INSURANCE officials say a 50 per cent higher damage rate has contributed to a rise in premiums. photo: TASR |
Citing an increase in local claims and the demands of European reinsurers, Slovak providers have raised minimum required auto liability rates by an average of 50 per cent for 2003 (see chart).
However, the fact that all but one of Slovakia's eight insurance houses offering liability coverage have published identical premiums has prompted the country's Antimonopoly Office (PMÚ) to investigate possible charges of collusion on prices.
According to the SKP, the price rises stem largely from the demands of insurance wholesalers, whose premiums to local dealers have increased as a result of damage throughout Europe from last summer's catastrophic weather.
"An important factor is that the reinsurer, on the basis of this year's unfavourable happenings - flooding, storms - could raise the price of reinsurance by up to 40 per cent," said SKP head Imrich Fekete at a late-October press conference.
"The whole [Slovak] insurance market is covered by one reinsurer, who is asking us to raise our premiums 20 per cent over the [legally-stipulated] minimum payment," he added.
In addition, say SKP officials, damage claims in Slovakia have increased by just over 50 per cent on average in the first half of 2002, creating the need for insurers to raise rates in order to cover payouts.
"Minimum insurance is regulated by law and [premiums] increase either with the average rate of inflation or with a growth in claims," said SKP spokesperson Lýdia Blažeková.
"It is probable that rates will rise again in 2004," she added.
For now, officials from Slovakia's market-regulating Financial Markets Office (ÚFT) say that the liability premiums on offer, at 20 per cent above the prescribed minimum, are within legal parameters.
"In the law, there is a defined progression in setting minimum insurance premiums," said ÚFT spokesperson Marek Kačmár.
"Insurers can set rates up to 30 per cent higher [than the minimum], and it's up to them to determine the level they can capitalise on," he said.
Kačmár says the ÚFT has no influence over the exact price of insurance premiums, and it is up to the PMÚ to investigate if competition rules have been broken.
"We have started to investigate all prices for mandatory contract insurance. Right now it is too early to say if there has been a violation of the law or [if prices result from] economic competition," said PMÚ spokesperson Wanda Závadská.
"The office has not filed any motion, but if we find out that there are cartel arrangements, we will initiate legal proceedings," she added.
Meanwhile, providers of insurance continue to stress that liability rates in Slovakia must go up as market forces increasingly come into play.
Specifically, insurers say the market has been distorted by artificially low liability premiums charged under the former state monopoly insurer Slovenská poisťovňa (SP) prior to market liberalisation in January 2002.
Before its buyout by Germany's Allianz earlier this year (see story, this page), SP had not priced liability insurance realistically and had not created financial reserves for accident claims, they say.
As a result, SP ran up a deficit of Sk2.8 billion ($65 million) in liability insurance over the past decade, which has been covered by other SP divisions and Slovakia's state budget.
However, as part of market liberalisation, all eight firms offering liability coverage will have to contribute to paying down SP's debt, based on each insurer's market share.
"On every Sk1,000 ($24) in revenue we gain from our clients through liability insurance, we have expenses of about Sk1,500 ($35)," said Marián Hrotka of the Generali insurance company.
"We also expect to pay between Sk15 million ($357,000) and Sk16 million ($381,000) to cover our portion of the SP deficit, so an increase in liability car insurance next year is justified," he continued.
