MTPL insurance market is monopolized by several companies

   “Mandatory auto insurance market is concentrated in the hands of two leading companied that hold 61% of the market share. This monopoly causes loss to the insurance market itself. The compulsory nature of insurances causes specialized companies’ profit to depend on the fees approved by the National Commission of Financial Market”, declared Alexandru Zgardan, author of the research “Characteristics of Mandatory Motor Transport Insurance in Moldova” launched by IDIS “Viitorul”, Tuesday on 9 December 2008.The expert stated that after over a year since the applicable legislation came in force the mandatory auto insurance market is still monopolized by several companies. “The new fees that had been discussed for many months were not approved. The rights of the insured are still being infringed. Despite legislative reforms aimed at introducing order into the market and establishing certain playing rules that would be clear and transparent to everyone, there are still cases of unfair competition and non-payment of damages”, mentioned Mr. Zgardan.  He specified that the new insurance premium calculation method, although efficient and correct, reveals numerous deficiencies when put into practice. Author of the research stated that mandatory insurances that make up the largest portion of the insurance market are civil liability insurance of damage caused by cars (23%) and the international Green Card insurance (22%). The volume of insurances of carriers’ civil liability to passengers barely reaches 1%.  As for civil liability insurance for damage caused by vehicles (Mandatory Auto Insurance), IDIS expert underlines that the new calculation method raises serious doubts despite claims that everybody will benefit from it. “Indemnity limits introduced in 2007 improve the insurers’ situation. This means that the insured can no longer claim unlimited indemnity. For instance, there is a limit of 350.000 lei for damage caused to health”, specified Zgardan.  IDIS expert supports the decision to offer the insured persons additional warranties and extend the number of types of covered damages. “The insured are not aware of their rights and, unfortunately, some people only find out about the changes when they become victims of these accidents”, said Zgardan. Author of the research reminded that “the creation of methodology is followed by revision of fees. If fees will be calculated according to a logic clear to both the insured and insurers it could help establish relationships based on mutual trust”.  Green Card insurance in its turn is steadily growing. Out of four companies holding a Green Card insurance license only two specialize in this type (65-70% of owned portfolio). “Sometimes both agents of certain insurance companied and their clients consent to the issue of fake policies that bring serious losses to the industry”, said Alexandru Zgardan.   IDIS expert considers that Green Card insurance premiums are decreasing due to evaluation of Moldovan lei in relation to a single currency. “Sooner or later, when the new methodology is actually applied, the corresponding fees will decrease even more. This will lead to a reduction of costs borne by carriers”, affirmed Zgardan.  Alexandru Zgardan states that the 20% inflation rate used in the official methodology does not correspond to reality. “We obtained this inflation rate used in the methodology by calculation. This indicator is not obvious at first sight. Therefore, fees resulting from such combination could be inflated”. The proposed rate of return of 10% for Mandatory Auto Insurance and 7% for Green Card Insurance is relatively high for compulsory insurances, explained Zgardan. 

   “Insurance companies do not make big efforts to attract clients. In the European Union these types of insurance tend to a zero rate of return. Importantly, the insured should also realize that they are under the state’s care”, added the expert of IDIS.

 

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