Quirky car insurance market enters 21st century

SLOVAK insurance companies, with the aid of the country's legislators, have begun to sort out the chaos on the national auto insurance market by reducing the number of people driving without coverage, raising insurance rates and creating bonus systems for good drivers.

SLOVAK insurance companies, with the aid of the country's legislators, have begun to sort out the chaos on the national auto insurance market by reducing the number of people driving without coverage, raising insurance rates and creating bonus systems for good drivers.

In perhaps the most important development, parliament amended the Act on Liability Car Insurance on February 2, preventing clients from repudiating insurance contracts simply by ceasing to pay the premium.

"In Slovakia it has become a national sport that if I don't like an insurance company I stop paying my dues. This doesn't work anywhere else in the EU," Imrich Fekete from the Slovak Insurers' Bureau of (SKP) told The Slovak Spectator.

Fekete is concerned with the issue because it is his office that must pay the damages caused by uninsured drivers and then recover the money through the legal system.

Of the 3,400 accidents caused by uninsured motorists last year, 70 percent involved people who had simply stopped paying their insurance and had not signed a new contract with another company.

Under the amendment, car insurance clients can get out of a contract with an insurance firm only by submitting an early notice of termination, and then changing to another company. According to Fekete, the change should help reduce the number of uninsured vehicles.

The SKP functions as an umbrella group for the eight companies that provide car insurance on the Slovak market. It helps them pay their liabilities and cover the damages caused by uninsured drivers.

Fighting fraud

Insurance houses have recently stepped up their efforts to combat insurance fraud. Industry statistics show that 30 to 50 percent of insurance claims are fake.

"In fighting fraud, insurance companies first of all try to protect the interests of honest clients, whose insurance rates should not be distorted by fraudulent insurance claims," said Lucia Muthová, spokesperson for Allianz-Slovenská poisťovňa.

Apart from hiring specialists to detect and prevent fraud, insurers are cooperating by putting cheaters on black lists that they share, said Siegfried Fatzi, general director of Wüstenrot poisťovňa. They are even taking measures to stop their own employees from bilking them.

"Our experience shows that sometimes employees themselves are drawn into insurance frauds, so we assign several employees to handle each insurance event," Fatzi said.

Normal prices

Compared with prices in other EU countries, Slovakia's liability car insurance rates are well below average. Even though the cost of buying a car is similar, insurance in Slovakia is three to four times cheaper than in neighbouring Austria, Fekete said.

But those times are nearly over. "All insurance houses have raised their prices [in 2006]. With the growth in damage coverage we can expect that insurance rates will increase slightly next year as well," Wüstenrot's Fatzi told the Spectator.

Fekete said car insurance rates in Slovakia had been flat for the last two years, leaving Slovakia far behind rates in developed western countries. But while local purchasing power remains relatively low, the costs of repairing and replacing vehicles has forced insurance firms to raise insurance rates, especially as the Slovak market is now open to the rest of Europe.

"In future we expect insurance companies from EU member states to enter the Slovak market. However, at the moment, companies interested in insuring cars in Slovakia are being dissuaded by the unreasonably low prices," Fekete said.

Bonuses for good drives

Last April, parliament approved another law granting more transparency in bonuses for safe drivers. Initiated by current Economy Minister Jirko Malchárek, the law ordered the SKP to create a register of the collision histories of car owners in the country, and to connect the list of insured vehicles with the police database.

The eight insurance companies on the market are now luring motorists with various discounts and bonuses. Still, the process is slightly different from what westerners are accustomed to, with Slovak companies offering aggressive discounts of 30 percent or more.

Wüstenrot, for example, offers an up to 40 percent discount on compulsory insurance for women drivers.

"We have seen that women drive more carefully," Fatzi said.

Companies now set their rates based on various criteria, such as the age of the owner, the make of the car and the size of its engine.

Allianz-Slovenská poisťovňa has introduced around 20 criteria to tailor their insurance plans for different kinds of motorist and car.

Poisťovňa Generali, on the other hand, also divides clients based on whether their car is registered in a regional capital or outside it. ČSOB takes the different regions into account.

"It's a very lively product that never ceases to develop," said Allianz-Slovenská poisťovňa Muthová. "We expect to see insurance rates differ according to various criteria to an even greater extent in the future."

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