FIAR 2019: Motor Insurance Conference - Part I. Main statements

22 May 2019 — Adina TUDOR, Andreea RADU
The evolution of motor claims and damages, changes and benefits brought by the Motor Insurance Directive, complaints management and beyond were among the topics debated at FIAR 2019 - Motor Insurance Conference. Here are some of the main conclusions.

Michael THEILMEIER, a renowned re/insurance specialist on international level, was the moderator for the first part of this conference. By his side:
  • Madalin ROSU, President, BAAR
  • Hayk ZAYIMTSYAN, Risk & Monitoring Manager, Council of Bureaux
  • Mariusz WICHTOWSKI, General Manager, Polish MIB
  • Alejandro Izuzquiza Ibanez de ALDECOA, Operations Director, Consorcio de Compensacion de Seguros
  • Florin GOLOVATIC, Director, ASF
  • Ioan MATEI, Legal Director, BAAR
The event was supported by BROADSPIRE, EUROTAX and ASISOFT and took place with the support of RECREX.

(You can find the second part of the conference here)


Risk & Monitoring Manager, Council of Bureaux, Green Card System

  • The Green Card system: 48 countries with a vehicle fleet of 450 million vehicles; over 1500 insurers issuing Green Cards; more than 450,000 cross-border accidents annually
  • The system is based on trust: "pay first, argue later"
  • Every day, more than 1000 cross-border accidents happen - this results in a cross-border cash flow needed at all times
  • Cash flows don't always match in time and space:
    • "Exporters" vs. "importers" of cross-border claims
    • Different levels of compensation across Green Card countries
    • Different claim settlement delays prescribed by legislation across Green Card countries
    • (Almost) always, the law of the country of accident applies Because cash flows don't always match in time and space, liquidity/ cash capacity is necessary at all times and at all levels
  • In almost no case, no country equals out in term of 'imported' accidents and 'exported' accidents - there are quite large discrepancies; the difference between imported and exported accidents is growing over time
  • Compensation levels are also different in different countries: if a Romanian vehicle goes to Sweden and causes an accident there, the compensation there can reach up to 30 million euros; if a Romanian car goes to Moldova and causes an accident there, the compensations there are significantly lower compared to Sweden
  • An additional complication: when Bureaux/ Guarantee Fund have to step in
  • There are additional challenges on the CEE region:
    • The region is an "above average" risk (Green Card accidents "exported" vs. share of vehicle fleet) - they export more accidents than their fleet share
    • Most countries are "net exporters" of accidents: this puts additional indirect pressure on the solvency / liquidity of Bureaux, insurers, and correspondents / claims handlers - they export more accidents than they import
    • Larger exposures due to circulation in high indemnification level countries - lots of vehicles circulate in regions with higher indemnities
    • Lower-premium environment
  • For most countries, the cross-border exposure is built into the single premium. For some of these markets, the risk is "normally based" in one country but occurs predominantly in other (high indemnity level) countries. Thus, it is necessary to have sound, actuarially justified pricing practices for premiums in order to achieve the stability and health of the system

General Manager, Polish MIB, Poland

  • The main aim of any regulation is to protect
  • The compensations are paid from financial resources coming from the insured persons
  • 70 years of the Green Card system - operating on 48 different countries. It is a very efficient system. Integrated in this system, we have 48 different markets, with different markets, with different clients, with different civil laws etc.
  • Green Card system is a voluntary system for the countries being a part of it, it is not a mandatory system; if a country joins the system, it must follow all the rules and obligations
  • Amendments to MID - adopted by the European Parliament on 13 February 2019; the amendments will have a large impact on the European insurance industry
  • The role of the changes of MID are positive. They aim to:
    • Obtain more rights for users and victims
    • Check the insurance contracts
    • Fight against uninsured driving
    • Fight against fraud
    • Analysis, statistics, tariffication
  • Proposals include:
    • Guarantee limits - which will be higher;
    • Random checks controls - the idea is a very good one, but the execution is difficult. For example, the police in Europe is not prepared to check in the way it is proposed in the Directive; there is no centralized database of the issued policies
    • Claims history
    • Liability of trailers - we have different rules in different countries; the system is different in Germany from the Netherlands
    • Prescription period - in Spain, the prescription period is 1 year, in other countries in the EU, the prescription period is 20 years; if the consumers do not know the period of time in which they need to notify the insurer, how can we protect them? The proposal to harmonize the period to 4 years is a good idea
    • Use in traffic
    • Bankruptcy
    • Price Comparison Tool
  • These changes involve costs

Alejandro Izuzquiza Ibanez de ALDECOA,
Operations Director, Consorcio de Compensacion de Seguros, Spain

  • For reasons of legal certainty the MID should clarify and delimitate the scope of compulsory insurance cover; we have reached the time for codifying various rulings (ex: judgments of the CJEU in Vnuk, Andrade, Torreiro and Juliana prejudicial cases) into one unitary view
  • The definition of "vehicle" should be objective and stable; MID should be focused on authorized vehicles covered by Regulations of the EU; the Motor Insurance Directive - MID should also be applicable for driverless cars; On the other hand, very light electric vehicles should be outside the scope of the MID (European Parliament's approach)
  • Definition of "use of vehicle": the MID should cover uses consistent with normal use as a means of transport (Vnuk ruling) at the very time of the accident - this aspect has been stressed by the Spanish market. The coverage should be irrespective of the specific place it is being used (Torreriro ruling), but excluding cases where the principal use at the time of the accident is something other as a means of transport (use as machinery: Andrade). Additional clear exclusions which, in our opinion, should be plainly stated in the MID include:
    • motor sport competitions,
    • vehicles as an instrument for committing terrorist attacks and violent deeds (assassinations, robberies in commercial establishments...) - we should address terrorist attacks by specific means
  • The activity a vehicle is used for or the mode it is in at any given time will vary. That cannot be the case for the general obligation to insure, which requires a clear beginning and end in time. The starting point for determining the existence of an obligation to insure should be: the vehicle is intended to travel on land and can indeed do so. The cover should last while the vehicle is road-worthy
  • Major issue: MID does not include the case of invalid insurance due to insolvency (a situation which may leave a victim unprotected even if compulsory insurance legal rules are in place)
  • Updating the minimum amounts of cover and harmonizing the protection of victims is the desired solution, to reduce the differences between member states; the amounts should not differ from one type of vehicle to the other, because:
    • It complicates the system
    • The dimension or power of vehicles is not always related to the severity of potential damage

Madalin ROSU,
President, BAAR

  • The Romanian market, in the last years, even now, has suffered shock after shock. We've had the two bankruptcies, for which BAAR has paid so far more than 90 million euro and there is another reserve of 50 million euro. It means that these amounts are borne by Bureau members and comsumers are paying fot them
  • So, every MTPL policy buyer will support these tens or hundreds of million euros that we have paid and we are going to pay (after bankruptcies)
  • At the moment, from ASF figures, we can see that the average premium decreases and the average damage increases
  • It is important that there is a legislation dedicated to MTPL. We haver to make adjustments and bring changes to this law
  • At this time, there is a chapter in legislation on the way in which damage is calculated for bodily injuries, it is a well-documented scale, but unfortunately it is not implemented
  • We still have some things uncorrelated with the European legislation and there are a few that have changed. We have policies that are valid for 1-12 months; unfortunately, there is a lot of exposure in the area of one month, which makes the risk of uninsured rising on the streets of Romania and the EU. We have the possibility to pay MTPL premiums in several payments - seen only for the fleet. We have the introduction of the Direct Settlement clause - although it was a full fuss, there are currently only 300,000 policies. Settlements have been respected. The use of telematics system - they are not being used at the moment, but it is a good thing they exist in the legislation. We have the Bonus-Malus system and I think that 99% of clients are in the bonus classes
  • In the damage area, the most important changes - these are the most aggressive changes in the euro area. We have 3 days for damages, 30 days for closing the claim file, 10 days for payment and penalties exceeding the European rule
  • There are also articles in the secondary legislation that offer the possibility for third parties - auto-service - to invoice as much as they want. And, unfortunately, the law allows such defrauding. Average damage is on the rise. After the las investigations we've made, the average repair reached more than 8,300 lei or almost 2,000 euros
  • Why has the legislation not changed so far, given that these slipping are getting worse?
  • Shareholders and investors wonder why they are forced to invest in Romania to cover the losses in the MTPL segment
  • I want you to think that we are in a critical moment in which the MTPL market losses, insurers lose, BAAR pays, the number of uninsured increases and we should do something. Let the customer choose how he wants to repair his car
  • It's time to act like the market we are. The excesses are being paid by all of us from our pockets

Interactive panel - MID - Motor Insurance Directive

Re/Insurance Expert

  • Insolvency should be better managed through MID; The local regulators should do more
  • In my opinion, it will take at least 3 years to have the final version of MID
  • In Germany, 99% of the cars have a higher coverage than the minimum imposed
  • The connection between the increase of the limits and the increased claims is also a question of legal maturity
  • Trying to have a Europe-wide system for bodily injuries has been tried many times

General Manager, Polish MIB

  • We must find the best way to satisfy the victim
  • The victim must be always protected: in case of terrorism, if we do not include it in MID, we need to find another system to protect the victims - and the system should be Europe wide
  • The formulation of ideas in MID (not the ideas behind) is not accurate, it is still too inaccurate to be adopted yet

Director, ASF

  • Every time when we are talking about a piece of legislation, there are always pros and cons
  • We have countries where liability is unlimited, we have countries where there are limits and so on
  • Through this new directive, we have the chance to unify the legislation
  • Depending on the final version of the new directive, we will see how to adapt our local legislation
  • The increase of the limits should not be a driver for increased claims; in the end, the increase of limits would affect more the reinsurance activity - the pressure would move towards the reinsurance segment
  • MID is required - there is the need to have it and to have these updates, because we need more clarifications. There are still aspects to be discussed

Director, BAAR

  • We in Romania are prepared for the new definition of vehicle - our law was already in this line; we have the distinction between on-road and off-road use
  • Because we have this former experience in Romania: we have some vehicles used as vehicles, but in the same time, used as a utility vehicle. Depending on what part of the vehicle is damaged, according to this change in MID, you would intervene or not - maybe some additional work should be done on this aspect
  • We have a dedicated guarantee fond for insolvency, in Romania, which is not the case of every country
  • We are one Europe, we should have one single rule, one single regulation; however, let's not forget that there are countries coming later to this 'select club' - Romania, Poland etc. All countries need to reach a minimum level first
  • Romania is a good example of a country which is exporting claims - we have 6 million cars insured for compulsory MTPL, we generate almost 40,000 green card claims (40,000 accidents outside the country), out of the total 400,000 claims
  • The beauty of the directive is that is sets a minimum standard and allows for lots of space for each and every country to adapt it to their own rules

Alejandro Izuzquiza Ibanez de ALDECOA,
Operations Director, Consorcio de Compensacion de Seguros, Spain

  • Normally, drivers buy not only compulsory MTPL, they also have voluntary motor insurance, so vehicles have a higher coverage
  • The MID review is completely needed: it is fruitful and useful, especially because we have to include insolvency cases. It should be focused to up to 5 points, not more; the European Parliament has done a good work when insolvency is concerned, but has done a poor work by introducing more and more items. The European Parliament has complicated everything
  • My fear is that the main topic - how to tackle insolvency - is going to be left outside the scope of MID

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