The motor settlement agreement, as well as the issues it raises are getting closer and closer to becoming a reality, with the entry into force on July 1st 2009. But many representatives of the insurance market think that the procedure still features many unclear aspects. In fact, they also submitted to the ISC a request to postpone the enforcement date, subsequently rejected by the Commission’s Board. All we can do now is wait…
Fears and uncertainties
The draft was delayed for almost two years, due to factors coming from the Romanian insurance market, as well as from the organizations of the European insurers. We are among the last countries in the European Union to introduce this procedure, Albin BIRO, Member of the ISC Council, stated at the beginning of the Motor Insurance Day at FIAR – International Insurance and Reinsurance Forum 2009.
Moreover, the request of UNSAR – National Association of Insurance and Reinsurance Companies from Romania, on postponing the start date for the implementation of the amicable report, was rejected by the ISC Council, convened on May 19th 2009. Thus, the amicable report will be applied accordingto the deadline provided for in the ISC Order no. 21/2008. The companies’ request of postponement was rejected, therefore the order will be applied beginning July 1st. From my point of view, I think the market will never be ready for a gradual transition. Nevertheless, all drivers were somehow anticipating the introduction of the amicable report, Albin BIRO continued.
To clarify the procedures about settling the cases, insurance companies drafted the memorandum of understanding on the amicable report in case of accidents. This covers the criteria for setting the sum of elements and facts that will help settling the claim files, the use of evidence, as well as guidelines for actual application of the cases, presenting a full case law inspired from the Romanian Traffic Code and the French practice in the field. This case law describes in writing and with sketches all collision possibilities that might be encountered in traffic, as well as the method for establishing the liability in the respective incident.
As a conclusion, the protocol can be improved, the legislation regulating the amicable report being also subject to improvement. To the extent to which there is a feed-back on how the amicable report works, subsequent improvements will be added. Paraphrasing the statement of the researchers from the Manhattan nuclear program, I shall state that, theoretically, everything is in place, but in practice, we don’t know how the bomb will explode and what will happen, Ovidiu CIOBANU, President of the Street Victims Protection Fund, said.
Thus, the liability will be established following this protocol. The insurance companies’ staff will decide who the guilty party is, but this will be done through the interface provided by the personnel that will be gradually trained in this respect, because we are talking about a new procedure. However, we could have a large number of cases where customers can be unhappy about how the liability was established, and the method of challenging the decision, according to the current conditions, is quite unclear, also requiring time, money and patience.
The amicable report replaces the contravention minutes or the police report - just like in European countries, where it is possible to establish the accident without the involvement of the police. I want to point out: the amicable report may coexist very well with the Police report. If two drivers are involved in an accident, nobody can or should prevent them from going to the police and ask for a police report instead of an amicable report. Also, the infringement sanction will be eliminated. The penalties will be different, coming from the insurance companies. The protocol and the liability in the respective case, although they follow the line of sanctions from the Romanian Traffic Code, do not automatically mean that what is considered an infringement in the traffic regulations must also be recorded as a liability under the protocol. One can agree or not with the liability, and in the latter case one can go to court. I am not saying it will be easy. The information must travel very smoothly between the insurance companies and between them and the customers, Ovidiu CIOBANU explained.
Regarding fraud, although many opinionate that introducing the amicable report will cause an amplification of the phenomenon, specialists do not think that the claim value will increase, with the argument that so far, at the Police, the report was issued based on the statements of the people involved in the traffic accident and the police agent could directly establish the situation in the field. At this moment, the reporting agent has the advantage of actually seeing the two vehicles involved in the accident, which will no longer be the rule with the amicable report, but the exception. From another perspective, namely from the statement’s perspective, the fact that there is an solid infringement report made it more difficult for the insurer to establish whether the accident happened or not under the conditions noted in the report. It was much more difficult to dismantle in court this relative legality presumption provided by the report drafted by the police.
With or without bonus-malus?
Also, often times, the amicable report was associated with the bonus-malus system, this being the only measure intended to make drivers more responsible, given that infringement sanctions will be eliminated. The system is not complete yet, because there is no bonus-malus principle, but its role is to reduce fraud, not to eliminate it. The discussions about it have been going on for approximately five years, but I think there are much more possibilities to get information about accidents or other events, especially through communication among companies. The bonus-malus system is intended to dissuade opportunity fraud, Albin BIRO mentioned. What I call opportunity fraud is the unwanted event that gives the possibility to change something or declare something else, so that both drivers are satisfied. I think we can’t do away with intentional infringements by introducing the bonus-malus system, because more and more customers face financial difficulties, Sorin GRECEANU, General Manager at F.P.V.S., continued.
Whether we talk about MTPL or Motor Hull insurance, a common database would allow the implementation of the bonus-malus system and it would make its application different, independent of the CEDAM database. On the other hand, for this to be introduced, we need one year time so as to have a reference period for each insured car.
Nevertheless, we won’t get rid of fraud with this system, because I don’t think that adding a RON 1,000 penalty to the next year’s premiums will persuade the respective customer to give up an EUR 30,000 compensation, Sorin GRECEANU underlined.
A solution for policy underwriting and follow-up operations could be a high-tech IT system. The IT issue is quite important and impacts the insurance companies’ operations. Everybody took a step towards such a service, and each one was the product of every single company’s imagination and requirements. The common base should include information on all the cars from the market, and we, company wise, are capable of providing such information in the countries where they are traded, starting January 1st 2000, Sorin IACOB, General Director EUROTAXGlass’s Romania, mentioned.
Steps to be followed in case of accident
Insurers are the ones who should firstly have the answer. The steps to be followed in case of accident are not very well regulated. The wording of the laws allows for resorting to the Police, at any time. However, in case the two willingly agree to write an amicable report and submit the form to the insurer, the latter will assess the case and decide the level of liability for each party. The problems occur when the two insurers are not in agreement, and they need to go to a third party that will make an unsatisfactory decision. I think this procedure should have been explained either in the implementation norms or in the protocol because, at the moment, the police report is an authority act and it cannot be challenged, Ioan MATEI stated.
The experts point out that many of the procedural aspects related to the amicable report are still unclear and may lead to numerous difficulties in the process of establishing the level of liability, and then the compensation. I would remind you the famous “Annex 2” form that will no longer be used. Because of it, the customer had to go to and fro the police and the insurer, and now I think we shall witness something similar, Viorel VASILE, Managing Partner, SAFETY Broker, underlined.
Introducing the procedure will significantly accelerate the pace of claim reporting, as outsourced services. Such an outside entity, neutral, cannot afford to make mistakes because, if so, it stands the risk of loosing its customers and ruining its image. As for brokers, I think this is a turning point due to a higher level of confidence in the services they provide. Moreover, for those who have a claims department, the introduction of the amicable report in the current economic context can become an opportunity to prove they have the necessary technical knowledge and are able to establish the liability in various cases, Gheorghe AXINTE, General Manager, AUDATEX Romania, stated.
On top of this, considering the economic crisis, the companies will be pushed towards new measures to mitigate the claims rate, focusing on every item that can generate extra liquidities for the company. Thus, the implementation of the amicable report will generate much more difficulties, but the measure must be implemented. What is left to do now is to finalize the scenarios and to find solutions for them, Ioan MATEI concluded.
Non-material damage – a danger turning into a reality
The term of moral compensations is increasingly present on the market and the trend is obviously upward. The reason is simple: higher living standards, a better informed public, as well as higher liability limits. Considering all these factors, the decisions on compensations are made in courts and the granted amounts tend to reach the maximum levels possible.
Moral compensations mean aesthetic damage, physical injuries, impact on the hedonistic principle, as well as psychological damage. At the moment, there is no clear regulation as to the quantum of compensation a judge may decide on in case of non-material damage. Here is a 2005 case relating to non-material damage: an accident that killed a 25 years old man, and three other persons sustained bodily injuries, as proven by the medical certificates. The wife of the deceased and the relatives of the injured persons both asked for compensations. Actually, the quantum of the compensations granted was as requested by the victims, Ion MOISE, Managing Director, E-CLAIMS Management, specified.
At F.P.V.S. level, we started to develop a database with cases of moral compensations, comprising 225 cases. They are split per categories: claims for bodily injuries, for death, for parents, for surviving spouses. We are not an entity authorized to appraise moral compensations, this is the role of the courts of justice. But we think that hiding behind the courts does not serve the interest of the insurance market, because the victim’s interest prevails, Sorin GRECEANU said.
These criteria apply differently throughout Europe. In many countries, this quantum is set in court. The recommendation for Romania would be the Spanish model and it would be important to consider this situation because the insurance premiums are established based on these criteria, Ioan MATEI stated.
The solution I recommend is the negotiation with the victim. In Germany, we try to avoid going to court, because courts are against the insurance companies, as they think they have enough money to pay the compensations to the victims. If there is a ruling in one case, it creates a precedent for the lawyers and they try to represent the client as best they can, Alexandrina QUENDLER, Senior Claims Counsel, QUATRO Consulting, mentioned.
Usually, those who ask for this situation to be regulated are the insurance companies with experience abroad, because they have already made payments of exaggerated compensations and they do not want to face such a situation in Romania. The boom started after 1989, as the practice was banned before that. At the moment, the judge is easily impressed by the suffering of the claimant, and he is free to grant compensations, MANEA, lawyer specializing in non- material damage, outlined.
Thus, as the criteria for granting these compensations are not yet established, most judges tend to grant these compensations in the quantum requested by the claimants. Therefore, many specialists consider that the Spanish model for non-material damage would be ideal for the Romanian market.
Such a model is legal and unitary, being binding, and what remains to be established is the set of criteria to be used in assessing how claims should be ranked.
