Insurance claims outpace premiums in Q1

Claims settled by domestic insurers continued to rise faster than gross underwritten premiums in the first quarter of this year, according to Insurance Supervision Commission (CSA) data.
While underwritten premiums climbed 16.8% compared with the same period last year, and reached 2.38bn RON (645m euros), claims increased at a much faster rate, by 22.8%, after their value reached 998.4m RON (270.6m euros).
This trend started four years ago and is threatening the financial income of the insurance industry, which has deteriorated considerably over the past two years. In 2007, the market’s net loss amounted to almost 76m euros, around 4 times higher than in 2006.
“This is a dangerous phenomenon,” states Radu Mustatea, general manager of Astra-Uniqa, one of the market’s top-ten insurers.
“The reason might be the fact that in the first quarter the overall market increase was triggered by segments other than auto insurance. (…) Claims, however, continued to rise, with the largest part coming from the auto segment, as a result of more accidents and of the increase in average claim value,” he explains.
The frequency of claims in Romania stands at 65%, which means that two insured people out of three are involved in accidents, while in the EU, the indicator stands at 10%, which means that one insured person out of 10 files a claim. “The faster rate of claims compared with gross underwritten premiums is breaking the already feeble balance of insurers’ profitability. If this trend continues, the balance will be hurt even further, and supplement the already substantial net losses on the insurance market,” says Dumitru Ceraceanu, general manager of Asiban, which ranked fourth last year. Ceraceanu states the rapid increase in claims is also because claim limits were pushed upwards at a fast rate, while rates increased at a slower pace.
According to a CSA decision, claim limits for auto liability policies will triple compared with last year. On the other hand, the Asiban manager considers claims are also rising for car insurance fraud. “Another market area resting on the brink of profitability is banking insurance. Any insurance category can experience losses as claims can be registered at any time,” explains Ceraceanu.
Insurers say there are two ways to put a brake on the rapid increase in claims against underwritten premiums: either to raise premiums or cut down claim costs through the improved control over claims. “The effects of this trend will be that insurers will raise premiums, as well as other measures, such as deductibles,” says Ceraceanu.
“Deductibles create responsibility. In Western countries, they are very high, but in Romania, they have just started to be introduced,” adds Ceraceanu.