​Insurance brokers oppose capping the distribution commission at 8% of the RCA price and ask the authorities to freeze this commission at the level stipulated in the distribution contracts signed with insurance companies on February 28, 2023, as insurers will also be forced to sell RCA at the latter’s prices day of February this year.

Brokers charge that the new ASF project limits competition in the sale of RCA

The National Union of Insurance Brokers and Consultants (UNSICAR), an organization representing 80 insurance brokerages, reacted on Tuesday to a new draft by the ASF to cap RCA prices at 28 February 2023.

• “UNSICAR members understand the efforts of the authorities to prevent possible negative consequences for consumers as a result of the insolvency of Euroins Romania, but limiting the commission of brokers at the level of 8% is not the right solution for the market. in which we work. As stated in the project, the only element that is limited in the project is the commission of intermediaries, the rest of the elements are frozen at the market price.
• In this context, UNSICAR proposes to the authorities to limit the level of distribution commissions related to RCA contracts to the level specified in the distribution contracts in force between insurers and distributors on 28/02/2023, for a period of 6 months from the date of entry. entry into force of the future normative act. Thus, the financial burden and risk of the measures taken will be equally borne by insurers and intermediaries.” it is stated in the statement of the Union.

Brokers believe that without this change in the draft GD, the restriction provided for in the draft can only deepen the difficult situation in which the RCA insurance market finds itself, given that any restriction of distribution commissions will violate the provisions of the law.

• “UNSICAR understands that the Commission’s cap proposal violates Article 16 of the Romanian Constitution on equal rights, as it would transfer the financial burden of the cap measure to insurance intermediaries only, while at the same time representing a real expropriation of insurance distributors’ income. , without fair and prior compensation.
• The only highly competitive market in the insurance industry – the intermediary market – is at risk of being left without this attribute, and the only losers are consumers due to the effects that typically occur in a market with low supply. Practically, although they blame the lack of competition at the level of insurers, the authorities take measures to reduce competition at the level of distributors as well.” brokers advertise.

The project creates an uneven playing field and promotes direct sales by insurers

They say this approach will not benefit the more than 8 million customers who use the services of insurance brokers and the more than 40,000 licensed distributors in the industry.

• “Furthermore, the proposal would create a level playing field by favoring sales through insurers’ direct channels, which are not subject to the future restriction, to the detriment of independent sales channels,” the brokers said.

Brokers say that the Ministry of Justice is also right, but the data has changed compared to the previous draft of the RCA limit

In the press release, the brokers refer to a positive opinion, but with many comments provided by the Ministry of Justice regarding the previous draft of the RCA restriction, the document presented exclusively by HotNews.ro, only that the data has changed significantly in the new draft regulation.

Here’s what brokers say:

• “We remind you that the Ministry of Justice has already provided a negative conclusion (It was actually a positive opinion with comments) regarding the previously published draft restriction, the institution notes that the level of commissions for distribution is an aspect related to the commercial policy of the economic operator.
• In addition, the DOJ indicated that the proposal to limit RCA rates and, by implication, broker commissions, should only be enacted by regulation, not by government decision.
• In this context, if the measure limiting the RCA tariffs is adopted by the government, there is a risk that its provisions will be declared illegal after a possible review by a competent court, which will lead to the establishment of payment obligations for the state budget and affect the areas of targeted activity.
• At the same time, there is a risk of initiating an infringement procedure against Romania, given that the independent distribution of insurance is an important component of the insurance market, as provided for in Declaration 4 of Directive (EU) 2016/97 of the European Parliament and of the Council of January 20, 2016. says the UNSAR press release.

In fact, even if some of the DOJ’s comments remain relevant, such as the risk of infringement, the new draft GD has significant changes compared to the previous draft, at least with regard to the RCA price cap.

Thus, the Ministry of Justice warned that the previous draft of the GD does not involve capping RCA prices, which the GD could do, but reducing RCA prices to the level of March 2022, a fact that could be challenged in court.

Brokers are afraid of bankruptcies and layoffs

Finally, the brokers say that “a large number of distributors will not be able to mitigate the shock that the adoption of the GD project will cause in this form, risking, according to UNSICAR, a reduction in the number of employees or partners” directly participating in the insurance of brokerage activities due to their bankruptcy or simply stopping this activity.”

• “Mass reduction of independent distribution will significantly affect the interests of insurance consumers in the medium and long term, especially in cities and towns with a population of less than 30,000 inhabitants, limiting access to insurance and consultations that accompany complex products.
• The fact that these areas cover more than 50% of the Romanian population and generally also have limited access to online shopping solutions cannot be overlooked either, as door-to-door distribution is the only option to access product insurance.” brokers warn.

The National Union of Insurance Brokers and Consultants (UNSICAR) represents 80 insurance brokerage, claims and training companies. UNSICAR members account for more than 60% of the insurance broker market, which has almost 280 intermediaries.

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