Following the temporary reduction in RCA prices for trucks over 16 tonnes, the Financial Conduct Authority (ASF) also wants to reduce the permanent contribution quotas paid by insurers on general insurance sales (including RCA), under a draft rule put out for public consultation on Thursday. This measure was proposed by insurers to offset the negative impact of the RCA reduction in truck prices.

The ASF draft rule proposes adjustments to the interest rates of premiums that insurers must insure for the year 2024, which are applied to the volume of gross premiums collected from direct insurance activities, beginning in February 2024 and ending on December 31, 2024.

Fixed contributions to the FGA, which are not refunded to insurers, will be reduced

The changes only affect the premium rates paid on insurance sales other than RCA-dominated life insurance, money that feeds the Policyholder Guarantee Fund (FGA), which pays out compensation when insurers fail.

Insurers are currently required to pay the FGA a fixed contribution of 4% and a special contribution of 3% for general insurance, with the ASF proposing to return to 2023 levels of a fixed contribution rate of 2% and a special contribution. the rate is 5%.

Unlike regular contributions, which are not returned to insurers, special contributions will be returned to them when the availability of the Guarantee Fund of the Insured is sufficient to cover the amounts due to the insurance creditors and to the extent that the Fund is provided at the expense of funds provided by law.

• SEE ASF DRAFT STANDARDS

How RCA truck prices temporarily fell and insurers’ demand to take measures to mitigate the impact

750 trucks over 16 tons received discounts of thousands of lei at RCA in the first week of applying the new calculation formula, designed exclusively for this category of high-risk insured persons. With Çolaku expecting thousands of cheaper RCA policies for trucks, insurers are hoping for tax cuts to ease the impact, while other insurers are relying on Parliament for promised changes to the RCA market.

The reduction in RCA prices specifically for trucks over 16 tons, a segment in which the frequency of claims is 3 times higher than the market average and the compensations to be paid are significantly higher, creates a negative financial impact on insurance companies.

• Sources from among the carriers involved in the negotiations told HotNews.ro that during the negotiations insurers raised questions about the financial consequences of changing this calculation formula and reducing the price of RCA for trucks.

HotNews.ro’s information was confirmed by BAAR, which reported that ASF is analyzing a possible reduction in taxes and contributions paid by insurers.

• “After consultation, we understand that the ASF is analyzing the adoption of a set of measures to reduce the negative financial impact caused by these changes, such as reducing certain taxes and contributions paid by insurers, adjusting the bonus-malus system, introducing or proposing changes. to the regulatory acts that regulate RCA insurance”, officials of the Bureau of Automobile Insurers clarified for HotNews.ro.

Insurers: Out of 100 lei collected for RCA, 77.3 lei are intended for payment of losses and 13 lei for taxes and contributions.

Insurers’ main costs are expenses, and out of 100 lei collected at RCA, 77.3 lei go to claims, the National Union of Insurance and Reinsurance Companies of Romania (UNSAR) said earlier this month.

After the Confederation of Motor Carriers (COTAR) charged that “only 25% of the RCA policy price is the payment of claims and 75% is collected by the insurers”, UNSAR responded by claiming that out of 100 lei collected on the RCA, 77.3 lei goes on claims, according to official ASF data.

• “The main expenses of insurance companies are, were and will be the payment of claims in order to fulfill their obligations to customers. At the same time, paying out important compensations, almost 5 million euros every calendar day (and this is only in 2022), Romanian insurers come to the support of people and companies.
• Even if you want to blacken the image of Romania and the insurance market in our country, from the point of view of costs, the insurance industry falls precisely in the range of 15-30%.
• The problem is not here, but depends, among other things, on the frequency of road accidents and the average damage.
• Returning, the expenditure area shows: taxes and contributions paid to the Insurance Guarantee Fund, the National Defense Fund and other institutional bodies in the amount of 13% (therefore not belonging to insurers). Some of this money is a loan that insurers provide under the law so that the FGA can pay compensation to injured parties.
• It is not known when the sums borrowed by the FGA insurers will be repaid, and what their value will then be, taking into account inflation and the loss of interest; commissions and other acquisition costs (ie insurers’ costs). During the period of limitation of premium rates, they amount to a maximum of 7.4%.
• In summary, approximately 6% of the premium remains for insurers’ administrative costs, claims adjusters, reinsurance and many other categories of costs. All other costs represent reserves for compensation of losses, the creation of which is a requirement of the law, so that insurance companies can fulfill their obligations at any time,” the insurers said.

When all RCA policy holders will benefit from the suspension of the policy while the car is parked or paid in installments

In addition to this temporary decision to lower the RCA price for trucks over 16 tonnes, Prime Minister Çolaku promised that in the coming period measures will be taken for the entire RCA market, such as paying in installments or suspending the policy until the vehicle is in the shop. use for a longer time.

The Financial Supervisory Authority (ASF) announced on Thursday 25 January that the possibility of RCA contract suspension, loss certificates and electronic monitoring through the RCA network of road traffic cameras are measures included in the draft law passed by the government in December and now registered in the Senate.

• Read also: Why RCA truck prices are so high: what carriers are advertising, what internal ASF data shows and what solutions are on the negotiating table