supervisory Authority should remove its six month deadline for the company to change compulsory insurance rates. “Companies should be free to interact at various prices at any time, and not have time constraints on changing prices. This provision lowers the flexibility of the market for a six-month period despite market conditions which can continuously change,” says the watchdog.
The Competition Authority also recommends the implementation of the Bonus-Malus system in compulsory car insurance under which drivers with a clear driving record will pay less. “The new system will increase competition giving companies the opportunity to have diversified rates for each customer and the market to operate at competitive fees. On the other hand, it also punishes dangerous drivers, positively contributing to reducing the number of car accidents,” says the Authority.
The MTPL car insurance is a liberalized market regulated by the Financial Supervisory Authority only to determine the risk premium. The final prices of the product are individually set by the companies.
Hike in motor insurance rates
Last September, compulsory car insurance policies registered another increase, which is the second for this year, despite insurance companies being under investigation by the Competition Authority over an alleged cartel deal. The increase is being applied only for holders of Category B driving licences who insurance companies blame for the majority of car accidents, especially those resulting in deaths. One-year compulsory insurance policy rates have risen by 7 percent to 15,600 during the past few weeks by all companies operating in the market claiming an increase in paid claims.
In early 2012, all insurance companies doubled their compulsory motor policies in a sudden move six months after the market was fully liberalized. The companies argued the move with a decision by the Financial Supervisory Authority which obliged them not to sell policies below their risk quota after prices were initially halved.
Albanian insurers had warned the crisis in the insurance market is not a result of the global crisis but rather a Mafia-like attack involving law firms and courts which oblige insurance companies to pay huge amounts in claims above the legal limits. The concern raised by the Association comes at a time when claims paid during this year have considerably increased. Claims paid during the first seven months of this year rose by 35 percent to 1.7 billion lek year-on-year, according to the Financial Supervisory Authority. Some 70 percent of paid claims belong to motor insurance. The market shrank by 5.1 percent as the number of insurance policies dropped by 21.5 percent in Jan-July 2012.
Meanwhile, the Directorate General of Road Transport says it has started working on implementing a penalty points system for driving offences which will be concluded with a new formula on the calculation of compulsory insurance for motor vehicles. Under the new formula, drivers with a clear driving record will pay less in their annual insurance and those involved in car accidents or having been imposed fines will pay more. Currently, fixed tariffs are applied in the compulsory insurance of motor vehicles which accounts for around 40 percent of the market.
Locally known as domestic MTPL, the compulsory motor insurance fees rose from an average of 5,000 to 6,000 lek (Euro 36 to 43) to 14,000 lek (Euro 100) for common cars with a 1,600 to 2,400 cm3 engine and above in Feb. 2012. Annual insurance policies for mini-buses, lorries and busies vary from 20,000 lek to 44,000 lek. At present there are nine companies operating in Albania, in a market dominated by Austrian-based insurers. Insig is the only wholly state-owned company and has been put up for sale. Last June, Ansig became the ninth insurer in the Albanian market.
Insurance penetration (premiums as a proportion of GDP) in 2011 was around 0.67 percent in Albania, a relatively low rate even compared to regional countries.
