Freezing RCA prices for 6 months is a compromise that may be acceptable in the short term, but is only related to measures to correct imbalances, Allianz-Țiriac Asigurări, RCA’s second-largest insurer, reacted on Friday after Euroins bankruptcy began.

RCA prices below payment obligations are the main reason for bankruptcies in the last 8 years

In the message, the insurer emphasizes that the most important principle in insurance is the adequacy of insurance premiums in relation to the payment obligations under insurance policies.

• “History shows us that sales with miscalculated premiums compared to commitments, whether during the limitation period or not, have been the primary cause of the bankruptcies we’ve witnessed over the past 8 years.
• The danger is not over, and the vital lesson that we all – the market, the government, politicians and customers – must learn is to match premiums with payment obligations.” this is reflected in the insurer’s report.

The company says that the money collected for insurance premiums is the main source of funding for the compensation paid, as well as for the creation of loss reserves, which ensure that any future payments to policyholders can be made under the assumed conditions.

In other words, if the price of RCA is too low, as practiced by City Insurance or Euroins, without sufficient financial resources to pay losses and reserves that must be created by law, there is a risk of new bankruptcies.

• “It should not be forgotten that RCA policies cover losses and risks for significant amounts that can exceed 7 million euros, that one accident can mean both material losses and physical or moral injuries to several people, and that, unfortunately, these are not hypothetical, but real cases, with a high frequency in Romania compared to other countries.
• At least 6 vehicles out of 100 registered in Romania are the cause of traffic accidents every year, resulting in property damage or bodily injury and death, Romania is the “champion” in Europe in terms of this indicator. says the insurer.

What issues should be fixed during RCA’s 6-month price freeze

Allianz-Țiriac notes that it “understands the difficult situation at the moment caused by final bankruptcy (eg City Insurance) and bankruptcy (eg Euroins) in a relatively short period of time, as well as the concern of the authorities to limit the impact on the budgets of individuals and companies, but price freezes can only be an acceptable short-term compromise that must be accompanied by legislative measures to correct imbalances.

• “In the absence of treating the real causes rather than the symptoms, intervention in rates can obviously reduce the pressure on the insured, but risks putting pressure on the market.
• It is like covering a pot with a lid, without reducing the intensity of the fire, without reducing the temperature of the water, and without having the possibility of exit.
• A new “explosion” can be avoided only if we intervene in the causes. said Virgil Oncutean, CEO of Allianz-Țiriac.

In this sense, the insurer says that it will work with the authorities “to find viable solutions aimed primarily at reducing the number and severity of traffic accidents, better control and predictability of repair costs or injuries they cause. them, the responsibility of Romanian drivers”.

What RCA’s “sufficient premium” looks like in the Allianz-Țiriac business: how much money it collected and what claims it paid last year

Revenues collected by Allianz-Țiriac Asigurări from gross premiums written across all lines of insurance last year amounted to 2.9 billion lei, which is 40% more than in 2021, and the amount of compensation paid was 1.2 billion lei.

In addition to the compensations paid, Allianz-Țiriac at the end of December 2022 had more than 3 billion lei in technical reserves, financial guarantees for the payment of obligations under all insurance policies.

Operating profit 250 million lei

The operating profit, the amount remaining after compensation payments, creation of provisions and deduction of operating expenses, was approximately 250 million lei.

The overall rate, ie the ratio between the amount of claims paid, administrative costs and gross accrued premiums, was 93% at the end of last year.

• In other words, for every 100 lei collected, the insurer earned 7 lei after paying claims and administrative costs.

The company claims that the maintenance of a positive trend of operating profitability, in the context of growing pressure of losses, became possible due to the strict discipline of costs and the result of investment activities.

The largest compensation paid in 2022 was to RCA: 5.2 million lei

The company announced that the largest compensation paid out last year was 5.2 million lei based on RCA insurance for a road accident that occurred abroad and resulted in the death of a pedestrian.

As for property insurance, the largest compensation amounting to 3.8 million lei was paid after a fire in an amusement park.

Similar compensation was paid following a landslide that affected a photovoltaic farm and a fire that destroyed all of the client’s production equipment in the textile industry.

In the case of individual clients, the largest payment made on the basis of property insurance amounted to almost 800,000 lei. The compensation was paid after a fire damaged the house.

In the case of health insurance, where payments are frequent, the highest compensation paid was 92,000 lei for surgery.

RCA prices to be capped for 6 months starting April 11 / Prime Minister Chuke asked for amendments to RCA law

​RCA prices will be capped, starting April 11, for 6 months at the base prices (B0) practiced by insurers on February 28, 2023, to which the price reduction or increase associated with the bonus-malus class will be applied. where each insured person is, after the publication of the Government Resolution on Thursday evening in the Official Gazette.

Unfortunately, consumers cannot know what rates each insurer was charging at B0 on ​​February 28, 2023 for each individual category of policyholders, as also reported by the Association of Romanian Financial Users (AURSF).

The Financial Conduct Authority (ASF), which developed this final version of the regulation, says that its analysis found that, in general, the rates charged by insurance companies on February 28, 2023 are lower than the published base rates. March 7, 2023.

On Wednesday, the government approved a 6-month cap on RCA prices at the end of February 2023, with one condition: that during this period the ASF and the Competition Council prepare the necessary changes to the RCA law to avoid further crises. and bankruptcies in the future.

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