SERBIA: New Law on Compulsory Traffic Insurance announced
Preparation of Draft Law is already in progress: this job has been entrusted to the Ministry of Finance Working Group, whose member is the Association of Serbian Insurers as well. The goal, as said, is to align with EU practice but also to increase the level of protection of third parties who suffered damage in traffic accidents.
The key elements of the new Law will apply to: Guarantee Fund, fees paid by insurance companies into the account of the National Health Insurance Fund, more efficient resolution of compensation claims through the new model of issuing records and other supporting documents, as well as the relationship between insurance companies and MOT test companies as the leading sales channel of Motor third-party liability insurance (MTPL).
During 2004, more than 20 insurance companies with irregular business operations in the Serbian insurance market went bankrupt. The insurance claims these companies were obligated to pay if the money from the bankruptcy estate was lacking, were borne by the Guarantee Fund. When the current Law on Compulsory Traffic Insurance was adopted in 2009, the decision was also made that the Guarantee Fund shall retain this obligation until and including the date of entry into force of this Law. At the same time, the obligation was introduced to establish a new Guarantee Fund - independently of the Association of Serbian Insurers - to deal with future damages. This new Fund has not been established so far because, according to the Association, it has proved to be irrational since it would create additional costs to be borne by the insurance companies, but also, indirectly, by the insured through the MTPL premium. Therefore, some damages occurring in the meantime, that would fall within the jurisdiction of the new Guarantee Fund, were not paid (for example, damages incurred in an accident caused by an unknown person, in which the party to be indemnified was killed or suffered serious bodily injury). In all likelihood, the new Law will define the existence of only one Guarantee Fund that will fall under the jurisdiction of the Association of Serbian Insurers.
The fee currently allocated by insurance companies for the National Health Insurance Fund (for treating injuries incurred in traffic accidents) is 5% of the gross insurance premium. The Association of Serbian Insurers proposed reducing the allocation to 2% or returning to an earlier decision according to which every single damage would be individually regressed.
The new Law should make it easier for vehicle owners to collect insurance claim after an accident by obtaining the records and other necessary documentation posthaste. Currently, they obtain this documentation themselves, but in the future the Association of Serbian Insurers will ensure that all documentation is delivered to the insurance company within 24 hours.
One of the leading sales channels of the MTPL in Serbia are MOT test companies. According to the current Law, the fee that the insurers are allowed to pay them for this service is 5%, which the MOT test companies are not satisfied with. Consideration should be given to the possibility of raising the maximum amount of the commission, so MOT test companies would not require the insurers to pay additional money in other legally questionable ways.
Discussions on this topic were publicly launched at the "Serbian Insurance Days" conference which was organized by the Association of Serbian Insurers late last year. On that occasion, the Governor of the National Bank of Serbia, Jorgovanka TABAKOVIC, said that the aim of the new regulation was to meet the European standards but also to preserve the market, adding that "domestic insurers must reach a consensus because the interests of citizens are more important than the interests of lobbying groups".