Extending the capping of the mandatory civil liability car insurance (RCA) puts huge pressure on insurers, increasing the risk of other players leaving a market that has only six companies authorized and regulated in Romania and another two operating under the European passport, say representatives of the National Association of Insurance and Reinsurance Companies in Romania (UNSAR).
According to a press release issued by the organisation, any potential exit from the market will generate additional pressure on the remaining players, creating "a domino effect".
"Extending the capping of RCA fees is far from a 'miracle cure'. On the contrary, it could once again lead to the results we all witnessed following the 2016 cap. It's a measure that doesn't look good on paper either and we don't think it will please anyone, especially in the medium and long term. Some stakeholders will however be affected in the short term. The price of RCA policy rates is influenced by the high number of accidents, the compensation that is disproportionate and not always correctly presented, resulting in a number of factors that can be resolved including through the legislative steps promised by the Government in the context of the cap. However, the dialogue must be technical and not populist. In fact, if we look back in history, the insurance industry has spoken on numerous occasions about the measures that need to be taken to avoid repeating the past," said UNSAR President and CEO Alexandru Ciuncan.
He pointed out that at the time of first extension of the RCA policy rate capping in September 2023, UNSAR representatives drew attention to the negative consequences of such a decision and continue to support the same arguments.
"The exceptional situation due to bankruptcies and the need for other insurance companies to take over a significant portfolio of clients was invoked for freezing premium rates. Through a significant effort, the insurance market has managed to absorb this shock. However, for this to happen, insurance companies needed capital, either by consuming existing capital or by asking shareholders for money," Ciuncan said.
According to UNSAR, the current law has demonstrated its limitations many times over, and "provisional measures, such as the freezing of RCA fees only sweeping the problems under the rug".
"Optimal solutions always come from dialogue. And we have solutions. Change depends on all of us: customers, drivers, authorities, insurers and distributors. Each of us has a role to play and no one can solve the situation on their own. The insurance industry is ready to provide all the technical support to change the current law on mandatory car insurance and to solve the problem upstream, not downstream. We need to work on the causes, not the effects," the document added.
The government approved in early October the extension of the capping RCA policy rates until the end of 2023.
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