This autumn, Serbian insurers will ask the Central Bank, the market supervising authorithy, for an increase in policy prices of the compulsory MTPL. The exact amount the insurers will request as a new minimum price is still unknown, but the National Association of Insurers confirmed that their expert services, together with representatives of the Serbian motor insurers, already started conducting analyses. The official request will be submitted to the National Bank of Serbia as soon as the Association's Management Board will agree on the exact amount needed for the minimum tariffs.

The National Bank of Serbia prescribes only a minimum price of automobile liability insurance, which now ranges from EUR 40/year to EUR 130/year per an automobile, depending on the engine power. This practically means that insurers can increase prices independently, but everyone agrees that, under the current economic conditions, a sided attempt to price increase would be equal to "suicidal market policy". The minimum price has not been changed for 4 years already and, according to the Association of Insurer's data, the price is the lowest in the region. For example, the policy for a new car (without any bonuses) of 55 to 66 kW amounts to EUR 80 in Serbia, EUR 110 in Macedonia, EUR 150 in Montenegro and around EUR 500 in Croatia.

Since the last price increase of 10 percent in August 2008, a series of changes occurred, leading to a situation in which insurers insist on price increase.

First of all, the euro exchange rate has been significantly changed, and euro is now worth RSD 118 instead of RSD 76 as it was four years ago. Imported automobile parts follow the exchange rate growth, so they also reported price increase. In addition, non-pecuniary damages to persons injured in traffic, although paid in RSD, are pegged to the euro exchange rate. Consequently, insurers argue that the amount to be paid for claims also increases from year to year, and that the claims paid last year were around EUR 6 million higher than a year before.

Meanwhile, new responsibilities were imposed on insurers. Since 2009 they have to set aside 1.2 percent of the total premium for video surveillance as a portion for prevention, paid into the bank account of the Ministry of Internal Affairs. As of this year, an obligation has been introduced to allocate 5 percent of gross premium for the Republic Fund for Health Insurance: this entry will soon be brought before the Constitutional Court because insurers believe that the amount is too high relative to the real needs, which are about 2 percent of the damages caused.

Finally, the regulation concerning new amounts in the compulsory automobile liability insurance, will come into force in October this year - EUR 1 million for damage to persons and EUR 200,000 for damage to property. According to insurers, the amount is ten times higher than earlier before, and it will additionally burden the premium allocated for covering the damage.

Apart from all the above, additional costs arise from the bonus-malus system which was introduced a year ago: 1.3 percent of drivers achieved the malus, and as many as 73.6 percent the bonus (the remainder refers to the vehicles registered for the first time, so this calculation was not conducted), and the total amount of maluses can not cover the amount that insurers reduce when calculating the bonus.

On the other hand, the increase in policy prices of automobile liability insurance could cause a partial "spillover" of money from insurers to roadworthiness test services. Roadworthiness test services sell the automobile liability policies together with the vehicle registration, but, recently, their cooperation with insurance companies has dropped significantly. According to the Insurance Law, the fee for such sale shall not be greater than five percent, but it has recently reached as much as 40 percent. As, in last year, the National Bank revoked the licenses to several general managers of insurance companies, this amount is placed back within the legal framework, but the roadworthiness test services remained unsatisfied: thus, they are less willing to cooperate with insurance companies and the latter are trying to find the way to renew the cooperation.

The dilemma will be solved upon launching the electronic vehicle registration and electronic purchase of policies, since part of the sales will be transferred from the roadworthiness test services: insurance policies will be available for purchase over the internet, which should prevent the premium spillover to fees.

The procedure for calculating new prices and submitting the requests should be completed during autumn and, by the end of the year in will be known whether the owners of automobiles will pay higher prices for the compulsory automobile liability insurance policy.


XPRIMM correspondent for Serbia, Montenegro, Bosnia & Herzegovina, Macedonia