In the midst of the ASF leadership change, insurers and insurance brokers are asking the government not to extend the RCA price cap in 2024, warning that such a move would put huge pressure on insurers in the market, increasing the risk of other players exiting after the Euroins bankruptcy.

In the context of the bankruptcy of Euroins, the former leader of the RCA with more than 2.8 million insured, the Chuke government has capped RCA rates, which were frozen from 11 April 2023, at the level of 28 February 2023. The RCA price cap was extended by the Cholak government until the end of this year.

In the midst of a change in ASF leadership and just days before the end of the year, unions representing insurers and insurance brokers have hit back by asking the government not to extend RCA rate caps in 2024.

UNSAR: Prolonged restriction increases the risk of other players exiting the market

The National Union of Insurance Companies (UNSAR) warned on Tuesday that the continued freeze on RCA rates was far from a “miracle drug” and that some market players would be hurt if it continued until 2024.

• “The price of RCA policies is affected by the high number of accidents, disproportionate and not always correctly presented compensation, which gives rise to a number of factors that can be addressed, including through the legislative measures promised by the Government in the context of the cap. But the dialogue should be technical, not populist.
• In fact, if we look back in history, the insurance industry has repeatedly spoken about the measures that must be taken to prevent a repeat of the past. During the first extension of the RCA discount rate freeze in September 2023, we noted the negative consequences of such a decision and continue to support the same arguments.
• The post-bankruptcy emergency and the need for other insurance companies to gain a significant portfolio of clients was used to freeze premiums. Having made considerable efforts, the insurance market managed to absorb this shock. But for this, insurance companies needed capital, either by consuming from what was available, or by demanding money from shareholders.
• The continuation of the restriction puts enormous pressure on insurers in the market, which increases the risk of other players leaving the market, which still only has 6 authorized and regulated companies in Romania and another 2 operating on the basis of the European passport.
• Therefore, it is clear that any potential exit from the market will put additional pressure on the remaining players, creating a domino effect.” warns UNSAR.

The insurers’ union then cites other reasons that have led to increased costs and that make it difficult to extend the RCA limit:

• Rates were frozen from 11 April 2023 at the level of 28 February 2023. This does not mean that on that date all companies had bids updated to the current level of requirements.
• Inflation, estimated at around 10% in 2023, directly affects claims paid, while RCA premiums remain frozen at February 2023 levels. In addition, the average amount of claims in the third quarter of this year increased by about 12% compared to the same period in 2023. last year, in the context of which compensations were also not limited. We don’t know what other industry is in a similar situation.
• Insurers pay rising taxes and contributions from 6.6% for RCA in 2021 to around 13% in 2023.
• Insurers’ contribution to the FGA has increased from 1% in 2021 to 7% in 2023, which represents a significant financial burden – funds that insurers feed from the policy value paid by all policyholders for all types of general insurance, not just RCA. It is not known when these amounts will be returned and what their value will then be, taking into account inflation and the loss of interest.” emphasizes the Union of Insurers.

Insurers are asking the Government to fulfill its promise to change the RCA law

UNSAR is asking the government to follow through on its promise to overhaul RCA legislation, as announced by former Liberal Prime Minister Nicolae Chuke after he decided to cap RCA tariffs.

• “However, we need a deep change in the legislation on RKA – as the Government promised this year. This is a necessity that insurers have been advocating for years. The current law has repeatedly shown its limits, and temporary measures like the RCA tariff freeze only sweep the problems under the rug.
• The best decisions always come as a result of dialogue. And we have a solution. The changes depend on all of us: customers, drivers, authorities, insurers and distributors. Each of us has a role to play, and no one can solve the situation we find ourselves in alone. The insurance industry is ready to provide all technical support to change the current RCA law and address the problem at the beginning, not the recession. We should work on the causes, not the effects.” says UNSAR.

Insurance brokers: Customers and the market need new RCA players, not restrictions

A similar reaction came on Tuesday from the National Union of Insurance Brokers (UNSICAR), which warned that maintaining the RCA price cap would further limit competition and delay the entry of new players into the market.

Insurance brokers note that RCA rates have been capped for more than 9 months and say that the niche market has managed to absorb the shock caused by the withdrawal of Euroins Romania’s operating permit.

• “The fundamental problem of the local RCA insurance market is the small number of profile players and, indirectly, the lack of competition in this market segment, which is also evidenced by the ASF annual report on the insurance industry for 2022, which states that the three largest companies in the RCA market have had a combined share of 72%,” said Dorel Duce, President of UNSICAR.

There are no negative consequences from the adoption of GD. 298/2023 regarding the establishment of maximum rates of insurance premiums fully affected the entire insurance market in general and the insurance distribution market in particular, the latter suffered significant financial losses.

UNSICAR believes that the future management of ASF should consider and implement measures to facilitate the entry of new serious players in the RCA insurance segment and beyond. The stability and predictability of this market are the most important elements that a potential new entrant will consider when deciding to enter a new market.

• “A possible measure would be to simplify the authorization procedures and shorten the duration of the authorization process to no more than six months for companies interested in investing in the insurance market of Romania,” said the President of UNSICAR.

He reminds that in 2022 brokerage brokerage companies accounted for almost 76% of the volume of premiums signed by insurers and that more than 15 years ago in the RCA market in Romania there were more than 15 profile companies, while at the end of 2022 there were only 9 active players , two of which are not abroad.

• “The reduction in the number of bidders has reduced the dispersion of risks accepted in insurance by profile companies, which has affected RCA rates,” said UNSICAR President Dorel Duce.

RCA’s new base rates: which drivers could pay more and which less over the next 6 months

​The FSA has published the new RCA base rates, consumers’ guide to final car insurance prices over the next 6 months, and the good news is that there will be no more significant increases compared to previous years.

Compared to spring, the largest increase is seen among people under 30 who drive low-powered cars, while a slight decrease is seen among 31-50-year-olds who drive high-powered or electric cars.