MTPL importance in developing countries Albanian Case

Transcription

1 MTPL importance in developing countries Albanian Case Protecting consumers Promoting markets Global Insurance Conference 2011 Washington, DC Enforcing law Elisabeta Gjoni 1-2 June, Washington, DC

2 Contents MTPL importance in developing countries MTPL architecture in Albania Current achievements and challenges The path toward free-market pricing Some statistical highlights 1-2 June, Washington, DC 2

3 MTPL importance in developing countries - may be the first class of insurance with which the general public has an acquaintance - in most countries MTPL is compulsory in order to protect the public - introduced only in the past decade, and it is poorly understood - it is often as a form of tax at liberty to evade - World Bank studies have shown that motor accidents causing deaths and injuries occur in developing countries at up to eight times the rate in industrial countries - given the weight of MTPL business in most developing countries (on average above 50 percent, but as high as 70 percent in the Balkans), ensuring the adequacy of premium rates means guaranteeing the solvency of the insurance industry in the long run 1-2 June, Washington, DC 3

4 MTPL architecture in Albania the market structure (slide 10, slide 11, slide 12) situation (temporary deals, extreme tariff cuts, earnings deterioration, manipulation of accounting) legal framework institutional architecture standardization prerequisites for the potential liberalization the data center on line sale and reporting set up of the claims register unified bonus-malus system 1-2 June, Washington, DC 4

5 Current achievements and challenges Recent achievements - Law on compulsory insurance - Compulsory Insurance Information Centre - Setting of a clear liberalization strategy in line with the EU Directives Current challenges Fixed tariffs/inefficient pricing - Cut of tariffs - Unfair competition - The uninsured driving problem - Build of a nation-wide MTPL database - Implementation of the bonus-malus system - Providing the proper environment to move toward free-pricing but based on a threshold risk premium in setting technical provisions 1-2 June, Washington, DC 5

6 law on Compulsory Insurance in the transport sector improves mandatory insurance legal basis increases the range of mandatory insurance products approximates legislation with EU Directives enhances further policyholders rights to claims establishes the legal basis on the Mandatory Insurance Information Center reformats the institutional architecture pertinent to MTPL market oversight and pricing establishes the prerequisites for the potential liberalization of MTPL 1-2 June, Washington, DC 6

7 The Motor Bureau member of the Council of Bureaux since 1992 formerly supervised by the Ministry of Finance as the shareholder of the state company INSIG serving also as the Motor Bureau supervised by AFSA since February 2010 with the entry into force of the new law of Compulsory Insurance in the Transport field controls the levels of uninsured vehicles acting also as a Compensation Body currently in accordance with AFSA by-law claims handling related to uninsured vehicles is carried on by Bureau Members 1-2 June, Washington, DC 7

8 The path toward free-market pricing why liberalize? i. insurance development trends - various European countries have opted for liberalization; - the process of liberalization in EU in (Italy was the last western country). ii. EU Directives - directive on Freedom to Provide Services and Freedom of Establishment (of 1988, as amended in 1990 and 1992) confirms the principle of freedom to set tariffs; iii. several advantages - enhanced services to consumers; - no reduced premiums; - no unfair competition; - no accounting fraud. 1-2 June, Washington, DC 8

9 The path toward free-market pricing END WB Assistance; FIRST-Funded project underway for MTPL marketdetermined tariff regime Objectives Main issues to be addressed Main Activities Main Outputs Assist AFSA in the development of policies and processes toward fully liberalized risk-based pricing of MTPL Assist the AFSA in bringing the relevant domestic legal framework in accordance with the EU directives Strategy of management of the uninsured problem The Compulsory Insurance Information Centre needs to have its capabilities a) verified and b) made available for use by insurers Raising insurers awareness of the motor insurance pricing techniques Assessment of the current state of MTPL Development of a road map toward a fully liberalized risk-based pricing for MTPL insurance Advice on necessary legal and regulatory changes Development of an actuarial model for calculation of premiums, reserves and tariffs MTPL assessment report Road map for MTPL liberalization The methodology for calculation of premiums, reserves and tariffs Guideliness on adoption of claims database to the liberalized market 1-2 June, Washington, DC 9

10 Insurance Market Structure Property and other 32% Life and Health 16% Highest concentration in MTPL is about 82% and the lowest is about 45%. MTPL 52% Source: Statistical Filings to AFSA % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 18% 42% 55% 82% 58% 45% * max market min Other MTPL * Non-Life only 1-2 June, Washington, DC 10

11 Motor compulsory vs. Voluntary Insurance in years % 29% 48% 52% 79% 71% 2011* Compulsory Insurance 43% Voluntary Insurance 57% * January- April June, Washington, DC 11

12 MTPL structure in the region 100% 90% 80% 70% 60% 48% 51% 69% 29% 53% 54% 71% 66% 50% 40% 30% 20% 10% 52% 49% 31% 71% 47% 46% 29% 34% Other than MTPL MTPL 0% Source: Research-Preliminary data (2010) * Source : Annual Reports (2009) 1-2 June, Washington, DC 12

13 THANK YOU 1-2 June, Washington, DC 13