MTPL market in Russia : Problems and trends March 3 rd - 4 th, 2013 Istanbul 1 Russian Association of Motor Insurers

MTPL essentials in Russia 2 Russian Association of Motor Insurers

MTPL essentials in Russia Limit of indemnities Bodily injuries: EUR for each of the victims Property: EUR 3 000, for one victim, and EUR for more than two victims Intention of increasing the limits Insurance tariffs Set by the Government Intention of liberalization (min and max) Insurance claims Independent Expertise Institute The claim has to be paid within 30 days Insurance contract is valid: 1 year with the limited use possibility Short term contracts (up to 20 days necessary to get to the place of registration or inspection) 3 Russian Association of Motor Insurers

Main functions of the RSA: Communication between RAMI members, developing and implementation of professional guidelines for the companies and their enforcement; Handling complaints of policy holders and victims; Representing the members’ interests in their relations with government authorities; Assets compensation during the process of insurance portfolios transfer; Guarantee fund for the bankrupt insurers and for accidents caused by uninsured vehicles; Regulating the technical inspection of the vehicles. 4 Russian Association of Motor Insurers

MTPL Statistics Exchange rate: EUR 1 = RUR 40 5 Russian Association of Motor Insurers

MTPL Statistics 6 Russian Association of Motor Insurers

Insurance Regulation for bodily injuries In case of death: - Funeral expenses; - Compensations for relatives of the victim if certain criteria are met In case of other bodily injury: - Pecuniary losses (loss of wages, medical bills, etc) - Other expenses 7 Russian Association of Motor Insurers

8 The basic principles for bodily injury compensation  No limits for the level of compensation for bodily injuries;  Bodily injury insurance covers pecuniary losses, medical bills and other expenses if the victim doesn't have the right to receive them for free;  In case of bodily injury, the refuse of compensation is not allowed (even in case of the victim’s serious negligence and no fault of the other driver that caused the accident);  Compensations for pecuniary losses – if the financial situation of the victim is improving, it will be taken into consideration only the income earned by the victim after the improvement and not the average monthly income for 12 months prior the injury;  Indexation of the compensations for bodily injuries according to the level of purchasing power Russian Association of Motor Insurers

Compensations paid for bodily injuries Number of paid compensations related to bodily injuries cases 9 PeriodDeath Medical expenses Death + Medical expenses Russian Association of Motor Insurers

Compensations paid for bodily injuries Number of victims 10 PeriodNumber of deaths Number of victims, affected as a result of a relative’s death in accidents Number of victims, that required medical treatment on bodily injury insurance cover Number of victims that suffered bodily injuries as a result of accidents has increased by 13 % in 2011 in comparison to 2010 Russian Association of Motor Insurers

Judicial practice for bodily injury compesantions Judicial practice for several unclear situations related to injuries: - Compensation for lost earnings MTPL rules stipulate obligation to provide victims with the conclusions on the degree of disability as a percentage, but the courts charge lost earnings without this conclusions made on the basis of days off work, as off work means 100% loss of work capacity. Compensations for treatment and medical bills (MTPL regulations stipulate that these expenses are covered only if the victim is in need of these types of assistance and was not entitled to benefit from them free of charge, but the courts charge these expenses even if the victim was able to get them for free). 11 Russian Association of Motor Insurers

A new bill to amend the MTPL Law At present, the State Duma is considering a bill to amend the MTPL Law, that refers, among others, to the limits and the process of compensations for bodily injuries:  Increasing the limit of insurance compensation for bodily injuries up to EUR , including: In case of death/lost of the person who assured the income – less than EUR ; Funeral expenses, to the persons who made these expenses not less than EUR Russian Association of Motor Insurers

A new bill to amend the MTPL Law  Compensations for additional expenses to be granted whether the victim had the right to receive them for free or not ;  Changing the compensation system for bodily injuries: To set up the compensations for bodily injuries according to the compensation chart for the mere fact of injury; Subsequent additional compensations - depending on the expenses incurred by the victim within the insured sum. 13 Russian Association of Motor Insurers

14. Evolution of the Green card policies and paid claims abroad from 2009 till present Distribution of the policies depending on coverage Russian Association of Motor Insurers

15 Loss distribution abroad from 2009 till present Russian Association of Motor Insurers

Losses > EUR – 6, of which: The biggest loss – Germany, insurance reserve EUR 1,1 million, EUR paid by RSA; Loss in Greece (death of a biker) – insurance reserve EUR ; Loss in Germany (railway damage) – claim paid EUR , insurance reserve EUR ; Loss in Germany (death of a passenger), EUR insurance reserve 16 Major losses from 2009 till present Russian Association of Motor Insurers

 2009: the sell of Ukrainian MTPL policies in Russia. The problem was solved in collaboration with Motor Insurance Burro from Ukraine  Systematical refuse of Ukrainian insurers to pay the financial claims of the Russian insurance companies. The problem is being solved by the Ukrainian Motor Insurance Burro. From 270 warranty claims, exposed by RSA to foreign Burros starting with 2009, approximately 90% were addressed to Ukrainian Motor Burro  Lithuanian Green Card policies sold on the Russian territory. Measures: the collaboration with legal authorities, with Green Card Lithuanian Burro, sent a request to the supervisory authority to contact the Lithuanian insurance supervisory authority. 17 The disputed issues on Green Card Russian Association of Motor Insurers

Life and Health: Bankruptcy of the insurance company Insurer’s license withdrawal Unknown author of the accident Uninsured vehicle Property: Bankruptcy of the insurance company Insurer’s license withdrawal RSA members contribute to the reserve Fond for compensations 3% of premiums collected from MTPL insurance. 18 Compensations paid for those who have suffered losses Russian Association of Motor Insurers

Number of companies that have left the MTPL market 19 Russian Association of Motor Insurers

Evolution of paid compensations Exchange rate: EUR 1 = RUR Russian Association of Motor Insurers

Informational collaboration starting January 1 st 2013 unique informational database on MTPL policies has been introduced. Collaboration with law enforcement authorities. Measures against unfair competition: Practicing unjustified discounts, incentives and gifts when concluding MTPL policies; Providing inflated commission under the agent agreement. 21 Handling the insurance fraud Russian Association of Motor Insurers

22 The share of claims, settled without the participation of police officers in 2012 slightly rose and represents 8% (2011 – 7,5%). There is a need for serious improvement to the application of European Protocol Unsolved problems:  Insurance fraud related to European Protocol - it is necessary to expand the use of video recorders and monitoring systems  Typical schemes used in case of an accident are mandatory only for insurers and decisions made on them are easily challenged in the courts (absence of an juridical mechanism for establishing shared culpability),  Lack of legal culture of the drivers on the accidents registration procedure without police officers. Handling the insurance fraud Russian Association of Motor Insurers

Proposed measures for stabilization on the market New amendments to the insurance legislation concerning the bankruptcy of the insurers (the interim administration, prevention measures for bankruptcy) Set up the managers liability of the insurance companies for their obligations Increase the demands for the financial stability of the insurers, introduction of prudential supervision The introduction of a warning system related to the insurer financial situation based on: - numbers of complaints to the number of insurance contracts, - share of unsolved claims, etc. 23 Russian Association of Motor Insurers

THANK YOU FOR YOUR ATTENTION ! 24 Russian Association of Motor Insurers