From August 1, the bonus-malus system used to determine prices for compulsory civil vehicle insurance policies (OCTA) will be discontinued. This has caused concern among some car owners who fear a possible increase in prices for policies of this type of insurance. What will change and how insurers will evaluate car owners in the future to determine the price of an OCTA policy, explains Delfi. Until now, the bonus-malus system provided the amount of insurance history data – accidents caused and days of insurance, taking into account the last 11 years when calculating a specific class. Recalculation of bonus-malus classes was carried out once a year and owners or holders of vehicles were grouped into 17 classes, recalled the head of the Latvian Association of Insurers (LAA) Janis Abashin. With the changes, the insurance history data will not be recalculated into classes, but absolutely all OCTA insurance contracts concluded since May 1, 2004 and accidents that have occurred, for which a decision was made to pay insurance compensation to the victims, will be reflected, regardless of who was driving the vehicle responsible party. This data will be updated daily. If a person owns several vehicles, the insurance history will be added up for vehicles of all categories that require OCTA, regardless of whether the person is registered as an owner or holder, Abashin explained. As before, quantitative indicators of the insurance history will be reflected – the number of insured days and insured events (caused by road accidents). The more insured days and fewer insured events in the insurance history, the better the insurance history. Each insurer evaluates this information individually, the head of LAA emphasizes. The reorganization of the bonus-malus system, according to Abashin, will not affect how insurers determine the price of the policy, since, as before, each insurer will independently assess the client’s insurance risk and determine the amount of the insurance premium. Representatives of insurers note that they will continue to take into account the insurance history of the vehicle owner or registered holder, including indicators of previous insured events (caused by road traffic accidents) and the number of days of insurance, as well as other criteria/risk factors that are under the control of each insurer (for example, data on the owner’s penalty points, purpose and place of use of the vehicle, etc.). And until now, the bonus-malus class was not the only factor that was taken into account when determining the price of an OCTA policy, Abashin emphasizes, adding that it should be taken into account that changes in OCTA prices are also influenced by economic factors in the country and the world. Abashin’s words are confirmed by the head of Ergo vehicle insurance products, Aldis Engelis, who promises that the changes will not affect the assessment of clients on the insurer’s side. “The bonus-malus system was based on the history of accidents and insurance, and we will continue to receive this information. Insurance history will continue to be one of the many factors that we will take into account when determining insurance prices,” Engelis noted. This means that in the future, OCTA prices will differ for drivers of higher and lower risk levels – the fewer accidents caused, the lower the driver’s risk level and the OCTA price. In terms of OCTA award trends, Ergo received 3,759 OCTA claims in the first six months of this year, up about 100 from the same period a year earlier. The largest OCTA compensation paid by an insurer this year reaches 219,479 euros – an accident occurred in Norway when a heavy vehicle hit an oncoming car, damaging it. This case confirms the trend that, in general, the largest OCTA awards tend to be for accidents occurring abroad, Engelis noted. So this year, the largest road accidents occurred in Norway, Germany, Denmark, the Czech Republic, Italy, Lithuania, Sweden, and the range of compensation ranges from 22,000 to 219,000 euros. It is worth noting that the amount of damage depends both on the value of the vehicle, the amount of damage and repair costs, as well as on the cost of treatment in cases where people were injured. Speaking about the biggest challenges in the OCTA segment now, Vice President of Balcia in Latvia Reinis Berzkalns noted that they are related to the increase in average remuneration, which is influenced by various economic and political processes, as well as the fact that vehicles are becoming more modern with many additional functions , which increases the cost of their repair. Discussions are currently underway about expanding OCTA coverage, which could include various additional products and limit customers' ability to purchase only a basic OCTA policy. Introducing such changes could help clients insure against a wider range of risks, while simultaneously improving insurance protection, Berzkalns emphasizes.
