Viorel Vasile, Safety Broker: The aggressive reduction of the brokerage fees will close down the brokers in the small towns

Tue, 05/30/2017 - 16:11

The insurance brokerage companies are faced lately with high pressure on the reduction of the fees collected for the brokerage of the civil liability insurance policies for motor vehicles (RCA), which dropped from an average of 16% at the end of 2015, to 10% at the present date, fact that could result in the exit of some players from the market and a significant decrease of the insurance coverage degree, especially in province, Viorel Vasile, CEO Safety Broker, considers.

“Most insurers have reduced the fees for civil liability insurance for motor vehicles (RCA), and the pressure comes from the FSA, on the idea of the reduction of the costs afferent to the sale of the mandatory motor vehicle insurances. On the market, the fees dropped to an average level of 10%, from 14% in the first quarter and 16% at the end of last year. A very aggressive trend of the fee reduction is obvious”, Viorel Vasile (photo) declared.

The manager of Safety Broker also says that an average “break-even”fee, ensuring the business continuity, would be of minimum 12.7%. “Economically, we can no longer put up with this fee reduction level. It affects our business, in the sense in which we have some fixed expenses to cover for the activity performance, such as rents, salaries, leasing for cars and so on and so forth. If the broker’s incomes get to the point of being below the level of the costs, I shall be bound to close some locations. And, unfortunately, the respective locations are, in general, in the small towns, below 10,000 inhabitants, where the collections are not very high. The insurers no longer have offices there either”.

Asked whether the sale of insurances in province, preponderantly via the Internet, would represent a solution if the insurance brokers are going to close most office in the small towns or in the rural areas, as a consequence of the decrease of the collections from fees, Viorel Vasile answered that the delivery of the policy subsequent to the purchase would generate costs that would be too high for each insurance.

“Civil liability insurance policies for motor vehicles (RCA) are very well sold via the Internet in the big cities: Bucharest, Iasi, Timisoara, Cluj, Constanta or Brasov, with a share of up to 90% of the total sales. However, in order to deliver the policy after the purchase in the small towns, of up to 10,000 inhabitants and in the countryside, the costs would be higher than the fee itself. Which will be the risk? The coverage degree for the civil liability insurance for motor vehicles (RCA) will go down, and not many insurances will still be taken out in those towns”, the manager of Safety Broker said.

Viorel Vasile: FSA and the market do not understand the broker’s role

“Unfortunately the authority or the rest of the market fail to understand the broker’s role and what the broker does based on the collected money. In principle, one should go where there is demand. In the towns with up to 10,000 inhabitants, it exists, especially in the absence of the direct presence of the insurance companies. Gains are not high, and margins are very low. Thus, we make a logistic effort in order to keep those offices open. When we drop below the cost, we have to stop the activity”, the manager of Safety Broker declared.

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