How does the vice-president of the ASF explain the increase in the RCA premium, despite the ceiling

• Sorin Mititelu: "The tariff increase is objective and was carried out in accordance with the regulations in force, at least until proven otherwise"

• "You can't only work at a loss, but you have to return to a price that allows you to survive", says the ASF official

RCA's average premium increased by 18% at the end of the first quarter of this year, compared to the level at the end of March last year, according to data published yesterday by the Financial Supervisory Authority (ASF), during a press conference.

The increase occurs even though, in the spring of 2023, the executive capped the price of auto liability insurance policies, a measure that was extended until September 30 of this year.

Sorin Mititelu, vice-president of the ASF responsible for the insurance market, says that, at least for now, according to the checks carried out by the Authority, the increase in tariffs is based on objective causes, being in accordance with the regulations in force.

According to the ASF representative, the market supervisor's checks considered two aspects: the factors that determined the increase in tariffs and the way in which it was achieved. "The first and most important factor is related to the fact that, before the ceiling, the combined rate, i.e. the ratio between expenses and income, was above unity. It is not a normal situation and it required an adjustment, which happened. You can't just work at a loss, you have to come back at a price that allows you to survive. You must have a sufficient income to cover your expenses", said Sorin Mititelu.

According to the vice-president of the ASF, the second objective factor that led to the increase in tariffs was determined by claims inflation, which was calculated by the Authority at 20.5%. "In other words, the general inflation is also transferred to the insurance area when payments are made for the compensations from the claims files, that is, for bodily injuries and the payment of car repairs," said Mititelu.

The Authority official added: "Also, we took into account that a certain space was created, in the sense that, at the beginning of January of this year, that maximum tariff was updated by 6.8%. On the other hand, the fact that the insurers have benefited from a cost reduction, generated by the capping of distribution expenses, in the sense that the brokers' commission has been capped at 8%, should also be taken into account.

According to the ASF representative, it should also be taken into account that, until March last year, the basic contributions to the Guarantee Fund of the Insured and to the Bureau of Motor Vehicle Insurers in Romania were at a relatively low level, somewhere around 1.5%. "Later they were increased, some special contributions were also introduced, in total being somewhere around 10.5%", said Sorin Mititelu, adding: "All these elements contributed to the adjustment of tariffs".

According to the ASF report, for the entire market as a whole, on March 31, 2024, the average annualized first RCA was around 1,386 lei, up 18% compared to the first quarter of 2023. The average annualized first RCA increased by 11% for individuals legal entities, to 2,158 lei, respectively by 17% for natural persons, to 1,079 lei.

Regarding the mechanism by which these increases appeared, Sorin Mititelu stated: "First there was that 6.8% adjustment. Then all insurers take into account, when they usually set their rates, a component called the negotiation margin, the discount or trade discounts. So far we have found that this margin has been quite generous for them, which has allowed them to offer new pricing on policy renewals. Thus, through that reduction, we had an automatic increase in the final tariff".

According to the vice-president of the ASF, the discounts were between 20-40% of the price of policies in certain segments, which were reduced by insurers to 10-20%.

"All these elements combined and administered through margin reductions made the final tariff register an effective year-on-year increase of almost 18%, for individuals. It is a situation that has mainly objective elements and which I would say was even necessary. Do not forget that this market must stand in a balance of financial stability. The situation in which those expenses are higher than the revenues cannot continue," said the vice-president of the ASF. "We are doing checks to identify if there are any problems, but so far we have not found any problems. It is a necessary and objective situation that, in the end, ensures the stability of this market. The tariff increase is objective and was carried out in accordance with the regulations in force, at least until proven otherwise".

According to the ASF report, the degree of concentration of the RCA market remains high for the first top insurers, in the first quarter of the year, so that the first three insurance companies accumulated approximately 60% of the RCA insurance portfolio in our country. "However, there is a decrease in the degree of concentration compared to previous periods, considering the dynamics of the subscriptions of the branches present on the local market, which had a cumulative share of 16.6% in the first quarter of 2024", the report states.

The total value of the insurance premiums subscribed for RCA insurance by the companies authorized and regulated by the ASF was approximately 1.8 billion lei in the first quarter of 2024. "Compared to the similar period of the previous year, the value of the gross premiums subscribed by the authorized and regulated companies of ASF decreased by about 16%", according to the report.

Including the activity carried out by branches, the volume of gross premiums subscribed in the first quarter of 2024 was around 2.15 billion lei, down by approximately 11% compared to the volume of subscriptions related to the first quarter of 2023, according to the ASF report.