ISSN E 2410-3500

Developments of the Albanian Insurance Market in the Framework of the MTPL Insurance Liberalization

Vol. 4, Issue 11, PP. 39-52, November 2017


Keywords: Liberalization, MTPL Insurance, Bonus-Malus System, Efficiency of Bonus-Malus, Markov Transition Matrix

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Aim of this paper is to present the challenges and developments of the Albanian insurance market during the process of its liberalization. Consequently the insurance market has shown instability with regard to the fluctuations of the premium levels. A fair pricing based on the market conditions is one of the biggest challenges of the albanian insurance market. By means of an econometric model, the correlation between the liberalization process and profitability of insurance companies has been shown. This paper discusses also the efficiency of the Bonus-Malus System, which is expected to be implemented in Albania in 2018 in order to stabilize the insurance market. In this regard the elasticity according to Loimaranta (1972) is calculated for Albania. As the Bonus-Malus System is already implemented in other region countries, the paper suggests that in addition to the advantages this system can bring, there is also the risk of the phenomenon known in the literature as Hunger for Bonus, according to which, people tend to not report the claims. Under such conditions the result would be a lower claim frequency deriving from the non-reporting of claims and not from the implementation of the Bonus-Malus System. The implementation of the Bonus-Malus system must be accompanied by an increase of anti-fraud measures.

Patris Poshnjari: University of Tirana,

Patris Poshnjari "Developments of the Albanian Insurance Market in the Framework of the MTPL Insurance Liberali Economics and Management Works Vol. 4 Issue 11 PP. 39-52 November 2017.

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