The director of INSIG state insurer has been fired because of his decision to increase motor insurance rate without an analysis and consultation, following the trend of eight private insurers which are alleged to have been involved in a price-fixing deal
TIRANA, Feb. 12 – Already under investigation over an alleged price-fixing deal, the insurance market has been involved in a new controversy with prices of compulsory motor insurance registering another overnight sharp increase by all nine operators, although the market has been liberalized for the past three years.
Compulsory motor insurance policies, known as Motor Third Party Liability (MTPL) and accounting for around 40 percent of the insurance market rose by 6,000 lek (Euro 42) to an average of 20,000 to 21,000 lek (Euro 140 to 147) by all nine companies operating on the market including state-owned INSIG insurer. Compared to the same period last year when they traded at 5,500 to 6,000 lek, motor insurance rates have more than trebled.
The increase by almost one-third in a single day has irritated citizens who described the new tariffs unaffordable at a time when fuel prices stand at a record high under new tax increases ranking Albania with the highest diesel and petrol prices in the region.
Socialist Party MP Erjon Bra襬 who chairs the parliamentary economy and finance committee, has demanded immediate explanations and an investigation by state authorities.
In a letter to the Financial Supervisory Authority, the Competition Authority and the Finance Ministry, Bra襠described the situation as a repeated cartel situation among market stakeholders.
“A more concerning fact is that state insurer INSIG is part of this coordinated action which has caused a 43 percent increase in the final price. The compulsory motor third part liability has quadrupled since February 2013,” said Bra襠demanding an immediate reaction from the state institutions.
Reacting to the situation, Tomorr Kalaja, the director of state-own insurer, INSIG, said the new tariffs reflect the real insurance costs. “This will enable companies to pay off obligations to consumers in time, and to the Albanian Insurance Bureau. I don’t believe there is a real deal, but there is kind of agreement in silence or a common opinion that this is the only the way out of this vicious cycle. INSIG is obliged to follow the market whether it is up or down, otherwise you are out of the market,” said Kalaja.
The price increase comes after the Competition Authority has already launched an enquiry into the insurance market over an alleged price-fixing deal which is believed to have limited competition in the compulsory motor insurance policies.
Monitoring carried out by the Competition Authority shows all agents traded insurance policies in online system called MSHM which was managed by a single broker. “Data from one agent’ system at a given time did not offer all companies licensed to trade the respective product, but a limited number of 4 to 5 companies. The number and the display of available companies on the system remains unclear because in another agent, all companies were available to offer motor insurance policies,” said the Authority.
The Competition Authority says the preliminary investigation starting November 2013 will determine whether the bahaviour of the insurance companies has limited competition.
Since December 2013, insurance policies for compulsory motor insurance MTPL were offered at the same price of around 13,500 lek (Euro 94) by all nine companies operating on the market.
In October 2012, 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 agreement severely damaging competition.
INSIG director fired
The unilateral price increase by INSIG cost the director of the only state owned insurer his job. The Finance Ministry announced on Wednesday INSIG’s supervisory council has fired Tomorr Kalaja because of his decision to increase motor insurance rates without an analysis and consultation. Kalaja had told reporters that INSIG is a company which is not subsidized by government and should adjust to the market.
Market shrink
Affected by a double-digit decline in compulsory motor insurance, the insurance market shrank by 4.6 percent in 2013, registering the first decline in the past five global crisis years.
Data published by the Financial Supervisory Authority show insurance premiums in 2013 dropped by 4.63 percent to 8.5 billion lek (Euro 60 million), affected by a 15.5 percent decline in compulsory motor insurance premiums, which account for around 40 percent of the market share.
Paid claims in 2013 also dropped by 3.3 percent to 2.7 billion lek (Euro 19 million).
The market share of compulsory motor insurance premiums dropped to 36.5 percent in 2013, down from 42 percent in 2012.
Albania’s insurance market rose by 7.8 percent in 2012, by 1.8 percent in 2011, 4.17 percent in 2010 and by 11.3 percent in 2009 soon after the outbreak of the global financial crisis.
Some nine insurance companies operate in Albania, of which only INSIG remains wholly state-owned following unsuccessful privatization attempts.
The Albanian insurance market, dominated by two Austrian insurance groups, is overwhelmingly non-life oriented with around 87.7 percent while voluntary insurance accounts for 54.2 percent of total insurance premiums.
