• EVENTS

•  
• INTERNATIONAL RELATIONS

•  
• PUBLICATIONS

•  
• NEWSLETTERS

•  
• NATIONAL COVERAGE INSURANCE PROGRAM

•  
• WWW.

ICAR- The International CAtastrophic Risks Forum


This year's start for mandatory insurance

After the announcement of the Ministry of Administration and Interior regarding the postponement of the fines application deadline until July 15th, 2011, mandatory household insurance underwritings fell sharply, while sales of voluntary policies were blocked.
Even though companies have used the compulsoriness as a launching platform for voluntary policies sales, the situation was similar to that existent before July 2010 - a little over 15% of the households were insured at national level.


The fines held the front page in mass-media throughout the summer

Although the purpose of this law is not to apply fines to the population and authorities kept repeating that they would not provide compensation for damages caused by natural disasters, the fines issue still remained the Romanians main concern rather than rising awareness of the need for household insurance. So this summer had began with a real "investigation", in which lawyers, authorities, representatives of the companies have been cited for elucidating the truth regarding the date when fines would begin to apply.

All opinions, more or less divergent, have been silenced on the 15th of July when ISC has announced a new deadline for applying fines for owners who have not bought a mandatory policy or a voluntary insurance that covered the three natural disasters - August 5th, 2011.
Then, ISC has also said it has initiated several amendments to modify the Law no. 26/2008, regarding numerous existing legislative inconsistencies.

The first year's checkpoint

In late June, at national level, the number of insured households was 3,377,026, of which 2,793,628 through voluntary insurance and 583,398 through mandatory insurance, which means a total degree of insurance coverage of the Romanian housing stock of 40.3%. With the deadline of application of fines getting closer, in July the underwritings have increased considerably, both on mandatory and on voluntary insurance, ISC estimating at the beginning of August a total degree of insurance coverage of about 45%.

All this development in 2011 was still dictated by the competitive rates between mandatory policies issued by PAID and the voluntary ones, launched earlier this year by insurers, covering other risks besides the ones included in the mandatory policy, at a similar price - around EUR 20.
Therefore, even if the positive effect of the pressure put upon the voluntary insurance rates was fostering the number of insured households, the downside is somewhat slippery: people were given the wrong impression a voluntary household insurance should cost only EUR 20.