Enekeleda Shehi, the director of the Financial Supervisory Authority, has warned the companies’ efforts to offer low rates not covering risks are short-term goals which could bring negative impacts on their financial stability in the long-term
TIRANA, Jan. 22 – Concerned over a sharp drop in compulsory car insurance rates over the past two months, the Albanian Financial Supervisory Authority has warned it will intervene in the already liberalized market if the companies do not reflect risks in calculating premium rates. In a recent meeting with directors of the nine insurance companies operating in Albania, Enekeleda Shehi, the director of the Supervisory Authority warned the companies’ efforts to offer low rates not covering risks are short-term goals which could bring negative impacts on their financial stability in the long-term. She called on company officials to show more professionalism in determining insurance rates and claims.
“Insurance companies must be led by long-term goals in order to preserve their financial stability, otherwise if this situation remains unchanged even in the coming months, the Authority will undertake all necessary measures to change and stabilize the situation,” said Shehi.
Currently, compulsory motor insurance rates have dropped to 6,000 to 7,500 lek annually, almost twice less compared to a couple of months ago.
The insurance market continued growing even in November overcoming its negative growth rates during the first nine months of this year only thanks to compulsory motor insurance rates which since early 2012 more than doubled in a deal which the Competition Authority ruled as price-fixing. Data published by the Financial Supervisory Authority show new insurance premiums during the first eleven months of 2012 rose to 8 billion lek, up 4.65 percent year-on-year.
The market shrank by 15 percent in the first quarter of 2012 and 5.5 percent in the first half. Data show insurance premiums in the domestic MTPL compulsory car insurance grew by 46 percent despite the number of insurance policies growing by only 1 percent compared to the first eleven months of 2011. Paid claims, three-quarters of which belongs to motor insurance, grew by 29 percent to 2.4 billion lek during this period.
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.
