VAT increase will affect all companies in terms of profitability
 "Supposing the insurance rates remain unchanged, the costs of claims files, which will be the first ones affected in the context of the VAT hike, will have a negative impact on the claims rate", insurers say. "For sure, the VAT increase will negatively influence all insurance companies in the Romanian market in terms of profitability", said James GRINDLEY, Deputy General Manager, CERTASIG.
"The national insurance market already offers, very often, extremely low premium rates and tarrifs, compared with the risks assumed on the insurance segment, and changes applied in the level of VAT will not have a great immediate impact on it. Normally, insurers will have to resort to various ways to compensate for these additional charges", said the CERTASIG leader.
Also, one of the main worries anticipated by the insurance companies will be the increasing phenomenon of fraud, said James GRINDLEY, especially for Motor Hull insurance, which will require a more careful claims management. Also, the sums insured will suffer a noticeable decline due to goods devaluation, resulting in a more reduced share of insurance premium given that the other indicators remain unchanged.
The Deputy General Manager of CERTASIG says another side effect of this VAT hike is the perception of potential and current customers regarding these changes in insurance matters. "Unfortunately, the insurance sector is among the first affected, because both individuals and companies will stop investing under the circumstances of an economy in decline", he said.
In the first half of this year, the business volume of CERTASIG remained approximately at the level of the previous year, around RON 18 million. Meanwhile, according to the new strategy adopted in 2010, the company's insurance portfolio has had several changes on the insurance lines level. Thus, Motor Hull insurance currently represents less than 50% of total portfolio, the company said.
"We have planned a number of new insurance products that we want to introduce on the Romanian market in 2010, products already existent in Western Europe", said James GRINDLEY.
Regarding the upcoming period, CERTASIG seeks to maintain underwriting profit, which will require a continuous discipline in the underwriting process.
Author: Andreea IONETE
on 13.07.2010
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