Insurance market growth accelerates to 45%

The market boost was fuelled by a sharp 97 percent increase in the compulsory auto insurance market which accounts for around half of Albania’s small non-life and compulsory oriented insurance market
TIRANA, Oct. 28 – Albania’s insurance market continued expanding even in September 2014 when growth for the first three quarters of this year rose to sharp 45 percent, the highest in the past six global crisis years, according to data published by the Financial Supervisory Authority.
However, paid claims during the first nine months of this year, are almost the same to the same period in 2013 when the market registered a slight decrease, unveiling the low level of consumer protection.
Insurance premiums in the first three quarters of this year reached 8.58 billion lek (Euro 60.5 million), up 45 percent compared to the same period last year. Meanwhile paid claims rose by a mere 1.4 percent to around 2 billion lek (Euro 14 million) compared to the same period last year.
The market boost was fuelled by a sharp 97 percent increase in the compulsory auto insurance market which accounts for around half of Albania’s small non-life and compulsory oriented insurance market.
The compulsory auto insurance known as the Motor Third Party Liability (MTPL) increased its market share to around 47 percent in terms of income in the first eight months of this year, up from 36 percent during the same period last year.
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.”