"New instruments of consumer protection in motor insurance" Maria Luisa Cavina Director of Consumer Protection Division, ISVAP Warsaw, 28 September

2 ISVAP - LEGAL NATURE Il controllo interno  Endowed with legal status under public law;  Set up on 1982 (law n. 576 of 12 August 1982);  Fully autonomous in the juridical, financial, accounting, organization and management field.

3 Purposes of supervision:  Stability of the insurance sector;  Solvency of companies;  Protection of policyholder. ISVAP - AIM OF SUPERVISION

4 ISVAP - SUPERVISED ENTITIES  Undertakings pursuing insurance and reinsurance business;  Insurance groups and financial conglomerates;  Insurance and reinsurance intermediaries, loss adjusters;  any other insurance market participants who, in any form, performs functions partly included in the operational cycle of insurance and reinsurance undertakings, limited to insurance and reinsurance profiles (outsourcers, e.g. claim settlement services);

5  Grants undertakings the authorisation to pursue insurance and/or reinsurance business.  Supervises on the technical, financial and accounting management of domestic and foreign insurance undertakings (branches of undertakings with head office in a non EU country) and reinsurers subject to its supervision.  Issues all the measures deemed useful in order to safeguard the undertakings and the consumers.  Provides consultation and presents proposals to Parliament and the Government for matters within its competence for the regulation and supervision of the insurance industry. ISVAP - FUNCTIONS

 Establishes rules aimed to guarantee the right behaviour of the market participants and the respect of the insurance law.  Take corrective, repressive and sanctioning measures or propose their adoption by the Ministry of Production Activities.  Handles and examines the consumers’ complaints. 6

7 ISVAP - COOPERATION AMONG SUPERVISORY AUTHORITIES ISVAP collaborates with :  the Bank of Italy, the Supervisory Authority on securities (CONSOB), the Occupational Pensions Supervisor (COVIP), the Competition Authority (ANTITRUST) and the Communications Supervisory Authority;  the competent Authorities of the other EU Member States, not only in the insurance sector, but even in the bank and securities sector (e.g. in case of insurance companies controlled by banks or securities firms).

8 CONSUMER PROTECTION DIVISION Structure and competences Il controllo interno  A “Complaints section” was founded by the Institutional law, since 1982  In 2003 the section was strengthened through the creation of the “Consumer Protection Division” made up of two Sections: “Third party protection” and “Insured person protection”  At present the Division consists of 45 people 8

9  Manages all the complaints presented to the Authority (annually about ), according to a specific procedure stated by ISVAP’s regulation No 24 of 19 May 2008;  Arranges and issues regulations permitted by law concerning motor vehicle liability insurance  Manages telephone assistance service and receives the consumers  Is a member of Fin-Net network, as national contact body, for the out-of-court settlement of cross border disputes and participates in Fin Net meeting)  Analyses general issues of the insurance market  Carries out information campaigns  Manages initiatives to the benefits of consumers, such as:  The Check Box project  The motor liability insurance quotation service for consumers CONSUMER PROTECTION DIVISION CONSUMER PROTECTION DIVISION Scope and mission

10 WHY DIRECT COMPENSATION?  Answer to a deep and long-lasting crisis of compulsory car insurance sector, due to:  Delays on claims settlement  High level of costs (repair costs, legal fees, undue involvement of lawyers for small damages, fraud) and consequently  High level of prices.  Outdated traditional system of compulsory liability due to the conflict between Insurance company and Policyholder DIRECT COMPENSATION SYSTEM

11 DIRECT COMPENSATION makes easier  the overcoming of the conflict through a direct contact between Insurer and Policyholder, based on:  mutual understanding  relationship of trust  verifiable service  the decrease in improper costs through  direct assistance provided by Insurers when the Policyholder submits a claim in order to resolve in shorter time the compensation  no legal fee if compensation is accepted  body repair network provided by Insurers

12  Collision happened in Italy (including San Marino and Città del Vaticano) involving only 2 motor vehicles registered in Italy and insured for civil motor liability.  Claims must be submitted directly to the non responsible (or partly non responsible) driver’s Insurer.  Claims must refer to: Vehicles damages Driver’s personal injuries if they fall within 9% permanent disability Damages to transported goods (goods owned by the driver or passengers)  Compulsory procedure since 01/01/2007, applying to claims incurred since 01/02/2007. DIRECT COMPENSATION – Conditions and requirements

 The Insurer is obliged to pay the compensation to its own Client on behalf of the Insurer of the responsible driver, without prejudice to a subsequent settlement between insurance companies as stated by the Insurance law Code (a specific regulation states measures to define and share liability, through Bareme schemes).  The damaged/injured person shall submit claim only to his/her Insurer. 13 DIRECT COMPENSATION – Conditions and requirements

coverage liability Insurance’s office Policyholder Intermediaries answer within 30 days Recovery of the eventual report First steps to the procedure: Check of the insurance coverage Agreement on the liability 14

15 Actual cost Fixed cost “forfait” CLEARING HOUSE Settlements between Insurers are regulated in a Clearing House managed by CONSAP. The non responsible Insurer does not receive the total amount refunded for the claim, but an amount corresponding to an average fixed once a year by the Technical Committee approved by the Minister of Economic Development 15

16 PASSENGERS MANAGEMENT Also passengers may benefit from the direct compensation scheme. In such cases the carrier’s Insurer (direct Insurer) follows the same procedure, but personal injuries are restored even if over 9% permanent disability. Compensation for personal injuries may be claimed to direct Insurer within compulsory coverage limits. The over compensation shall be claimed to the Insurer of the responsible driver. 16

17 DIFFERENCES AMONG SIMILAR PROCEDURES The comparison with other european countries adopting similar procedures for motor vehicles claims: In Italy direct compensation is compulsory and regulated by law either as regards the technical aspects or as concerns the rules which fix the exchange of the refunds The Insurer of the responsible driver is not allowed to know the real value of the refunds, according to the position of the Competition Authority (ANTITRUST). 17

Direct compensation 1/2/2007 – 31/12/2008 No CARD 43,8 % 56,2 % CARD AMOUNTS PAID Claims totally/partially refunded Ordinary procedure 19

Agreement between two parties No agreement Statement agreement Voluntary system Compulsory system Within the system Out of system 25% 75% CARD No agreement 38% 62% 38% Total claims CARD 100% CARD Agreement between two parties What has changed: an increasing trend of agreement 20

Decrease of time of payment (average, measuring settlement times from the report to the first payment) What has changed: an important result for consumers 21