mtpl market in russia : problems and trends march 3 rd - 4 th , 2013 istanbul

MTPL market in Russia :Problems and trends

March 3rd - 4th, 2013

Istanbul

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Russian Association of Motor Insurers

MTPL essentials in Russia

25.04.2002 “Mandatory law on MTPL insurance” was adopted by the Federal Parliament

08.08.2002 Set up of the Russian Association of Motor Insurers (RAMI) – 48 insurance companies

14.10.2002 Registration of the RAMI

On 28.02.2013 there were 109 members in RSA, among them 103 companies selling MTPL

01.07.2003 Implementing the MTPL system

01.07.2004 RAMI started to pay its first compensations

01.03.2008 Compensation limits for bodily injuries on MTPL policies were removed (for more than one victim)

01.01.2009 Russia joined Green Card System

01.03.2009 Introduction of the direct procedure on handling claims in case of accidents - European Protocol (Amicable report)

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MTPL essentials in Russia

Limit of indemnitiesBodily injuries: EUR 4 000 for each of the victimsProperty: EUR 3 000, for one victim, and EUR 4 000 for more than two victimsIntention of increasing the limits Insurance tariffs Set by the Government

Intention of liberalization (min and max)Insurance claimsIndependent Expertise Institute The claim has to be paid within 30 daysInsurance 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)

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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.

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MTPL StatisticsExchange rate: EUR 1 = RUR 40

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MTPL Statistics

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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

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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


Compensations paid for bodily injuries

Number of paid compensations related to bodily injuries cases

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Period DeathMedical expense

s

Death + Medical expenses

2010 11 135 9 566 20 701

2011 9 721 11 671 21 392


Compensations paid for bodily injuries

Number of victims

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Period Number 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

2010 2 655 7 294 8 679

2011 2 292 6 749 10 489

Number of victims that suffered bodily injuries as a result of accidents has increased by 13 % in 2011 in comparison to 2010


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).

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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 13 000, including:

In case of death/lost of the person who assured the income – less than EUR 12 000;

Funeral expenses, to the persons who made these expenses not less than EUR 1 000

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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.

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..Evolution of the Green card policies and paid claims abroad

from 2009 till present

Distribution of the policies depending on coverage


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Loss distribution abroadfrom 2009 till presentRussian Association of Motor Insurers

Losses > EUR 200 000 – 6, of which:

• The biggest loss – Germany, insurance reserve EUR 1,1 million, EUR 206 000 paid by RSA;• Loss in Greece (death of a biker) – insurance reserve EUR 763 000;• Loss in Germany (railway damage) – claim paid EUR 55 000, insurance reserve EUR 618 000;• Loss in Germany (death of a passenger), EUR 300 000 insurance reserve

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Major losses from 2009 till presentRussian 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.

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The disputed issues on Green Card


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.

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Compensations paid for those who have suffered lossesRussian Association of Motor Insurers

8

34

7

17

15

97

0

5

10

15

20

25

2005 2006 2007 2008 2009 2010 2011 2012

Number of companies that have left the MTPL market

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Evolution of paid compensations

Exchange rate: EUR 1 = RUR 40

20

84 81286 300

118,286

77 700

13,68010,7346 522

1,62222 0,5

4,327 3 785

4,990

3,400

480310

59

375

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

2012201120102009200820072006200520040

20000

40000

60000

80000

100000

120000

140000

Total number of the paid claims

Total volume of the compensations, RUR million


Informational collaborationstarting January 1st 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.

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Handling the insurance fraudRussian Association of Motor Insurers

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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


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 supervisionThe 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.

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THANK YOU FOR YOUR ATTENTION!

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mtpl market in russia : problems and trends march 3 rd - 4 th , 2013 istanbul

Documents

bodily injury compensation

mtpl insurance

freein case of bodily

compensation limits

case of accidents

level of compensation

mtpl system01

victim doesnt