TIRANA, Jan. 26 – Albania’s insurance market registered a record double-digit growth in 2014 fuelled by a sharp rise in compulsory auto insurance which accounts for the overwhelming majority of 65 percent of the market, says the Financial Supervisory Authority.
The 36 percent market boost which is the best performance in the past six global crisis years was a result of a sharp rise in compulsory motor insurance rates in early 2014, a situation which continued during the whole of the year sparking allegations of a price-fixing deal by all ten market operators.
The boost is estimated to have considerably increased profits by the market operators considering that the number of insurance policies rose by only 3.7 percent while paid claims were up by only 4.7 percent.
Data published by the country’s Financial Supervisory Authority shows the insurance market grew by 36.2 percent to 11.6 billion lek (Euro 81.7 million), fuelled by a 79 percent increase in the compulsory motor insurance which includes the domestic MTPL, border insurance and the Green Card insurance.
The Albanian insurance market, dominated by two Austrian insurance groups, is overwhelmingly non-life oriented with around 91 percent while voluntary insurance accounts for 60 percent of total insurance premiums.
The compulsory auto insurance known as the Motor Third Party Liability (MTPL), also the key driver of the insurance market in Albania, increased its market share to around 49 percent in 2014, up from 36.5 percent in 2013.
Meanwhile, paid claims, the overwhelming majority of around two-thirds of which also belong to motor insurance, rose by only 4.7 percent to 2.3 billion lek (around 16 million euros) which is around one-fifth of the companies’ income.
Affected by a double-digit decline in compulsory motor insurance, the insurance market shrank by 4.6 percent in 2013, registering the first decline since the onset of the global crisis.
Some ten insurance companies operate in Albania, of which only INSIG remains wholly state-owned following unsuccessful privatization attempts.
In its latest financial system stability assessment, the IMF describes Albania’s insurance market as one of the smallest in Europe, with assets of around 1.5 percent of total financial system assets. “Its development has been hindered by several factors, including lax insurance regulation, low disposable incomes, and a poor record of claims performance,” says the Fund.
In a bid to promote competition, Albania’s Competition Authority has warned insurance companies operating in Albania to introduce risk-based pricing on auto insurance otherwise they risk being fined up to 10 percent of their annual turnover. The Authority demands the immediate implementation of the Bonus-Malus system under which drivers with a clear driving record will pay less. The new scheme takes into consideration the cars’ age and engine capacity, but also the geographical area.
In a recent report on Albania, the World Bank says performance of non-life insurance sector has not been good in the last six years, despite the fact that the market claims ratio was only 45 percent. “While theoretically plausible, such a low claims ratio is more likely to indicate a poor claims performance by most insurers and a low level of consumer protection. Around 70 percent of premiums went to cover insurers’ operational expenses, which are well above the levels observed in other insurance markets of the region.”
Tirana dominates insurance market
Albania’s insurance market continues remaining highly concentrated in Tirana which accounts for almost two-thirds of the market revenue, according to an annual insurance geography report published by the Financial Supervisory Authority.
The region of Tirana, where a quarter of the country’s 2.8 million resident population lives, accounts for more than one-third (38 percent) of the country’s GDP with the services sector dominating with 67 percent, according to a previous regional GDP report for 2012 published by the country’s state statistical Institute, INSTAT.
While the region of Tirana provides 67.23 percent of total insurance premiums, the contribution in other regions ranges from 0.71 percent in the northeastern region of Kukes to 7.35 percent in Durres. The regions of Fier and Shkodra account for 4.3 percent and 3.96 percent of the market share respectively.
Albanians pay on average 25 dollars annually for compulsory and voluntary insurance of vehicles, as well as property and life insurance, a small amount compared to other European countries. Albania’s per capita consumption of insurance dropped by 271 lek to 2,929 lek (Euro 20.5) in 2013, the lowest in the region.
Tirana also leads in terms of paid claims with a 60 percent share followed by the southern region of Vlora 6.86 percent.
