The third party motor insurance market investigation carried out by the Croatian Competition Agency (CCA) particularly analysed the car insurance premiums and prices. The objective of this market study was to identify the changes this market has undergone compared with the findings of the CCA market investigation covering 2013 and 2014.
The newest results show that the compulsory third party insurance market in Croatia is competitive and well-structured. The results of the investigation reflect efficiencies in the form of product differentiation that brings about benefits for the consumers, particularly a wider choice. Competition has been intensified and the insurance companies have changed their premium schemes.
The major change in the compulsory third party insurance market in 2016 is that most insurance companies have abolished the geographic criteria in determining the amount of compulsory insurance contribution for trucks, meaning that the whole territory of Croatia is now regarded as a “one-risk zone”. All road transport vehicles now enjoy more favourable terms and lower prices of insurance policies.
The market investigation also indicated positive trends in the compulsory third party insurance for the passenger cars that now benefit from a better choice of insurance products and favourable premiums offered by insurance companies to final consumers, particularly based on “individualized” or tailor-made insurance policies.
Motor insurance market features
The same as in the previous year in 2016 there were 13 insurance companies active in the third party motor insurance and the comprehensive automobile insurance market. In 2015, which was the last full calendar year in which a comprehensive data were gathered for the market inquiry, Herfindahl-Hirschman index (HHI), as a commonly accepted measure of market concentration, was 1.500 – showing a fall compared with the previous years and thus indicating a competitive market structure.
The average premium paid was some one thousand Kuna, whereas the total gross written premium for third party automobile insurance was some 12 billion Kuna in 2015. In comparison with the year 2015 the number of issued policies increased in 2016 by 5.6%.
In 2015 the highest market share in the third party automobile insurance was held by Croatia osiguranje followed by Euroherc osiguranje and Jadransko osiguranje, both members of the Agram Group. The fourth market player on the list of the biggest insurance companies in third party car insurance was Allianz Zagreb.
Regarding the insurance groups, the highest market share has been held by Agram Group, followed by Croatia osiguranje, Allianz and VIG Group.
Significant changes in risk zones – geographic criteria in determining the amount of motor insurance contribution abolished
The CCA focused in this market inquiry first, on establishing facts with respect to risk zones, i.e. determining the amount of compulsory insurance contribution (functional premium), and second, on analysing the pricing of insurance premiums depending on the registration areas. A comparative analysis of prices was carried out based on a sample of vehicles.
The analysis showed that risk zones are somewhat sill used for the calculation of the functional premium and the overheads. This model is based on aggregate statistical data and indicators. However, it has been established that individual insurers use their own statistical data and develop their own actuary models.
The use of the uniform functional base (zone) has positive effects on road transport operators. On one hand, the price of the compulsory third party insurance dropped, on the other hand, extreme differences in prices that formerly depended on the geographically determined zone of risk and therefore produced harm for the road transport operators with registration plates in high-risk zones have been abolished.
For the sake of comparison, the CCA market inquiry for 2013 showed that the price that all insurance companies charged for the insurance policy for a truck selected by the CCA as a sample in the geographical area of Daruvar (the lowest risk zone) was 12,000 Kuna. No more favourable offer was possible at that time. On the other hand, the price of insurance for the truck carrying the Zagreb or Krapina registration plates was some 22,000 Kuna – again charged by all insurance companies and no more favourable conditions.
Namely, all insurance companies used in principle the same elements for calculation of the third party insurance premium, particularly the geographical criterion consisting of seven risk zones applicable under the former Basic Premium Scheme that was in effect in the territory of the Republic of Croatia and valid for the calculation of the third party motor insurance premium for almost thirty years.
The most recent CCA inquiry shows that three years later the road transport operators have a wider choice springing from the product differentiation in respect of the third party motor insurance policies.
Concretely, the application of the uniform risk zone criterion on the whole territory of the Republic of Croatia brought about lower prices and more favourable terms in third party motor insurance for all road transport operators. Particularly significant savings of more than 50% of the former insurance policy price are recorded now by the trucks with the Zagreb and Krapina licence plates. The prices are the same for all trucks of the same make and category within the territory of Croatia.
In the sense of competition rules the CCA welcomes the changes, in particular on the account of the fact that these removed competition concerns that were raised in the last year market investigation.
On many occasions the CCA has reacted publically and indicated that if a truck displays licence plates from a certain region it does not necessarily mean that it carries out its transport services exclusively in the area concerned. On the contrary, the transport activity is at least marked by the area in which the truck was registered and got its licence plates. Transport is provided within the national borders or even within the EU integral market and this mostly affects the conditions and the competitiveness in the transport sector. Therefore, the changes spotted in the market may have positive effects on competitiveness of certain transport operators, both in the Croatian and the EU market.
“Individualization” of premiums for passenger cars
The changes described above were also somewhat reflected in the passenger cars insurance policy, in the first place in the setting up of the risk zones and the pricing policy.
In the passenger cars insurance the CCA found positive trends in the wider choice of products and more dynamic competition that lead to more favourable third party motor insurance.
Whereas in 2013 the differences in the prices of third party insurance premiums in a particular risk zone for the same vehicle were negligible, in 2016 the CCA market inquiry on a sample of all classes of motor cars (small, medium and large cars) indicated differences in the prices of insurance policies and greater choice for consumers.
The “individualization” trend means that a series of new elements are introduced when calculating the third person motor insurance policy by different insurance companies.
By way of illustration, a new parameter was introduced when calculating the amount of contribution – “the age of the policy holder”. In spite of the fact that the age span and the number of categories differ from one insurance company to another, the results of the study indicate that the drivers in their 30s and 40s are considered to be the drivers in the lowest-risk category whereas young drivers indicate more risky behaviours. In addition, in accordance with the results of the survey one of the insurers claimed 11 age groups, whereas other may have not more than 4, which also reflects the differentiation of policies.
Additionally, the car make and the technical characteristics of a motor vehicle are also taken into account by some insurance companies in the assessment of risk. For instance, one insurance company classifies 16 types of vehicles, whereas the other one provides for 28 classes.
A no-claim bonus (NCB) also varies from insurer to insurer. Some insurers give more than 50% discounts that were the cap amounts applicable in the former years. There is also a possibility of transferring any NCB you’ve built up on your spouse or on your company. Benefits are also available for close members of the family.
Some insurance companies offer NCB retention where the basic premium new add-on cover is offered by insurance companies. This concretely means that you may make an additional payment topping up the basic third party premium and ensuring to retain the earned no-claim discount should you claim against your insurance policy.