Romania’s parliament endorses car insurance law which frees insurers to hike premiums

Romania’s parliament endorses car insurance law which frees insurers to hike premiums
Car insurance premium rises are likely to be seen following the endorsement of a new law on third party insurance
By By Dimitar Koychev May 17, 2017

Romania's parliament endorsed the law on third-party car insurance (Raspundere Civila Auto or RCA) on May 16, two days before the deadline. A transitory six-month period in which car insurance fees were frozen expires on May 18, liberalising the fees charged by the insurance firms. However, the new law needs secondary regulations to be endorsed before it can become functional.

The bill will regulate a RON4bn market (€900mn) that, beside the voluntary car insurance market (CASCO), accounts for the largest share of the local insurance market. The financial problems of several insurance firms pushed up the RCA fees last year, prompting protests from hauliers. Eventually, the government stepped in and froze the fees at compulsory benchmark levels. However, the EC expressed its disapproval of the decision to cap premiums saying it wasn't in line with EU law and it would put pressure on insurers' capacity to generate profit.

The head of ASF, Misu Negritoiu, who initiated the freeze and didn't think it was necessary to raise fees, was dismissed on May 11 in relation to the car insurance crisis, just days before the deadline. 

After May 18, the benchmark levels will not be binding and transporters can expect further price hikes which could lead to more protests. 

The financial markets regulator ASF has to announce benchmark fees for each category of vehicle and driver as of May 19. The benchmark fees will be revised on a six month basis. The bill also aims to bring in procedures to assess customers' risk to identify those drivers classified as risky (by at least three insurers). But these rights largely depend on the secondary regulations.

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