The Assembly of Kosovo should review CBK’s decision to increase car insurance premium prices, as it violates the principle of free competition


GAP Institute published its report “Increase of car insurance premium prices: lack of transparency and limitation of free competition”. Although the decision of the Central Bank of Kosovo has a major economic impact, both on the citizens and the insurance industry, neither the decision nor the (actuarial) valuation report have been made public. Moreover, the decision is not in line with the recommendations of the International Monetary Fund (IMF) and the professional opinion of the Kosovo Competition Authority (KCA).

On October 31, 2019, the Executive Board of the Central Bank of Kosovo, consisting of the Governor and two Deputy Governors, took a decision to increase the tariffs for compulsory motor vehicle insurance (category 1) by 26%. Although the tariff review is in line with the recommendation of the International Monetary Fund, the IMF didn’t suggest a specific rate of increase, but rather only ascertained that a tariff review should take account market developments, such as inflation in medical spending, behavioral change in drivers due to technology, or changes to risk profiles as a result of court rulings. However, the CBK failed to take any of these factors into account in the actuarial report, and increased the tariffs only following the inflation rate over the period 2002-2018, though the IMF mentions that tariffs were revised in 2011, not 2001, as the CBK states.

This decision is also contrary to the professional opinion of the Kosovo Competition Authority, despite the CBK itself initiating the request to KCA regarding the compatibility of the decision with the principles of open competition. Given that companies have different sales strategies, different customer profiles, and different cost structures, KCA argued that the interaction of companies should be avoided and that uniform pricing was contrary to the principles of open competition. Another issue affecting public confidence in this decision is the low transparency of the CBK during and after decision-making. Neither the board’s decision nor the actuarial report have been published on the CBK website.

Therefore, based on the opinion of the Kosovo Competition Authority and the report of the International Monetary Fund on the actuarial capacities, GAP Institute raises doubts over the legitimacy of this decision. Given the weight of this decision, GAP Institute recommends the Assembly of Kosovo to commission an international professional company to assist in a professional review of the decision to raise the price of car insurance premiums.

Please click here te read the full report.