The culture of voluntary insurance in Albania! Why do we need to make sure?

Miscellaneous people with insurance protection plan

By Elda Shehu

The insurance market in Albania was liberalized in 1999, so for 20 years and since then there have been many quantitative and qualitative changes, the legal basis, mentality and worldview have changed, but again Albania remains one of the countries with little culture and education in insurance, compared to countries in the region.

The value of per capita insurance has increased, but still remains the lowest in the region and beyond. In the last three years, per capita insurance has evolved very little from 5,300 ALL in 2016, 5,600 ALL in 2017 and 5,900 ALL in 2018, while in Kosovo the performance of per capita insurance in the last 3 years is higher 47.49 and 52 euros. 

The insurance market is dominated by that of motor vehicles and the demand for voluntary insurance still remains low, where for the period January-May 2019 voluntary insurance accounted for 40,25% of total gross premiums of 6.7 billion ALL.

Despite the large number of companies operating in the market and the variety of products offered, Albanian citizens have not yet given due importance to this industry. Accurate conception of the importance of insurance still remains difficult for Albanians; This is because we come from a culture where the state was responsible for everything, while today it has taken on the role of regulator, supervisor, drafting the legal basis and protecting the interests of consumers, where there is still much work to be done to achieve all European standards. especially improving the legal framework where broad-based consulting by insurance industry experts is needed.

 Despite the serious exposure to the risk of natural disasters including earthquakes, floods, fires, droughts and landslides, the frequency and extent of which are likely to increase as a result of climate change, citizens are still indifferent to the provision of their property.

Factors that affect this low level of insurance in Albania are numerous starting from the low standard of living, lack of culture as well as legal shortcomings such as the law on civil, professional and product responsibilities.

According to data from the Financial Supervision Authority in the period January-May 2019, only 18,470 contracts were concluded in the portfolio "fire insurance" compared to 18,099 in the period January-May 2018.

The culture of voluntary insurance in Albania! Why do we need to make sure? 1

In the portfolio "fire insurance and natural forces", during the period January - May 2018 there is a decrease of 8% in the volume of gross written premiums of this portfolio from 768 million ALL in January-May 2018 to 705 million ALL January- May 2019.

While for the damages paid for this portfolio in January-May 2019 we have an increase of 61% compared to the same period of 2018 where 432 million ALL were paid from 259 million ALL for the same period of 2018.

What stands out is that although the number of contracts in the 5 months of 2019 is higher for property insurance 18470 from 18099, the average premium for police has dropped from 42 thousand to 38 thousand.

 Insurance companies under the supervision of the AFSA have made progress in the volume of claims paid by shortening payment deadlines, but it remains to be done by companies in this regard, as timely payment of claims affects the growth of trust in the citizen and the desire to get closer to voluntary insurance.

Property insurance is one of the new concepts that has entered the financial relations of citizens with their property. This, in most cases, is also related to the obligations required by the relations with the banks, for the loans taken by the citizens for the purchase of apartments. 

The culture of voluntary insurance in Albania! Why do we need to make sure? 2

The evolution of gross written premiums of building insurance for the last three years from 2016-2018 has been 1.8 1.9 and 2.1 billion ALL.

Likewise, the claims have a positive performance in the total market ranking where about ALL 2 billion in damages were paid by the insurance market for the first 5 months of 2019, marking an increase of 6% compared to the same period a year ago . 

Most of the damages were paid in Non-Life insurance, ALL 1.97 billion, while ALL 94 million were paid in Life insurance.

At the same time, the number of claims paid during the period January-May 2019 increased by 421 and reached the figure of 19,535 of which 18,698 claims were paid by Non-Life insurance companies and 887 by Life insurance companies.

Payment of claims in the insurance market has followed the trend that closed the year 2018, where about 7 billion ALL were paid, or 26.2% more than in 2017, thus marking the highest figure of claims ever paid. 

The evolution of claims paid in total for all products for the last three years from 2016-2018 has been 4.8, 5.5 and 7 billion.

This positive trend in the payment of damages will also have its impact on the growth of the culture of being insured in a variety of insurance products offered by all companies operating in the market.

 Recently, the insurance companies themselves as well as the FSA have developed financial education in many university colleges where cooperation agreements have been concluded for the education of the new generation towards a European insurance culture.





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