Huge premium threat as monopoly comes to end

Motorists may face 20% higher premiums once a monopoly enjoyed by Slovenská poisťovňa (SP) on third party liability insurance ends next year.
Insurance bosses are warning potential clients that prices for accident coverage will rise by a fifth in some cases despite increased competition on the market.
Slovak insurance firm Kooperatíva has already told car owners to expect steep rises, and other companies have issued the same stark warnings.

Motorists may face 20% higher premiums once a monopoly enjoyed by Slovenská poisťovňa (SP) on third party liability insurance ends next year.

Insurance bosses are warning potential clients that prices for accident coverage will rise by a fifth in some cases despite increased competition on the market.

Slovak insurance firm Kooperatíva has already told car owners to expect steep rises, and other companies have issued the same stark warnings.

"All insurance companies will raise premiums by as much as 20%," said Marian Hrotka of Generali insurance.

SP's monopoly on liability car insurance will end this year under legislation designed to make the Slovak insurance market more open and closer to European Union norms.

Motorists have long been keen to see more competition for accident coverage, hoping to take advantage of the expected benefits of competition.

But finance experts have said while there is going to be more competition and potentially better services, premium rises are an inevitability.

"Of course, the competition will be good for car owners. Insurers will have to offer new packages and special bonuses, just as they do in the Czech Republic, for example. But unfortunately, the price will go up," said Marek Jakoby of the economic thinktank Mesa 10.

"All data from this industry shows this type of insurance is a loss-maker. Companies need to create huge reserves to cover claims. If all the clients in the market that are currently with one company, SP, are suddenly split up among a number of firms, they'll probably raise prices to cover their reserves," he added.

Eight firms have been granted licences to start offering the insurance, which must be bought before the start of next year by every motorist.

The list includes German insurance giant Allianz, which is bidding in SP's privatisation at the end of this year, as well as Italian Generali and Česká poisťovňa - Slovensko. SP will also continue to provide the insurance.

Insurers have already promised some new services, including a special bonus for people who drive next year without filing a claim for accident coverage. SP has developed a range of services, including special deals with other companies on tyres and car security systems, in an effort to keep existing clients and woo new ones.

"We're not afraid of the new competition. We think we can hold on to a 30 to 45% share of the market for this type of insurance.

"Look at the Czech market. It's very similar to ours, and when Česká pojišťovna lost its monopoly on the same insurance two years ago, many customers stayed with them. It will be the same here," said Lucia Bombošová, spokesperson for SP.

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