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In Albania, as of January 1, 2025, there will be a new way of calculating the price of compulsory insurance for approximately 900,000 road vehicles. The Financial Supervisory Authority, through a regulation, has added several risk factors, which have led to an increase in the price of vehicle insurance of up to 20%.
According to the Albanian Bureau of Security, the total increase is only 3%. The regulation, which also helps road safety, is causing debates regarding several elements. Voice of America correspondent in Tirana Mimoza Picari brings a detailed analysis regarding this issue.
Many citizens in Albania have been faced with increases in the price of mandatory car insurance since the beginning of the year. Two of them confirmed to Voice of America that car insurance this year cost them almost 10 and 15 percent more than a year ago.
A law adopted in 2021 on mandatory insurance in the transport sector brought a different approach to this area, leaving room for the Financial Supervisory Authority to draft a new regulation in September 2023, which significantly adds risk factors to the calculation of the insurance premium.
Previously, the vehicle's engine power and year of manufacture were taken into consideration, while since January of this year, several other risk factors have been added, such as the age of the insured, experience in driving a motor vehicle, use of the vehicle by an entity or individual, and the vehicle's registration district.
But the new regulation does not take into account, at least until 2026, the damage history that reduces the price for those who have not committed violations and the opposite for those who have committed violations of road traffic rules.
In a written response to Voice of America, the Financial Supervisory Authority explained that the entry into force of this definition has been postponed in order for the public to become familiar with this new element of the legal provision.
"This principle is essential as individuals should have the opportunity to become familiar with the legal norms and plan their actions in accordance with the law, which should be clear, consistent and predictable. Based on this principle and the ability of drivers to be aware and disciplined when using the vehicle, this regulation does not have retroactive effect with regard to the "history of damages" that occurred before its entry into force," explains the AFSA.
The Financial Supervisory Authority also explained that the methodology applied for the risk factor "claims history" varies from one country to another based on the characteristics of the insurance market, underlining the importance of the financial equilibrium of this market.
"It is important that with the implementation of this factor, the technical-financial balance is maintained at the portfolio level for the business line where it is applied. Regarding the insurance market in Albania, the automobile portfolio, the claims history taken into consideration is up to three years, as calculated using actuarial methods and based on the recommendations of the World Bank," argues the AFSA.
The Albanian Insurance Bureau confirmed to Voice of America that the average price increase is 3% in total. The Chairman of the Assembly of this bureau, Kadri Morina, said that for 3 decades, prices in the insurance market have hardly changed, while health insurance for motor vehicles has increased significantly since 2021. Also, as Mr. Morina states, the values of damage from accidents have increased by almost 40% in recent years.
"For example, you know how the prices of iron have gone, because it is used in car services. The level of increase in damages alone has gone up to 40%. The main part of the public has the same prices as they have had but even lower, while the categories according to the cubic capacity of the car, the age of the driver, according to the regions, the age of the car, have undergone a small growth trend, where the entire growth in the insurance market is 3%. Whoever has a small 1500 cubic car has had their insurance reduced, but a car worth 400 thousand euros that has high engine power has had an increase of 20%, but we are talking about the broad stratum of the public" - says Mr. Morina.
The insurance market has often been the target of criticism for operating on the basis of prohibited agreements, where companies that own the market fix prices, hindering competition and harming consumers. Socialist MP Erjon Brace shared such a concern with Voice of America.
-"We are talking about a market that functions on the basis of a prohibited agreement. The Competition Authority in this case is to guarantee effective competition in the market that occurs through continuous verifications, and of course penalties in the case of prohibited agreements. AFSA in the insurance market must guarantee rules that bring competition. Introduction, licensing that increase competition" - says Mr. Braçe
When asked about these concerns, the AFSA said that according to the law, the issue of free competition in the insurance market is not within the purview of this institution, while the Competition Authority told Voice of America that over the past few years it has evaluated agreements in the insurance market, giving the relevant recommendations when it deemed it reasonable. This institution explains that it has not identified any problems that distort competition, as otherwise it would have taken the relevant legal actions. These
The markets remain under constant monitoring, this institution says in its written response.
On the other hand, the Chairman of the Assembly of the Albanian Insurance Bureau, Kadri Morina, dismissed allegations of collusive agreements between insurance companies and confirmed that competition in the market is strong.
"Competition is terrible, like in any other market. There are times when a client comes to us and says - lower the price by two thousand lek because the other company gave it to me cheaper. It's competition, it's a free market," says Mr. Morina.
Voice of America conducted a survey of 6 out of 8 insurance companies operating in the market. For the same vehicle, the initial price offered by them ranges from 205 thousand to 216 thousand old lekë, depending on the company. However, in negotiations, the companies offered discounts from 5 to 16 thousand lekë and the price decreased - in three companies 200 thousand lekë, in two 205 thousand, and in another 210 thousand old lekë.
The new regulation of the Financial Supervisory Authority "On the determination of risk factors included in the calculation of the premium for compulsory insurance products in the transport sector" is being accompanied by a lot of discussion. This is the first year of application and full calculations or its impact on road safety, according to experts, belong to the future. / VOA
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