Insurance market shrinks by 5.6%

TIRANA, Sept. 4 – Affected by a double-digit drop in motor insurance premiums, the insurance market ended its growth rate in the first half of 2013, shrinking by 5.6 percent in the first seven months of this 2013 year-on-year. Data from the Albanian Financial Supervisory Authority show insurance premiums in the first seven months of 2013 reached 4.7 billion lek (Euro 32.8 million), down 5.6 percent compared to the same period last year. The number of insurance policies during the first seven months of 2013 also dropped by 4 percent to 551,514.
Data show the slowdown was first of all affected by a double-digit drop in the compulsory motor insurance DMTPL, accounting for around 40 percent of the market share, despite the number of car insurance policies increasing by around a quarter compared to the same period. The situation reflects the frequent price fluctuations in insurance policies after the liberalization of the market a couple of years ago. In the first half of 2013, the insurance market grew by 2.45 percent while paid claims dropped by 8.9 percent compared to the same period in 2012.
The Albanian insurance market is overwhelmingly non-life oriented with around 87.7 percent while voluntary insurance accounts for 56 percent of total insurance premiums. Data show Albanian insurance companies are paying out less in claims during this year. Paid claims during the first seven months of this year reached 1.6 billion lek, down 1.47 percent compared to the same period last year. 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.
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. Two years after the liberalization of the compulsory car insurance market, the Albanian Financial Supervisory Authority says it has concluded a project targeting efficient tariffs based on risk and the implementation of a 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 driving record and geographical area. Recent price movements have been very turbulent and this turbulence will continue in the short term, warns the World Bank.