Insurance market grows by double-digits

TIRANA, March 26 – Fuelled by a sharp increase in compulsory motor insurance and a drop in paid claims, the Albanian insurance market registered a 20 percent increase in the first two months of 2013. Latest data by the Financial Supervisory Authority show new insurance premiums in the first two months of 2013 climbed to 1.3 billion lek while paid claims dropped by 18 percent to 400 million lek.
A sharp increase in the compulsory motor insurance, the DMTPL, which doubled to 490 million lek and accounted for 43 percent of the market, was the key driver of growth in the first two months of this year. However, experts doubt the increase could be fictitious due to the frequent fluctuations in premium rates and the fixed reported prices. Insurance companies regularly report the policies are sold at 18,000 lek at a time when in fact car owners often pay as low as 6,000 lek for the annual compulsory car insurance.
The Financial Supervisory Authority has recently called on Parliament to review the law on the liberalization of compulsory motor insurance, warning that price floors are needed for the well-functioning of the market. Introducing the annual report at the parliamentary economy committee, Enkeleda Shehi, the head of the Supervisory Authority described the liberalization of the market as hurried, concluding that the companies had focused on prices and market shares rather than the quality of services. Under a decision made in late 2012, the Financial Supervisory Authority determined the 9,600 lek as the price floor for the compulsory insurance of motor vehicles with a capacity of 1,600 cc and 14,000 lek for vehicles with a larger capacity, but the ruling has been neglected by all operators.
Fuelled by an increase in compulsory car insurance rates, Albania’s insurance market rose by a moderate 7.4 percent in 2012, registering the biggest increase in the past three years. Data show insurance premiums in the domestic MTPL compulsory car insurance grew by 53 percent despite the number of insurance policies growing by only 3.7 percent compared to 2011. The MTPL market share rose to 42 percent in 2012 down from 30 percent in 2011.
Last October, eight insurance companies operating in Albania were 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.