Insurance premiums are not expected to rise steeply after the introduction of a harmonization law on compulsory third party liability motor insurance, insurance companies said yesterday.

Deputies had warned earlier this week that insurance costs were expected to be subject to a drastic increase based on an EU Directive that must be implemented by June 11.

At the moment, insurance companies are expected to cover a minimum of £60,000 for material damages in the event of an accident. Based on the directive, this amount will increase to £600,000 (1 million euros).

In addition to this, the existing law that sees insurance companies covering up to £2 million in compensation for each person injured during a car accident is set to be altered as well. This amount will increase to a minimum of 30 million euros to cover all injuries suffered in each accident.

While motorists may fear major upheavals in insurance premiums, the Group Managing Director of Commercial General Insurance said he did not expect any changes in the near future.

“Insurance companies will have to look at the new situation that will be brought about by this directive, but do not expect immediate changes from June 12. Insurance companies will take account of all details before acting and who knows what will happen?” Constandinos Dekatris told the Cyprus Mail.

However, Dekatris did say that there could be some small-scale changes in the field of motor insurance.

“Basically, the issue here is that insurance companies will be exposed to greater risk as well as a possible increase in other legal costs that insurance companies have to pay because of this new bill. But any changes will be taken after a lot of thinking and I can say with certainty that there will be no astronomical increases; where increases will occur they will be of a mild nature. There will also be a time-lag from the implementation of the law before any changes are made, so that the new state of affairs can be assessed,” he added.

As from June 11, citizens will have the right to take direct legal action against insurance companies, something that could see the legal expenses of insurance companies rise.

However, the prospect of ratification of a bill set to change the interest rate paid by insurance companies for court procedures could balance out the suspected increase in premiums. The interest rate in this case has not been changed from eight per cent, despite the liberalization of interest rates elsewhere.
A reason that Cypriot insurance companies do not see this law as overly worrying is because they have never had to pay claims of this magnitude. The highest claim that has been paid to a person injured in a car accident was around £1 million.
Filios Zachariades, Chairman of the Cyprus Insurance Association, gave his outlook on the situation.
“It is such a fiercely competitive market that companies will only increase their premiums if they are making losses,” he told the Cyprus Mail. “In all probability, no increases are expected because in Cyprus there are still no claims above these limits that are set. The new law, which we have no option but to implement as it is imposed by the EU, does not change anything from that point of view.”

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