Three insurance companies have tried to torpedo the market of civil liability policies. Dumping prices appeared in the menu of brokers during the most important season for such insurances. Statistics show that in the last months of the year, every fifth vehicle concludes compulsory insurance liability.
Uniqa followed by Generali and DZI decided to cut prices, throwing a stone in a stagnant market. The forecasts from only days before were for a rise in the prices by up to 10%. Early this month, representatives of the Financial Supervision Commission said that prices cannot go down. The picture shows a market behaving somewhat different.
From 3.2 million cars in the country, over 600,000 will conclude compulsory insurance contracts by the New Year. The insurers are now fighting for each and every client. This is how brokers explain the step taken by some of them to reduce prices, but warn that the price of the policy, as it is today, may prove to be insufficient to cover possible damages.
According to brokers, if one fails to make an objective analysis whether a lower amount of the insurance can lead to a problem with the covering of future losses, other insurers will also try to bring down prices in order to be competitive.
Although all insurers are aware that in every campaign, prices should go up, their market passions push some of them to reduce prices to increase market share, said Nikolay Zdravkov, Chairman of the Management Board of the Bulgarian Association of Insurance Brokers. He declined to confirm the names of the companies but said his observation was that the price decline is a non-market approach. I could understand if an entity has hundreds of millions of levs in reserve, and it is then fighting for a market share, but acting without such lining merely increases the risk, Mr. Zdravkov pointed out.
Even to talk about reducing prices is a provocation, said Tsvetanka Krumova, CEO and Member of the Board of Armeec insurance company. According to her, Sofia has the same insurance coverage as the developed European countries do, the same limits of liability, but a higher number of accidents and deplorable roads, which all make the present extent of insurances realistic. In Greece the price of a comparable policy is about EUR700, in Germany about EUR1,000, and for Bulgaria, it is about EUR100 and it is now falling instead of catching up with the other EU prices.
Mrs. Krumova added though that compulsory nature of the policy confronts with the social element endash low income levels in Bulgaria, which creates some level of tolerance on market. So there is no way for the price of a policy to rise dramatically. But in recent years it has been growing by about 10% per year. Krumova is sure in her logic: You cannot drive a car on increasingly expensive gasoline, and in the same time neglect another statutory costs such as the insurance liability.
