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Legislative flaws

Auto insurance is the last insurance product remaining where the state-run insurance company, Slovenská Poisťovňa (SP), still holds a monopoly. Despite the fact that auto insurance is mandatory for all car owners, and that prices have increased 100% in 1998 compared to 1997, SP hasn't been able to fully compensate all its legitimate claims. Economic experts say that insufficient legislation to ensure that compensation is provided is behind the mess. The Economy and Finance Ministries, they say, have no legal authority to monitor the activities of any insurance company.
"Any chance to change the situation depends on a new government after September's parliamentary elections," said Rudolf Hečko, Insurance Supervision Department Head at the Slovak Finance Ministry.

Auto insurance is the last insurance product remaining where the state-run insurance company, Slovenská Poisťovňa (SP), still holds a monopoly. Despite the fact that auto insurance is mandatory for all car owners, and that prices have increased 100% in 1998 compared to 1997, SP hasn't been able to fully compensate all its legitimate claims. Economic experts say that insufficient legislation to ensure that compensation is provided is behind the mess. The Economy and Finance Ministries, they say, have no legal authority to monitor the activities of any insurance company.

"Any chance to change the situation depends on a new government after September's parliamentary elections," said Rudolf Hečko, Insurance Supervision Department Head at the Slovak Finance Ministry.

Though the insurance law was amended in 1991, liberalizing the previously monopolistic market, no changes to the conditions of insurance mandated by law were approved. "It is up to the state to decide, whether it wants to compensate [statutory] insurance or not," said Vladimír Rančík, Secretary General of the Slovak Association of Insurance Companies.

Viliam Vaškovič, the opposition SDK economic expert, complained about SP's continued monopoly. He said for the daily Národná Obroda that the current legislation does not respect the rules anchored in European Union (EU) directives. "The scrapping of the monopoly of a single insurance company and stricter disclosure rules should benefit competition among insurers," Vaškovič explained.

According to Hečko, some minor amendments to the insurance law are expected later this year, but a major change in legislation will take longer and will probably be completed no sooner than the year 2000, in line with EU requirements.

Squabble over travel agency obligations

Last summer, some 50 small travel agents in the Czech Repblic, such as Travela or Oasis Tours, went bankrupt due to lax regulation and widespread incompetence. Thousands of their clients were left abroad for some time, unsure how their trips would end. Over 15,000 would-be travellers watched as their money was swallowed by these travel agents before a single tourist was sent on holiday.

To avoid such a catastrophe for Slovak holiday-goers, the Slovak Association of Travel Agencies (SACK) met with Slovak insurance companies on April 22 to work out the creation of a new insurance product that would protect travellers and travel agencies. The product should prevent travel agencies from going bankrupt and leaving their customers stranded in a foreign country because of unpaid dues.

Both a new Civil Code amendment, as well as a new Tourism Law, propose that travel agencies pay mandatory fees to a new travel fund to protect customers, which would be used to pay travel agencies' debts in case of bankruptcy.

With two separate types of legislation being prepared, agencies will be paying twice for the same insurance if both laws pass. This double blow was sharply opposed by the Slovak Travel Agency Association. "A decision on the best insurance system has yet to be reached, as there are many voices against 'doubled' insurance," said Jana Kozubová, SACK's General Secretary. The two proposed funds, she added, would double the costs of administration.

"If [the insurance] is kept mandatory, the agencies's abilities to bear the expenses will have to be respected," Kozubová added. But insurance company officials claim that they would prefer that travel agencies covered the costs in these cases themselves. A Union Insurance Company official estimated the costs at 150 to 200 million Sk ($4.3 to 5.7 million) if 5 to 6 travel agencies went bankrupt.

Marián Bujna, Director of the Tourism Division at the Slovak Economy Ministry, said that finding a solution is quite complicated. "Insuring against bankruptcy has become necessary, but we have to find a way that would meet the needs and requirements of both travel agencies and insurance companies," said Bujna.

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