On Thursday, the government will approve an extension of the RCA price cap for another 3 months until June 30, 2024. “We want to fight this risk of excessive price increases due to the imbalances that previously occurred in this market and extend a helping hand to Romania, as the ASF recently did, seriously reduced the RCA insurance in the case of transporters,” said Prime Minister Marcel Ciolacu on beginning of the government meeting.

The Prime Minister’s announcement on Thursday came despite complaints from both carriers and insurers that the RCA price cap extension was ill-timed and could backfire.

How does the Ministry of Finance justify the expansion of the RCA limit

On Tuesday evening, the Ministry of Finance submitted for consultation a draft regulation that proposes to extend the RCA price limit for another 3 months until June 30, 2024.

RCA prices are currently capped at rates applied by insurers on 28 February 2023, indexed to a maximum rate of 6.8%, a situation which will end at the end of March.

The measure, proposed by Finance, is motivated by the need to “combat excessive price increases that may occur suddenly amid imbalances” in the market.

Among the problems that still remain in the RCA market, the Ministry of Finance mentions that only 7 out of 10 cars are insured by RCA, a large number of high-risk policyholders assigned to insurers, and a high degree of market concentration. .

In addition, the Ministry notes that they are also taking into account the fact that a number of changes to the national legislation on RCA insurance are currently in the legislative process, which propose to correct the existing imbalances.

Carriers and insurers are appealing the Government’s decision

The Confederation of Road Transporters (COTAR) appealed to the government on Wednesday to reject the extension of the RCA tariff cap proposed by the Ministry of Finance unless it is done on the base tariff presented by the ASF. “While prices have been seen to rise regardless of the cap, insurance companies will have the option to double prices at the end of the so-called cap period, on the pretext that there has been no rate increase until then,” the carriers said.

On the other hand, insurers expressed their displeasure at the decision to extend the RCA premium cap period for a third time by another 3 months, to June 30, 2024, even without taking into account the impact of inflation.

• “We remind you that from April 2023, restrictions on RCA tariffs have been established. Initially, the measure was adopted for 6 months, extended for another 3 months, and then, at the end of last year, the Government extended it once again with an adjustment of 6.8%, which did not even cover the inflation of 2023. (10.4% compared to INSSE).
• Most importantly, average RCA claims increased in the third quarter of last year even more than inflation by about 12% because claims were also not capped,” UNSAR member insurers complained.

Photo source: Dreamstime.com