Mr. Klime Poposki
PROS AND CONS FOR THE MTPL TARIFFS LIBERALIZATION IN
THE CHALLENGING ENVIRONMENT OF A SOFT PRICING AND
HIGHLY COMPETITIVE MARKET
T H E I N T E R N AT I O N A L I N S U R A N C E F O R U M , I I F 2 0 1 4
A P R I L 6 - 7 2 0 1 4 , I S TA N B U L , T U R K E Y
Republic of Macedonia
MTPL market in Non EU SEE countries
Gross Written Premium
200,000,000
180,000,000
160,000,000
In EUR
140,000,000
120,000,000
2013
100,000,000
2012
80,000,000
2011
60,000,000
40,000,000
20,000,000
0
Macedonia
Montenegro
Serbia
Share of MTPL premium in
total GWP
Macedonia
46.97%
Montenegro
45.52%
Serbia
31.45%
Bosnia and
Herzegovina
48.39%
Albania
45.29%
BiH
Albania
Macedonia
• Serbia
• Montenegro
Bosnia and Herzegovina
• Kosovo
• Albania
•
•
•
MTPL regulation is at different levels in
compliance with the EU MID
•
Continually increasing of the minimum insurance
sum limits
MTPL market in Macedonia
Average premium
Average Claim paid
120%
2009
95
1.826
2010
114
1.598
2011
90
1.081
2012
90
1.077
2013
88
1.160
Macedonia MTPL ratios
100%
98.60%
103.90%
96.70%
104.20%
97.20%
80%
60%
58.50%
54.70%
42.00%
40%
54.80%
52.50%
51.70%
49.10%
50.20%
40.10%
20%
0%
2009
2010
Claims ratio
• Population of 2.06 million
• 155 motor vehicles per 1000
people
• HHI 981.85
• Intermediation in sales 55,37%
2011
Expense ratio
2012
2013
Combined ratio
• Regulated tariff for MTPL
• Bonus-Malus implemented in
2006
• Single premium for green card
MTPL market in Montenegro
2011
114
2.059
Average premium
Average Claim paid
2012
123
1.978
2013
122
1.496
Montenegro MTPL ratios
120%
100%
100.00%
85.00%
80%
60%
47.00%
53.00%
40%
85.00%
51.00%
50.00%
34.00%
20%
35.00%
0%
2011
2012
Claims ratio
•
•
•
•
Population of 0.62 million
309 motor vehicles per 1000
people
HHI 2634.86
Intermediation in sales 54.93%
2013
Expense ratio
•
•
Combined ratio
Regulated tariff for MTPL
No Bonus-Malus implemented
MTPL market in BiH
2009
131
1.356
Average premium
Average Claim paid
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
90.00%
83.00%
2012
134
1.217
2013
133
1.207
81.00%
76.00%
48.00%
45.00%
45.00%
49.00%
32.00%
35.00%
2010
Claims ratio
•
•
2011
133
1.217
BiH (R.Srpska) MTPL ratios
2009
•
•
2010
133
1.307
Population of 3.88 million
132 motor vehicles per 1000
people
HHI 643.90
Intermediation in sales N/A
2011
Expense ratio
•
•
46.00%
2012
Combined ratio
Regulated tariff for MTPL
Inappropriately implemented
Bonus-Malus
MTPL market in Albania
Average premium
Average Claim paid
2009
80
1.140
160%
2010
75
1.381
2011
60
1.348
2012
70
1.916
2013
55
2.300
Albania MTPL ratios
140%
138.20%
120.76%
120%
100%
98.46%
95.87%
93.70%
80%
60.57%
60%
72.09%
78.80%
59.40%
65.76%
40%
32.70%
20%
48.67%
54.22%
35.30%
0%
2009
2010
2011
Claims ratio
•
•
•
•
Population of 3.2 million
120 motor vehicles per 1000
people
HHI 1348.13
Intermediation in sales 50.9%
Expense ratio
•
•
2012
2013
Combined ratio
Liberalized tariff for MTPL
Single premium for green card
MTPL market in Serbia
2009
95
1.724
Average premium
Average Claim paid
120%
2010
87
1.473
2011
89
1.522
Serbia MTPL ratios
100%
111.09%
97.95%
80%
60%
67.19%
59.45%
43.90%
40%
38.50%
20%
0%
2011
Claims ratio
•
•
•
•
Population of 7.43 million
252 motor vehicles per 1000
people
HHI 1705.37
Intermediation in sales N/A
2012
Expense ratio
•
•
Combined ratio
Regulated tariff for MTPL
Bonus-Malus implemented
2012
79
1.574
Major challenges of the MTPL
insurance market
Reserving
Pricing
• Inadequate claims payment and reserving practices among a sizeable part of insurance companies
• Undermine these companies’ claims paying capacity and solvency
• May, upon their potentially insolvency, transfer the costs to better market players
• MTPL tariff setting system that does not provide for actuarial risk pricing
• Conducive for concealing unsustainably high insurers’ expenses
• Premium discounts and high intermediary commissions through non-transparent accounting practices
• Lack of proper regulatory requirements to reinsurance of unlimited green card liabilities
• May inflict large financial losses on the insurance market
Reinsurance • Can adversely affect the standing of the NIBM as a member of the Council of Bureaus
Other
• Insufficient & inaccurate industry data
• High level of uninsured vehicles
• Lack of standardized approach by courts to bodily injury claims awards
• Limited control by insurance companies over their production costs due to unfair price competition
MTPL premium tariff system
 Nine main tariff groups:









(i) Passenger vehicles,
(ii) Goods vehicles;
(iii) Buses,
(iv) Towing vehicles,
(v) Special vehicles,
(vi) Motorcycles,
(vii) Trailers,
(viii) vehicles with foreign registration, and
(ix) Operating vehicles.
 Four age groups for vehicle owners;
 Type of vehicle use (e.g. taxi, rent-a-car, transportation of hazardous goods, etc.);
 Claims history: a bonus-malus system comprising eighteen classes;
 Period of coverage: normally one year. Less than one year periods can apply to specific conditions;
 Limits: Minimum country limits as set by the Law;
 Vehicle fleets.
IS THE MARKET READY TO LIBERALIZE NOW?
Given the current stage of MTPL market development:
Pros
Cons
Immediate and unprepared liberalization is likely to
lead to market instability, reduced claims paying
capacity and profitability and may have a negative
social and economic impact.
Istanbul, March 2013
Motor Insurance Conference
10
Goal of the liberalization of MTPL tariff
 MTPL tariffs liberalization
Allowing insurers to price MTPL insurance coverage based on the
underlying risk characteristics of local drivers and their vehicles rather
than setting premium rates by administrative fiat
Bringing the Macedonian insurance market
in compliance with the EU Directive
Roadmap for MTPL tariff liberalization
Proper claims
payment and
reserving standards
Risk based actuarial
pricing
Proper risk control
and transfer
Proper information and DATA processing
Claims paying
capacity
Enhanced
solvency
Profitability
Confidence
Main phases of MTPL market
liberalization
Current situation
Transitional period
Liberalized!
Liberalized Premium Rates
Regulated Tariffs
ISA Rulebook
(insufficient actuarial input)
Inadequate claims reserving from
some insurers and Guarantee
Fund. Insufficient supervision of
reserves under lack of market
benchmarks
Potential high risk under lack of
Green card reinsurance criteria
Regulated tariffs based on
actuarial risk prices developed by
the project
Insurers price MTPL risk
individually
Actuarial pricing guidelines
available for insurers
Proper actuarial standards on
claims reserving based on
actuarial methodologies for
insurers and Guarantee Fund
Maintain Minimum requirements
(benchmarks) on claims reserving
based on actuarial methodologies
for insurers and Guarantee Fund
Minimum criteria for Green Card
reinsurance
Maintain minimum criteria for
Green card reinsurance/ Impose
minimum criteria for MTPL
reinsurance if country limits
increase further
Statutory requirements for Green Card
Reinsurance
Amount of
Reinsurance
Coverage
Set up maximum
threshold for net
insurer’s exposure
Accepted Quality
of Reinsurance
Cover
Ensures proper and
timely payment of
loses from
reinsurers
Maximum net
retained
exposure from
Insurer
Maintains insurer’s
and market
financial stability
Klime Poposki
The President of the Council of Experts
Insurance Supervision Agency of the Republic of Macedonia
Email: [email protected]
www.aso.mk
THANK YOU!