BTA: The number of OCTA clients, who choose to receive indemnity in cash, has decreased significantly

Since 1 January, when amendments to the Compulsory Civil Liability Insurance of Owners of Motor Vehicles Law (hereinafter — the “OCTA Law”) came into force, stipulating crucial differences in the amount of indemnity in the event it is paid in the form of repair works or in cash, only 27% of car owners chose to receive remuneration in cash. Last year, this type of indemnity was chosen by 41% of OCTA clients, as suggested by data summarised by the insurance joint stock company “BTA Baltic Insurance Company” (BTA). BTA forecasts that as a result of amendments to the OCTA Law, state tax revenues from OCTA indemnities paid by BTA will increase by EUR 1 million in 2017.

When choosing indemnity in cash or in the form of repair works, the average amount of OCTA indemnity differs significantly. The average amount of OCTA indemnity at a service station this year is EUR 895, which is EUR 39 more than in 2016. In turn, the average amount of OCTA indemnity paid in cash this year is EUR 388, which is almost EUR 100 less than a year before, when the average amount of indemnity paid in cash was EUR 480.

Amendments to the OCTA Law benefit clients

Jānis Lucaus, BTA Chairman of the Board, links changes in clients’ habits directly to the amendments to the OCTA Law, which encourage clients to choose to receive indemnity in the form of repair works. Thus, gradually putting the sector of service stations in order, which is traditionally associated with a high share of informal economy.

“With the current dynamics persisting, state tax revenues from OCTA indemnities paid by BTA might increase by EUR 1 million in 2017. However, the fact that amendments to the OCTA Law encourage clients to choose repair with the insurer’s partner, which is carefully selected, is no less significant. It is crucial for us that a service station, whereto we send our clients, has good reputation and ensures high quality and speed of work. Wherewith, we can say that amendments to the OCTA Law benefit clients and cars are repaired at service stations of higher quality”, as explained by J.Lucaus.

The total amount of BTA’s OCTA indemnities has increased by 9%, which is related to both amendments to the Law and increase in repair expenses at service stations.

Clients perceive repair with an authorised dealer as a bonus

Aivars Brikmanis, Amserv Motors Bodywork Repair Manager, admits that as of the beginning of the year, when amendments to the OCTA Law came into force, the number of OCTA clients at the service station has increased. Moreover, the share of older cars, which end up at the service station via the insurer, has increased significantly.

“The repair of 7-year old or older cars used to amount to 3-5% of the total volume. Now, we see that the share of these cars amounts to 10% already and they mostly come via the insurer. In conversations with clients, we have often observed that the owners of older cars perceive the possibility of repairing a car with an authorised dealer as a bonus provided by the insurer”, as told by Aivars Brikmanis.

Amendments to the OCTA Law were introduced to reduce the share of informal economy in the sector of service stations

BTA reminds that upon the proposal of the Ministry of Finance with a goal to promote the payment of taxes for the repair of vehicles, amendments to the OCTA Law came into force on 1 January a.c. In the event of damages to vehicles, the envisage to reduce by 30% the amount of payable insurance indemnity before the performance of repair works in cases, when the vehicle owner chooses to receive insurance indemnity in cash instead of in the form of repair works, namely, before the performance of repair works, the insurer pays to the vehicle owner 70 % of repair expenses, deducting the VAT amount, while the owner may receive the remaining 30 % of repair expenses and the share of the VAT amount after the submission of documents certifying the performed repair works.

Amendments to the OCTA Law also increased the term, during which the vehicle owner may submit documents certifying the performed repair works: instead of previous two months, as of 1 January a.c., clients may submit payment-certifying documents for the performed repair works within four months. The OCTA Law also clarifies the term, during which the insurer, following the receipt of payment-certifying documents, has to make a decision on the payment of additional insurance indemnity: instead of previous 30 days, as of 1 January a.c., the insurer has to make a decision within 15 days.

About BTA

BTA Baltic Insurance Company (hereinafter – BTA) is one of the leading insurance companies in the Baltic States, providing all types of non-life insurance services in Latvia, Lithuania and Estonia. BTA is also one of the largest indemnity payers in the Baltics – in 2016, BTA disbursed an average of 300 thousand euros each business day in insurance indemnities in the Baltic States or approximately 38 thousand euros every business hour.

The largest shareholder of BTA is one of the leading ore than 50 companies in 25 countries constitute a group with a solid brand, with 190 years of experience in the insurance field and close cooperation with customers. VIG employs 23,000 employees and is a clear leader in its core markets. VIG is a group with the best rating of all companies in the ATX, the leading index of the Vienna Stock Exchange, with a secondary listing on the Prague Stock Exchange.

More information:
Linda Upeniece
Marketing and Public Relations Department Director
BTA Baltic Insurance Company AAS
email: linda.upeniece@bta.lv
phone: +371 67025676, mobile: 26756841