ECONOMY

Bleak prospects ahead for vehicle insurers of Greece

Greece’s battered auto insurance sector is set for even worse times ahead. New guidelines under preparation by the European Union, imposing increases in the minimum amounts paid for accidents and bodily or material damages will further burden an industry which has accumulated big losses. Insurance companies will respond to these new guidelines by hiking their premiums up to 100 percent, according to industry sources. Such a move may seem excessive, said attendants at a seminar organized yesterday by the Association of Greek Insurance Companies, but it will be necessary to stem further losses. Some insurers think that the threat of such an increase might put pressure on the State to put a cap on damages which, according to them, «have spun out of control.» The EU directive under preparation would also abolish the cap on damages paid per accident in order to promote unlimited coverage for all EU citizens. Despite the fact that the authors of the directive provide for a grace period of between four and seven years, the insurance industry is already considering its own defensive tactics. Insurance executives said that they would propose to the Development Ministry to enforce objective values for damages paid, according to the type of accident, the type of vehicles involved and each party’s liability. Such objective values, seminar participants said, had already been applied in Spain and Italy and had succeeded in stopping a growing industry of conniving companies and courts imposing ever higher damages. The absence of a clear-cut value placed upon damages has often led courts to prescribe excessive amounts, insurers claimed. Insurers also inveighed against the according of damages to distant relatives and an elastic interpretation of stress suffered by accident victims. Such practices were responsible for damages for bodily harm to escalate in recent years from 60-70,000 euros to about 250,000 euros. Worse, from the insurers point of view, the EU directive under consideration proposes raising minimum compensation for material damages to 500,000 euros and for actual bodily harm to 1 million euros. One of the participants in yesterday’s seminar, Mario Salomone, head of the damages division of insurer Unipol, said that Italian insurance companies pay 7.4 billion euros annually for damages in cases resulting in permanent disabilities. Costs escalated in the period 1994-99, causing the Italian government to accept objective values placed on damages. Constantine Bertsias, president of the Greek insurers’ Auto Insurance and Civil Liability Committee, told participants that about 1 million cars in Greece were uninsured, and placed the blame squarely on the State. This large number of uninsured cars, along with significant rises in the cost of replacement parts, were mostly to blame for the rise in premiums, he said. Greek auto insurance companies show a collective loss of 205 million euros; more importantly, 40 companies have seen their licenses revoked since 1990 for being unable to cope with