The funds accumulated in the OCTA Insurance Fund are rapidly declining, so the prices for OCTA insurance policies are likely to increase, according to Juris Stengrevics, member of the board of the Latvian Motor Vehicle Insurers Bureau (LTAB, hereinafter LMVIB).
Despite the fact that since October 2016 the insurance companies have renewed their contributions to the OCTA Guarantee Fund, at the moment it has decreased to the historically smallest volume, which was last in April 2008, when its volume exceeded the 20 million euros stipulated by the law and there was no longer any need to make contributions. Data of LMVIB, which is administering the Guarantee Fund, indicate that by August of this year the volume of the fund will decrease to 17 million euros.
As the portal Delfi already wrote, contributions to the Guarantee Fund were provided for by regulatory enactments in the event that its volume was less than 20 million euros. In turn, if the volume of the fund fell to 17 million euros, insurers would need to make contributions in double volume. Dues to the fact that the last decade was characterized by a slow rate of economic growth, an increase in the volume of average compensation for several consecutive years, as well as other factors, the Guarantee Fund in 2016 decreased to a level of 20 million euros and, despite the contributions of insurers, its volume continues to decrease.
In an interview with the Latvian radio, Stengrevics explained why the contributions to the fund had become insufficient. The industry still had to provide payments to customers who were insured in the bankrupt Balva insurance company. “Three million euros have already been paid, but more than two million euros have yet to be paid,” Stengrevics said. In addition, the companies of the industry decreased the return on investment, and the fund had to pay compensation for discounts of the insurance of invalids and farmers.
A representative of LMVIB explained that insurers knew the situation with the Guarantee Fund, therefore most companies have already increased the price of the OCTA policy. This is understandable, because the company will have to pay more from each policy sold, however, according to Stengrevics, “the amount to be paid would not be so great to make buyers feel it.”
“Insurers can get money from their clients and divide them into different funds. If it is necessary to pay more, then they have to take more from their customers,” the representative of LMVIB admits. In 1997, the OCTA system was introduced in Latvia, the purpose of which was to protect the interests of third parties affected by road traffic both in Latvia and in the countries participating in the Green Card. To ensure the successful operation of the system, LMVIB was created. The structure united insurance companies that had the right to carry out insurance of OCTA in Latvia – AAS Balta, AAS Baltijas Apdrošināšanas Nams, AAS BTA Baltic Insurance Company, Latvian branch of ADB Compensa Vienna Insurance Group, Latvian branch of SE ERGO Insurance, the Latvian branch of ADB Gjensidige, the Latvian branch of AS If P & C Insurance, the Latvian branch of AS Seesam Insurance and the Latvian branch of AS Swedbank P & C Insurance.
