Damages suffered by honest drivers for damage caused by cars without RCA or abuse in court by some collectors are among the lesser-known phenomena that increase the payment obligations of insurers and lead to higher RCA prices, says the Financial Supervisory Authority (ASF) ) .

ASF’s clarification can be found in the answer recently given to the AUR MP who wanted to know what structural problems exist in the insurance market in Romania, especially in the RCA segment.

• CLICK HERE FOR AN EXPLANATION OF ASF

National fleet reaches almost 10 million vehicles / Less than 7 million active RCA contracts

• “A comparison between international markets and the market of Romania shows that the insurance sector in our country is relatively underdeveloped, the basis of this situation is mainly the structural conditions related to the preference for auto insurance and the behavior of the Romanian consumer, who shows a low level of interest in other types of insurance products , than those in the auto insurance category, especially RCA.
• In the last 30 years, the motor civil liability insurance (RCA) has been the engine of the growth of car insurance, the RCA subscription advantage is the result of the fact that the RCA insurance is compulsory insurance for all vehicle owners in Romania, and the size of the national car fleet has continuously increased to about 10 million vehicles, adding to them an increase in insurance premiums as a result of an increase in payment obligations of RCA insurers.” this is shown in the ASF responses.

The ASF warns that not all of these cars are insured by the RCA and the damage caused in such cases is ultimately borne by the correct drivers, a whole phenomenon that is also reflected in the increase in RCA prices.

Who to contact if you are hit by a car without an RCA

In particular, if you are involved in an accident caused by an uninsured RCA vehicle, or in the case of an accident resulting in bodily injury and/or death caused by an unidentified vehicle, you should contact the Bureau of Motor Vehicle Insurers of Romania (BAAR).

BAAR will bear the damages and recover the amounts paid as compensation from the person at fault for the accident.

The funds at BAAR’s disposal are formed from the contributions paid by the insurers authorized to sell RCA, that is, indirectly also from the money Romanians pay for these insurances.

ASF sources told HotNews.ro that “as of February 28, 2023, approximately 7 million RCA insurances were in force, of which 85% were valid for 1 year and the rest mostly for 6 months.”

5 phenomena that increase insurers’ payment obligations and RCA prices

In the continuation of the answers to the questions of the Parliament, the ASF clarifies that the tendency to increase the liabilities of insurers and implicitly RCA prices are influenced by 5 phenomena:

• 1. increase in the frequency of damage, Romania is one of the leading countries in Europe in terms of the frequency of road accidents;
• 2. the degree of inclusion in the RCA insurance of the national car fleet is maintained at a relatively low level, the conditions under which damages caused by vehicles not insured by the RCA are borne by the correct drivers who have concluded such RCA insurance policies;
• 3. an increase in the severity of losses due to an increase in vehicle repair costs, costs that can be compared with the costs required for their repair in Western European countries, although RCA insurance premiums are not at the same level as in these countries;
• 4. increase in moral damages awarded by the courts;
• 5. the presence of abuses, for which professionals in the collection of insurance indemnities apply to the court on the basis of debt assignment agreements in order to receive the compensation due to them instead of the victims;

“This practice changes the social nature of the law in a setting where the injured person is no longer the ultimate beneficiary of compensation, and changes the purpose of RCA insurance by turning the recovery of compensation due to injured persons into an activity carried out by those professionals whose purpose is to make a profit.” supports ASF.

What problems insurers have with compensation for non-pecuniary damage on RCA are solved by the courts

The Financial Supervisory Authority (ASF) also notes that Romanian courts have had and still have a non-universal approach to compensating victims of car accidents or suffering caused by the death of a relative in a car accident.

From this point of view, “it is difficult for insurance companies to predictably estimate the compensation due to them.”

• “Under these circumstances, it is understandable that there has been a sharp rise in claims made by RCA insurers in recent years, which has put pressure on RCA premiums. In addition, the unpredictability of the amount of compensation awarded by the courts for personal injury and death has a strong impact on the underwriting process,” states the ASF.

Problems with car repair and car rental

Another significant issue in the RCA market that the ASF is looking at is the cost of car repairs and rental services, which is leading to tensions between insurance companies and certain garages.

“At the same time, given that current RCA legislation allows businesses to bill for the cost of repairing or leasing vehicles at an unlimited level, above the free market price, these costs are borne by RCA insurers, this is also understandable. that there is tension between the two industries (insurance and car service/rental companies) which affects the interests of consumers,” says ASF.

• On this topic, read also: How car repair ends up costing 7 times more than its market value: 72 inflated bills declared by insurers in parliament

Ultimately, the ASF concludes that “under the given conditions, in the absence of legislative changes that will change these trends, the RCA insurance market in Romania will remain unattractive to other insurance companies practicing this form of insurance. in other markets, conditions in which the RCA insurance sector in Romania will continue to show a marked tendency towards concentration”.

Amending the RCA law is a condition required by Ciucă to cap RCA prices

All these major issues in the RCA market should be addressed in the near future by amending the RCA legislation.

It will be recalled that in order to stabilize the RCA market after the beginning of the bankruptcy of Euroins, on April 5, the Government approved the limitation of RCA prices for 6 months at the level of the end of February 2023.

However, Prime Minister Nicolae Chuke set a condition: during this period, the ASF and the Competition Council must prepare the necessary amendments to the RCA law to avoid other crises and bankruptcies in the future.

ASF Vice-President Christian Rosu said at a government meeting that a new form of RCA law will likely be presented at the end of April, beginning of May.

• Read more: RCA prices to be capped for 6 months at end-February 2023 level / What condition does PM Chuke demand

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