On the day the Government announced the withdrawal of the ASF to re-examine the GD’s proposed RCA price cap, the biggest insurance broker associations are showing the seriousness of the proposed measures: more than 40% of the insurance broking industry’s workforce will lose their jobs, and around 350,000-500 000 customers every month will face real problems while taking out RCA policy.

The project risks causing an almost complete deadlock in the RCA insurance market

The National Union of Insurance Intermediation and Consulting Companies (UNSICAR) and the Romanian Association of Insurance Brokers – Reinsurance (PRBAR) announced on Friday that they oppose the GD project to set maximum premium rates for RCA policies, the main reason being the negative impact that will have a future regulatory act on the distribution of insurance, consumers and, at the same time, on all road users.

• “The current version of the draft regulation risks causing a quasi-total blocking of the RCA insurance market, either by limiting the sale of RCA policies by insurance companies, or by the withdrawal of some players from the RCA market (as happened with UNIQA Insurance after the bankruptcy of City Insurance), or by a combination of the two scenarios.
• The main effect that this termination will have on insurance distributors will be to drastically reduce the number of intermediaries that will survive in the market under these conditions. Thus, the final effect will be a reduction in the number of insured vehicles on the road.
• In practice, the GD project will have an effect directly opposite to the fundamental purpose of the CAR legislation at the European level, namely: instead of protecting road users, injured or innocent victims of road accidents, it will only provide car owners with a minimal financial advantage. and in the very short term, i.e. holding a cheaper RCA policy.”, warn two professional associations.

See the HG DRAFT ON RCA MAXIMUM RATE which has been withdrawn here.

Brokers remind that over the past 10 years, the RCA insurance market has faced various imbalances and tensions, the main problems are related to the quality of the process of establishing, evaluating and paying compensations, as well as possible abuses by some entities. involved, other market players complained.

• “Among these dysfunctions, there has always been a victimized person, on whom most of the negative consequences of these market functioning problems were manifested, and the current project will only emphasize the negative consequences for the victims,” ​​the two associations said in a statement. say.

The criteria on which ASF sets RCAs and distribution limits are completely arbitrary

The members of the two professional associations are grateful that the rationale of the draft GD does not include the criteria on the basis of which the maximum limit was determined, reporting March 1, 2022, and not another date, respectively, the criteria on the basis of which the distribution percentage commission was set to a maximum of 8% .

Thus, the proposed limits are arbitrary because they are set without serious analysis of the costs borne by insurance distributors, the impact of annual inflation of more than 15% on these costs and the profitability, respectively, of the distributors’ real rate of return.

Consequences: bankruptcies, layoffs and hundreds of thousands of Romanians affected

Brokers then present what the adverse effects would be of capping RCA prices and distribution fees as provided for in the ASF:

• “We estimate that most distributors will not be able to mitigate this shock and risk, according to the first estimates, to reduce by more than 40% the number of employees or partners directly involved in the activities of insurance brokers due to their bankruptcy. or by giving up this activity.
• In a situation of reduced number of insurance intermediaries, policies previously managed by intermediaries who have left the market will have to be issued directly by insurance companies that cannot build the necessary operational capacity in a short period of time. Thus, about 350,000-500,000 customers every month face real problems when concluding an RCA policy with all the serious consequences.
• A sharp decrease in the number of distributors will delay the entry of new insurance companies into the RCA market, since in the absence of independent distribution, the new player’s investment in the development of the distribution network will be even more expensive, but also riskier. at the same time, and maintaining a low number of insurers in the RCA market will lead to maintaining the current tension in the profile market.
• The massive reduction in independent distribution will also have a significant impact on the interests of insurance consumers in the medium to long term, particularly in cities and towns with populations of less than 30,000, limiting access to insurance and the advice that accompanies complex products.
• The fact that these areas cover more than 50% of Romania’s population and are generally also the ones where access to online shopping solutions is one of the lowest cannot be overlooked either, as door-to-door distribution is the only option to have access to insurance products.
• We clarify that the direct presence of insurance companies in these places in Romania has been constantly limited in the last decade, and the decrease in the level of economic activity and the decrease in purchasing power will make investments in direct distribution in these areas highly unlikely.
• These same consumers are also the least prepared to access purchasing solutions in purely digital channels and urgently need an independent insurance distributor.” This is stated in the press release of the two associations.

As a result, UNSICAR and PRBAR demand the withdrawal of this project and the initiation of a dialogue with all market participants (consumers, insurers, distributors of insurance services, service providers) in which the perspectives of all involved parties will be presented and together to constructive solutions.

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 brokerage market, which includes almost 280 intermediaries. The Romanian Board of Insurance and Reinsurance Brokers (PRBAR) was established in 2017.

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