SERBIA: increasing MTPL prices started a war between motor insurers and the market watchdog

25 August 2022 — Daniela GHETU
The 22% increase in the MTPL tariffs adopted by Serbian motor insurers in the first week of August started a heated debate between the market players and the National Bank of Serbia (NBS) - the market supervising authority.

On one side, insurers argue that the price increase, the first adopted in the last 8 years, is justified by the inflation driven raise of prices of spare parts, as well as the increase in the prices of transport services and damage assessments, and a significant item that influenced the increase in prices is the higher prices of working hours in service centers. "The overall situation on the car market has an unfavorable effect on the operations of insurance companies in the AO segment. On the one hand, more and more sophisticated and expensive vehicles are produced, primarily electric ones, which are more susceptible to damage and whose repair is more expensive, while on the other hand, we have an evident jump in the price of used vehicles on the market, which are the benchmark for determining vehicle damage compensation," explains Dusko Jovanovic, secretary general of the Association of Insurers of Serbia. He added that throughout the last eight years since the last price adjustment, inflation, measured by the Consumer Price Index, has been recorded at 20.68%. On the other hand, in 2019 there was a change in the bonus/malus system in part of the bonus increase, from 10 to 15 for the second and from 15 to 25% discount for the first premium group. In addition, the market will have to deal with the further increase in the limit for compensation of damages prescribed by the Law on Compulsory Traffic Insurance.

On its side, the National Bank of Serbia (NBS) has sent a letter to all insurance companies that unjustifiably increased the auto liability insurance premium, inviting them to return the premium to the previous level as soon as possible, a press release of the institution reads, mentioning that, within the framework of its supervisory powers, the NBSwill initiate supervisory procedures against those insurance companies that continue to charge unreasonably increased premiums and will take all necessary measures to protect the rights and interests of policyholders, with the application of supervisory measures and other sanctions against the insurance company.

At the same time, it expects insurance companies to refund the additional premiums cashed and inform policyholders without delay about the deadline and the manner in which they will proceed.

Moreover, the NBS adopted a regulation that prevents such circumstances from recurring, by specifically regulating the decision-making process in insurance companies related to the conditions and tariffs of compulsory insurance premiums. This means that in the future, insurance companies will notify the National Bank of Serbia of their intention to change the premium rates 60 days before the planned increase, along with the submission of documents that establish the justification for changing those premium rates, especially taking into account the ratio of mutual benefits in the concluded contracts, the impact on the protection of rights and the interests of the beneficiaries of compulsory insurance, the solvency or financial position of the company and other relevant data, which will enable the prevention of such situations in the future.