UNSAR: insurers support the introduction of an efficient direct settlement system; digitalization reduced the management costs

18 February 2021 — team
Motor insurance lines are still struggleling high combined ratios, despite the lower acquisition and administration costs achieved through digitalization; on the other hand, the industry will join the effort of setting up an efficient direct settlement system, top representatives of UNSAR explained recently.

Adrian Marin, President of UNSAR (The National Association of Insurance and Reinsurance Companies in Romania) stated during a conference that insurance companies have streamlined their activities and digitized, which has led to a reduction in administrative costs in the motor insurance area - MTPL and CASCO, but the combined ratio has continued to be super-unitary.

He said that the profitability of the industry is given by the combined ratio, which, unfortunately, continues to remain superunitary, of 104.97% on the general insurance segment at the end of the first 9 months of 2020. MTPL and CASCO are main drivers and Adrian MARIN stressed that these lines seriously exceed the threshold of 100% of the combined ratio, being 113.3%.

"The industry seeks and implements internal solutions to streamline its business. We note the impact of digitalization and efficiency measures taken by companies, which is reflected in the decrease in the rate of expenses (acquisition) and administration on both MTPL, CASCO and property insurance segment. It means that there have been efficiencies, digitizations and this reduction in administrative costs has been achieved. At the same time, at least on the MTPL side, the loss rate has continued to rise, despite the pandemic and the state of emergency," said the UNSAR President.

"Digitalisation and innovation are not just a trend, but a reality that supports consumers and is certainly a priority for any industry. Here is what has happened internationally at the trend level in 2020: there has been a sudden shift in importance on the online distribution channels - we are talking about distance selling and customer service, online channels have successfully facilitated consumer information and insurance distribution, online sales have increased or remained stable in member countries that have provided information to EIOPA, "said Adrian MARIN.

"Our industry, as well as the entire financial services industry, is focused on people, and digitalization is just a way to reach them," added Adrian MARIN.

"The insurance industry is ready to contribute to the implementation of an efficient direct settlement system in Romania", said Alexandru CIUNCAN, General Manager of UNSAR, stating that the Association appreciates the efforts made at an accelerated pace by The Financial Supervisory Authority (FSA) and other authorities regarding the improvement of the functioning of the MTPL segment in Romania.

"Specifically, direct settlement is an additional coverage offered based on the MTPL policy through which drivers could apply to their own insurer to which they concluded the policy to recover damages caused in a car accident for which they are not guilty. There is a procedure now, but it is optional for clients", Alexandru CIUNCAN explained.

He reminded that the introduction of mandatory direct settlement, an initiative that is the subject of a public consultation at the level of the Ministry of Finance, is one of the most debated topics at present.

"It must have the legal and operational levers to ensure a better functioning of the MTPL insurance market, for the benefit of both insured and injured parties, and to implement efficient and rapid recovery mechanisms. the indemnities paid between the MTPL insurers ", he added.

Alexandru CIUNCAN pointed out that, at the same time, it is still necessary and important to amend the MTPL legislation, so that the provisions that are contrary to European directives and for which the European Commission has initiated an infringement procedure against Romania are eliminated.

According to him, the insurance industry paid under the MTPL policies compensations of almost EUR 1.8 million every day in the first three quarters of 2020, while it managed a total of 9.1 million MTPL contracts, according to FSA, respectively 4.7 million policies expressed in annual units.

In the first nine months of 2020, the MTPL insurers, authorized and supervised by FSA, concluded a number of 162,469 direct settlement clauses, the gross written premiums related to them being RON 16.13 million.

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