The Ukrainian Green Card market is currently at the crossroads, and next three or four months will determine whether it moves towards recovery or dumping - from which there would not be way out – according to the board chairman of the Universalna insurance company, Oleksiy Muzychko.
"The market is at a crossroads, and I think the next three or four months will be decisive," he said.
Muzychko said that the situation on the Ukrainian Green Card market is complicated, as many insurers who recently entered the market are using dumping and the payment of large commission fees of up to 60%, which are obviously unprofitable. The period of payments in claims on the Green Card, in contrast to other types of insurance, is longer, so the companies spend the money of their clients.
"This is the way of Strakhovi Tradytsii insurance company, but it is more dangerous," he said.
He said that under an initiative of Universalna insurance company, members of the Motor (Transport) Insurance Bureau of Ukraine (MTIBU) in 2009 signed an agreement on behavior on the market, setting commission fees no higher than 20%.
Muzychko said that not all companies are sticking to the agreement, so the market was divided into three parts. The first one is companies that observe the accepted principles. The second is companies, the leadership of which has decided to follow the agreement, but due to their own management system, cannot fully control their regional chain structure. The third part is companies that know that the Universalna insurance company is sticking to its commission fee policy and that are trying to seize market share.
"In the end, I'm not sure that the latter companies and their shareholders will have enough funds to cover claims. Then the MTIBU and conventional insurance companies will have to settle the issue," he said.
Muzychko said that in H1, 2010 the leaders on the market changed - unfortunately in favor of those who are not sticking to the partnership agreement. Currently there are 14 key players on the Green Card market in Ukraine, he said.
He said that the situation could be resolved through toughening requirements for the capitalization of companies and the state commission for financial service market regulation and the MTIBU's control over the real formation and placement of reserves.
