Motor Insurance Working Party

1. Motor Insurance Working Party Lisbon 8th May 2013

2. Contents of slides The present presentation contains: • Introduction to the questionnaire • The questionnaire • A synthesis of received answers • A synthesis of the discussion during the meeting in Lisbon.

3. Indemnificationprocedures and costincreasing in Motor Insurance • It’s a matter of fact that Motor Insurance is a compensation mechanism having a relevant impact on the free movement of persons and vehicles. • At the same time it is obvious that the correct functioning of a such mechanism depends on an efficient system of victims’ indeminification.

4. Indemnificationprocedures and costincreasing in Motor Insurance • We can remember shortly: • - direct indemnification in case of no fault insurance; • - third party insurance; • - direct indemnification by insurer of the wrongdoer in case of third party insurance (so called direct action) • - direct reimbursement in case of third party insurance. This system preserves the tort principle requiring that the agent company be subsequently “reimbursed” by the principal company. All different indemnification systems pose worldwide problems of costs’ increasing

5. Possible reasons • The British Insurance Brokers’ Association puts at the top of the list of the reasons of increased cost of motor insurance: the increase in the propensity to claim, the increase in the amounts awarded with specific regards to physical damages not objectively assessable (like in case of whiplash claims ) and to non pecuniary losses. Non pecuniary losses can be characterized as losses or harm not assessable in money on the basis of any standard financial yardstick. We can consider for example pain and suffering as a result of physical injury, or even the death of a person.

6. Possiblereasons“le maladeimmaginaire-Moliere”

7. Possible reasons • Another reason of insurance increased cost could be frauds. Typical motor insurance frauds are: the so called crash for cash (for example a person causescrasheswithinnocentmotoriststomakefraudulentinsuranceclaims) and the cases of exaggerated claims (for example a real accident may occur, but the dishonest victim may take the opportunity to ask compensation also for a whole range of previous minor damages of the vehicle).

8. Possiblereasons“I bari”- Caravaggio

9. All these factors have moreover a negative impact on the fundamental function of insurance: risk pooling. • Risk pooling works well if certain conditions are met: 1) we are considering real events resulting in a physical loss to particular agents; 2) each loss affects only a small fraction of the pool at the same time; 3) the probability of a loss can be calculated; 4) the risks are not correlated across.

10. What’s the problem? • Till now national legislators have mainly focused their attention on indemnification system regards to motor insurance, aiming to ensure that all victims of road accidents could claim compensation from an insurance company. But may be it should be better to consider also the above factors of costs’ increasing in motor insurance.

11. Question 1 • In your country, is the Government (or Insurance Market’s Public Authority) monitoring motor insurance costs?

12. In Italy • According to ANIA results in 2012 the incurred claims cost for the accident amounted to Euro 13,441 million, with a 3.1% decrease compared to 2010. 2011. Possibile reasons: -application of the direct indemnity system (?) - ANIA said that in particular, the total number of claims (and the claims frequency indicator) diminished, probably because of the decreased vehicle use – especially in urban centers – owing to higher fuel prices (on average 15%). Moreover Ania underlines that the average claims cost registered an increase due to the change in the settled claims mix consistently with the hypothesis that smaller claims diminished.

13. In UK • On 20 April 2012, the House of Commons Transport Committee published the Government’s response to its follow up report on the cost of motor insurance, which was originally published on 12 January 2012.

14. Numberof Motor InsuranceInjuryclaimsnotifiedto the Compensationrecoveryunit

15. In UK • Government observes also that premiums have continued to rise, especially for young drivers. • 21% of drivers considered driving without an insurance because of the high cost of premiums!

16. DISCUSSION • With regard to the problem of persons driving without an insurance David McKenna (Australia) underlines that this is not a problem in countries like Australia where Motor Insurance is mandatory and criminal sanctions are provided in case of drivers without an insurance. • In Australia in case of mild injury it’s generally possible to claim compensation only for pecuniary losses.

17. DISCUSSION • Marco Aurelio Moreira (Brasil), Eduardo Magialardi (Argentina), Carlos Berguido (Panama), Pablo Quintero (Columbia) observethat in many South American countries a compulsoryinsuranceisprovided, butmanylosses are escludedfromcoverage. • Particularly in Brasil a compulsory auto injury insurance system operates in the country (DPVAT, for Personal Damage caused by terrestrial vehicles - or in Portuguese, "DanosPessoaisCausadosporVeículosAutomotores de ViasTerrestres“). This insurance is run by the Federation of National Private Insurance and Capitalization Firms (FENASEG), and provides a minimum insurance coverage for injury to third parties. The premiums for this insurance are paid when the car owner pays the annual road tax. Owners can subscribe also a facultative insurance in order to cover damages escluded from the compulsory insurance coverage, but many drivers don’t subscribe a facultative insurance.

18. Discussion • Marco Frigessi observes that lately the Italian Supreme Court, in two judgments 10211/2011 and 5327/2013, ordered to some insurance companies, condemned by Italian Antitrust Authority, to pay damages to consumers for “anticompetitive deal”. According to Supreme Court’s opinion damages could be calculated taking in to account premiums increasing.

19. 2° question • In your country, are limits to indemnification provided by law?

20. In Italy • Italian law provides limits for personal damage non objectively assessable (art. 139, 2 Insurance Code – dlgs 209/2005 as modified by art. 32 DecretoLegge 24 gennaio 2012, n. 1, converted into law by the act Legge 24 marzo 2012, n. 27). • According to this new rule no personal injury compensation can be claimed for any mild injury in the absence of a forensic examination which, depending on type of injury, makes a specific observation of the claimant’s injury (either visual or via diagnostic instruments).

21. Increasingof personal damages on the basisofAnia data

22. England • In England around 70% of motor insurance personal injury claims arise from whiplash injuries. In the report of the House of Commons of 2012, dedicated to Motor Insurance, is taken in to account the possibility to pay whiplash only where “clear ojective evidence of real injury is provided”.

23. Discussion • With regard to the incresing of whiplash injuries Tim Hardy (UK) observes that the reason could be found also in some safety measures in vehicles. • Of course appropriate motor vehicle safety measures may reduce the chances of a more severe injury.

24. Discussion • Warren Tseng observes that in Taiwan a compulsory insurace strongly regulated is provided. Indemnity limits and premiums rate are under public control.

25. 3°-4° questions • What kind of damages and compensation can accident car victim get in case of personal injury? Medical expenses? Costs of living with a disability? Lost wages? Pain and suffering? Loss of consortium ? Impairment of earnings capacity ? Cost of repair for damaged cars or vehicles ? • In your country, can a plaintiff receive punitive damages in case of car accidents? If yes, what conditions are required ? Are they insurable?

26. In Italy • Personal damagesaccorded : -Loss ofearning -Noteconomicaldamages (moraldamage) accorded and established on anindividualbasis (Courtstendtoconsider the tablesestablishedby the tribunal of Milan). -Allmedicalexpenses are completelyreimbursed. -Italianlaw don’t recognize punitive damages.

27. In Italy • Article 138 of the Insurance Code (Legislative Decree 209/2005) provides for the issue of a single national table for the economic and forensic evaluation of severe personal injury due to traffic accidents. • Adraft of the presidential decree that is to promulgate the table was presented at the Council of Ministers in August 2011 and transmitted to the Council of State, which in November (Act 04318/2011) gave a substantially positive opinion, with some observations. • A new decree has been approved by the Council of Ministers on third April 2013, but it has been strongly criticized by Italian lawyers. • By the moment we’re still waiting………. • A system for evaluation of mild personal injuries is provided according to art. 139 of the Insurance Code.

28. In Portugal • Personal damages accorded : -Loss of earning -Not economical damages (moral damage) accorded and established on the basis of a dettailed medical report. -All medical expenses are completely reimbursed.

29. In France • Personal damages accorded : -Loss of earning - Moral damages. The ammount of claim is influenced by the entity of pain, moral suffering and esthetical impairment but NOT by the extent of negligence. -All medical expenses are completely reimbursed.

30. In Germany • Personal damages accorded : -Loss of earning - Moral damages. The quantification depends on the age of victims, nature and severity of the injuries. -All medical expenses are completely reimbursed.

31. In England • 1. Specialdamages • The pastfinancialexpensesthatyouhavealreadyincurredas a resultofyour road accident . They include: lostincome , the costofrepairtoyourdamagedvehicle, medicalexpenses, the costof a hirevehicle and travelexpenses. • 2. Generaldamages • a) Compensationforpain and suffering due to trauma • b) Compensationforfinanciallossesinto the future • The amountwilldepend on an estimate by a consultant in a medical report astohow long youwill continue tobeabsentfrom work. • c) Trafficaccidentcompensationforuncertainlosses • Uncertainlosses include, in particular, a reduction in life expectancy.

32. Discussion • Tim Hardy observes that the amount of damages in UK depends also on the different settlements of disputes. • Marco Frigessi explains that in Italy settlement of disputes was facilitated by compulsory mediation.

33. Discussion • Sofia Ventura Coelho, lawyer in Lisbon, observes that lately, insurers are required to submit extra judicially reasonable offer to the victims, considering various parameters both in case of death and in the case of simple injury.

34. Discussion • Italian parliament, according to the 2008 EU Mediation Directive,   introduced a mandatory mediation scheme through legislative decree No. 28 enacted on 20 March 2010, article 5.1. • Italian law did not require parties to settle disputes at mediation, merely to attempt to do so with regard to some specific subjects like motor liability. • In an interim statement released by the Court on 26 October, Italian mandatory mediation process has been found to be unconstitutional because the Italian Government lacked the legislative power to introduce article 5.1 of the Decree 28, i.e. that it was going beyond the relevant provisions of the Delegation Law n. 69/2009 - which did not explicitly refer to the compulsory mediation procedure.    

35. Discussion • In Australia, says David Mc Kenna, there may be a mandatory requirement to attend mediation. In any case the outcome is always voluntary. • In Argentina, says Edoardo Mangialardi, the percentage of successful mediations is about 30%. • With respect to the mediation in Taiwan,says Warren Tseng, we have two kinds of mediation: in-court (before instituting legal action with the court, there are several items required to "compulsory mediation” by the court) and out-of court (it is mechanism to provide a third party who tries to resolve the civil dispute between the parties).

36. 5° question • In your country are there applications and claims form to contain fraud ?

37. U.S.A. • according to Ohio law: <<All applications for group or individual insurance issued by an insurer and all claim forms issued by an insurer, for use by persons in applying for insurance or submitting a claim for payment pursuant to a policy or a claim for any other benefit pursuant to a policy, shall clearly contain a warning substantially as follows: “Any person who, with intent to defraud or knowing that he is facilitating a fraud against an insurer, submits an application or files a claim containing a false or deceptive statement is guilty of insurance fraud.”>>

38. Discussion • As Marco Aurelio Moreiraobservesinsurersprefertouse private law in ordertodenycoverage and avoidpayment in case offrauds. • Insurersusually don’t denouncefraudsto public authoritiesalsobecausecourtstendtojudge in favourofconsumers. • As Eduardo Mangialardiobservesinsurers and intermediariesshould take the necessarymeasurestoprevent,detect and remedyinsurancefrauds.

39. 6° question • What about criminal provisions on insurance fraud?

40. In Italy • In Italian criminal code a special disposition is contained in paragraph 642. Moreover art. 33 Decree Law 1/2012, of 24 January, on liberalizations, known also as the “Grow Italy” decree, converted with amendments into Law 27/2012 of 24 March amends Article 642 of the Criminal Code on insurance fraud, increasing the minimum sentence to one year and the maximum to five years.

41. 7° question • In your country, does law provide claims handling procedure in order to contain motor insurance frauds ?

42. In Italy Other useful measures, contained in the above Decree “Grow Italy”, are mainly those: • to reduce the phenomenon of falsification of paper documents through “dematerialization” of insurance certificates; • procedures whereby insurers may suspend payment when they have information (deriving from Ivass’s accident database) indicating the likelihood of fraud.

43. 8° question • What about the coordination of different systems of compensation?

44. In Sweden • In Sweden since they have been working with the intention to ensure compensation for the injured persons, the definition of motor accident has been extended. In some cases in rulings of the Swedish Supreme Court, motor liability has met the likewise widened workers compensation schemes and the problem with overlapping and double compensation has arisen.

45. In Italy • The Act. 23 Febraury 2000, n. 38 introduced the notion of danno biologico thereby providing for its compensation as part of compulsory insurance against work related accidents and occupational diseases. • Here the biological damage si defined as an “injury to an individual’s psycho-phisical integrity capable of medical evalutation”.

46. In Italy • Danno biologico isindemnifiedby INAIL (Italianworkers’ compensation authority) withreferenceto a point system. • Inail don’t grantanycompensationofother non pecuniarylosses. • Inail has the right ofsubrogationprovided in art. 1916 c.c.”aninsurerwhohaspaid the indemnityissubrogated up to the extentof the amountofsaidindemnity, to the rightsof the insuredagainstthirdpersonswho are liablefor the damage”.

47. Joint meeting CCWP-MIWP Sidney • We are going to discuss about some topics of relevant interest to both WPs. • One of these topic will be “green car and insurance” We intend to focus attention on the relevance of eco-driving habits of insured parties regards to motor insurance policies.

48. *** Thanks for your partecipation and for your attention!