Dancho Danchev, Chairman of the Association of Bulgarian Insurers: The price of the Civil Liability insurance policy will jump by about 15% this year

- Mr. Danchev, after three years of crisis, what is the actual situation in the insurance industry? What were the most important events in the industry in the past year?
- During the years of economic crisis, the companies in the insurance sector were not isolated from the general economic environment. The crisis affected insurance enterprises as well. Revenues from the so-called voluntary insurance polices were reduced and the basic proceeds came from compulsory polices, more specifically, from the automobile insurance products.
Last year, the branch was able to offset the loss of premium income thanks to the compulsory Civil Liability (CL) insurance policy. The results recorded in the last few months showed a minimum increase of 0.1-0.2%, which was negligible, but still not a drop. Some of the insurance products continue to lose their market share in terms of total volume, but CL policies compensate for the overall delay in the sector. We can say that we have reached the lowest point and expect the results by the end of 2011 to show a slight increase.

- In early 2012, what are your forecasts for the market's development?
- The expectations are that there will be no dumping attempts this year since the market is quite competitive and there are different prices, terms and services offered. However, due to the difficult situation, I think that there will be no companies trying to raise their market share via unreasonably low prices. In general, the year will be no different from 2011. I even expect that the situation will be more severe. I do not see how the situation might improve since we are highly dependent on the economy of Europe. Insurance, as we know, is a consequence of economic development and I expect the market to move within the same limits.

- One of the most topical issues, some time ago, was the price of the CL policy but no one has brought up this matter recently. Is a price increase needed there and if so, what should it be?
- There are a lot of speculations related to the price of this insurance policy and after each statement released customers start using obscene epithets and comparisons in the forums. The mere fact that, as of this summer, the compensation limits that insurers have to pay under the CL policy will double, shows whether the price has to be increased. I wish to underline that the price cannot be doubled. The trend will be maintained. In the past two years, we observed a smooth monthly increase, which was the most logical option. Last year, the price of the CL policy increased about 12-13% on an annual basis. If this year a similar price raise of about 15% is recorded on an annual basis, the monthly increase will be of around BGN 2, which will be acceptable for consumers.

- The “bonus-malus" system is expected to be introduced. What are the real benefits to honest customers and how much cheaper will the insurance policy be?
- It is still difficult to comment on the topic because it is not clear what the "bonus malus” scale will be. Changes in the Insurance Code are needed for the implementation of the system, but Parliament rejected the bill in late 2011 and it is expected to be passed this summer. Unfortunately, we cannot expect the system to be introduced in the middle of the year. Once the changes are adopted, the guild will submit suggestions to the Financial Supervision Commission. Generally speaking, the idea is that the longer drivers do not have an accident - the greater the discount.

- The Government introduced a 2% tax on insurance premiums. How has this measure affected the sector?
- We are definitely not happy with this measure but, since the law has been passed, we are obliged to observe it.

- In the last two years, the premium income under the Casco insurance policy was substantially reduced. According to experts from the industry, the crisis was the main reason for the decline which held back the renewal of the automobile park. What is your opinion?
The Casco insurance policy is one of the most affected by the crisis. In the past three years, the premium income from this product fell by BGN 200 mln. It is not reasonable to think that this happened only due to the lower number of new cars sold. I do not want to offend my colleagues but the sales of new cars have never been terribly high. Yes, it is true that new cars are more expensive and the premium is larger, but they represent about 10% of the total number of cars sold. The main reason is that many drivers have not renewed their policies as a result of the crisis. Unfortunately, in most cases, when you do not renew your policy, something unpleasant happens.

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