The introduction of a new system for calculating premiums for mandatory vehicle insurance has led to significant price increases for users.
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For instance, insuring a 2007 vehicle with a 2500 cc engine, driven by someone over 21 years old and registered in Tirana, now costs approximately 21,700 ALL annually (including taxes), marking an increase of about 15% compared to last year. Prices show very small differences among different companies.
If the driver is under 21 years old, the insurance cost rises to nearly 25,000 ALL, or about 32% more than last year.
For a 2013 vehicle with a 2000 cc engine, registered in Tirana and owned by an individual over 21 years old, the new insurance price, including taxes, is around 21,000 ALL, approximately 10% higher than last year. For drivers under 21, the price increases to about 23,100 ALL, or 21% more than in the previous year.
Higher Costs for Business-Owned Vehicles
For vehicles owned by businesses, the price increase is even more pronounced due to a 20% baseline increase factor applied to this category. This is because business vehicles are considered to have a higher risk of accidents as they may be driven by multiple drivers. When combined with other increase factors, insurance premiums for business vehicles can exceed a 30% rise compared to last year.
The New Regulation and Risk Factors
The increase comes following the implementation of the new regulation titled “On determining risk factors included in the calculation of premiums for mandatory insurance products in the transport sector.” This regulation, effective as of January 2024, requires insurance companies to consider several key risk factors when calculating premiums. These include:
- Damage history (including cases where the at-fault party is not listed on the insurance policy),
- Vehicle engine capacity,
- Age of the insured,
- Driving experience,
- Whether the vehicle is used by a business or an individual,
- Registration region of the vehicle,
- Vehicle age.
In addition to these, insurance companies are also allowed to apply other risk factors determined by them.
However, the current system lacks detailed differentiation for certain risk factors outlined in the regulation. For example, it imposes higher prices for drivers aged 18–21 but does not further differentiate for older drivers. Similarly, it does not account for driving experience, such as the year the driver’s license was obtained.
Differentiation by region applies only to certain districts like Berat, Dibër, and Kukës, where lower coefficients are used, while all other regions have higher, uniform coefficients.
Bonus-Malus System to Begin in 2026
Another factor that will impact premiums is the bonus-malus system or damage history, set to be implemented in 2026, based on 2025 damage records. However, the system currently only envisions a malus factor, penalizing drivers who cause damages, without offering a bonus (premium reductions) for drivers with no damage history. The bonus, in practice, will only be maintaining the same coefficient.
Public and Parliamentary Reactions
Last week, MP Erion Braçe publicly called the TPL insurance price increases an abuse at the expense of consumers. He announced plans to urge the Parliamentary Economic Commission to pressure the Financial Supervisory Authority (AMF) to annul the new prices.
Under the law, insurance companies set their TPL premium rates independently but are required to notify the AMF at least 30 calendar days before applying new rates. Along with the notification, companies must submit the technical basis of their data, risk factors, and actuarial assessments used in the calculation, supported by the authorized actuary’s written report.
The AMF can order a review of new premium rates if it finds that the data used to calculate premiums is inaccurate or that the company has not followed actuarial principles and methodologies for applying risk factors.
Record Profits from TPL Insurance in 2023
Efforts by companies to increase TPL premiums began as early as 2021, following the adoption of the law "On Mandatory Insurance in the Transport Sector," which raised liability limits. In 2022, the need for price increases was attributed to rising costs of spare parts, vehicle services, and general inflation.
However, AMF data shows that despite these factors, TPL insurance has remained a profitable product for companies.
According to the 2023 oversight report, the technical account balance for domestic TPL insurance was positive at 1.6 billion ALL, a 130% increase compared to 2022—marking the highest profit ever recorded for this product.
The main driver of increased profits was the rise in net premiums earned, along with lower acquisition expenses, while paid damages showed only a marginal increase. Last year, net premiums earned reached 9.82 billion ALL, up 7.7% compared to the previous year. Operational expenses related to the product also decreased by 9%, falling to 4.7 billion ALL.
In contrast, gross damages paid totaled 3.38 billion ALL, a 3.4% increase from the previous year, while net damages (excluding amounts paid by reinsurers) rose by just 0.9% to 2.91 billion ALL. The net claims-to-premium ratio slightly increased to 36.14% from 36.06% in 2022.
Insurance Market Trends
Motor insurance remains a dominant category, accounting for nearly 67% of gross written premiums in the non-life insurance market in 2023. Profits from these products significantly impact the overall market performance.
According to AMF data, the total profit of the Albanian insurance market last year reached 2.76 billion ALL (around 266 million euros), reflecting an almost 70% increase compared to 2022.