The Romanian Competition Council (the “RCC”) recently concluded that competition in the car insurance market is ineffective due to high entry barriers, increasingly concentrated level of the market, (particularly in the civil liability car insurance sector) and other indications of possible anti-competitive practices. The RCC found that there is a constant reduction of insurance companies both in the third party liability mandatory insurance and the third party liability voluntary insurance sector.
Practices which raised particular concerns for the RCC include:
- insurers take advantage of the limited information available to consumers and approve only partial payments of damages;
- insurers interpret the conditions in which an accident occurs in a manner to avoid or limit the extent of their indemnification obligations;
- insurers inaccurately assess losses, fail to provide mandatory reserves and appropriate reinsurance coverage;
- insurers and repair practices are contrary to consumers’ interests, for example the use of spare parts of inferior quality or delayed payments for car repair services;
- consumers have limited knowledge on the criteria used by insurers to set the level of insurance instalments;
- insurance premiums have increased, on average, by 16% for natural persons and 29% for legal persons from 2011 to 2014.
The RCC issued the following specific recommendations to address these concerns, focusing particularly on insurers authorised to issue third party liability motor vehicle insurance:
- Insurers should more accurately evaluate insurers risk of damage (e.g. by way of new tariff criteria such as the power of the engine and the duration of the driver’s licence or by refining existing criteria such as the age of the ensured persons);
- the Financial Supervisory Authority (the “FSA”) together with the Romanian Actuary Society, should provide reference models to insurers on insurance tariff criteria;
- third party liability car insurance coverage should include coverage for supplementary risks and auxiliary services from insurance companies;
- the FSA should continue its efforts to amend the current procedure for issuing mandatory third party liability motor vehicle insurance policy, similar to the model applied by the National Highways and Roads Company C.N.A.D.N.R. for vignettes in Romania;
- the FSA should further ensure that consumers are provided with an adequate level of information on the criteria insurers use to set level of insurance instalments.
Insurance companies should implement the above recommendations either voluntarily or by way of specific regulations in the insurance sector in order to avoid potential sanctions for anti-competitive practices.