Regulation of compensation for moral damages and bodily

Regulation of compensation for moral damages and bodily injuries Madalin Rosu, Head of Motor Insurance Section Budapest, April 2016 Motor Insurance Conference

Romania from MTPL perspective MTPL policies ~ 4, 5 mil Romanian traffic the highest risk for death in Europe (together with Bulgaria). No of deaths per million of inhabitants : Romania 95 / Sweden 27 / Average Europe 51, 5 MTPL claim files Frequency ~ 340. 000 7 - 8 % Indemnities in a worrying increasing trend Specialized “hunting companies” = “claim farmers“ Non-unitary judicial practice Same type of bodily injury – the compensation granted by one court can be 100 times larger than the one granted by another court

Predictability Unfortunate events can not be prevented. But insurers are trying to make them more bearable, by answering two questions: How likely is for an unpleasant event to happen? How much would it cost removing its effects? In both cases, the key word is Predictability. 02

What is happening in Romania? % weight of bodily injuries and deaths in total MTPL claims 25 30 Romania faces a lack of legislation in the field of moral damages. th of w o r G % 1000 25 19. 6 16. 77 18. 52 20 The amount of compensation is unpredictable: compensation paid for bodily injuries on MTPL is alarmingly growing, from year to year (25% of all 15 6. 92 10 claims paid in 2014 represents moral damages). 5 2. 7 3. 38 4. 4 0 2007 2008 2009 2010 2011 2012 2013 2014 02

What is happening in Romania? Discrimination between victims of accidents who suffered similar damage frequently appears. Compensation for injuries and death (mil. RON) 500 450 400 Marginal undesirable situations are created: veritable 350 networks that “hunt” victims for representation before 300 the insurers (“claim farmers”). 250 Additional costs generated by the absence of a predictable system are transferred to policyholders. The 470 million lei (approx. 105 million euro) paid in 2014 represented an increase of 24% over 2013 and more than 2000% over 2007. 470 th of Grow 0% 200 378 330 266 200 150 100 50 0 111 67 41 20 2007 2008 2009 2010 2011 2012 2013 2014 Compensation injuries and death (mil. RON) 02

What is happening in Romania? PREMIUMS VERSUS DAMAGES (MARKET) 36% 3857 2054 1875 33% % 106 87% 2461 3298 2464 2937 2160 2306 1367 1398 1795 28% 4036 Total damages (mil. RON) 3866 GWP - Gross written premiums (mil. RON) 64% 02

Increasing severity of claims OCTOBER 2014 – A TRUCK hit a car column 5 people lost their lives, 20 people were injured. AUGUST 2015 - A minibus crash 2 people lost their lives, 5 people were injured. 02 Catastrophic accidents caused by vehicles registered in Romania

Increasing severity of claims DECEMBER 2015 – Collision between a truck and a minibus, Sibiu 3 people lost their lives, 3 people were injured. FEBRUARY 2016 – Bus crash near Ploiești 5 people lost their live, 19 people were injured. Catastrophic accidents caused by vehicles registered in Romania 02

Increasing severity of claims 17 people were injured and 5 people lost their lives, including three members of male handball team CSU Targoviste 02 Catastrophic accidents caused by vehicles registered in Romania

European experience Objective criteria for granting moral damages exist across Europe: Spain, Czech Republic, Slovakia, Germany, France, Austria, Italy. In 2013, the IMF recommended Italy a move towards a table system to reduce uncertainties related to the costs of moral damages and ensure equal treatment of victims. 03

European experience Combined ratio – Romania vs. Italy Romania Source: Annual report of Financial Supervisory Authority 2013 Italy Source: IMF Country Report No. 13/346 – December 2013 1104

Solution TABLE SYSTEM FOR GRANTING COMPENSATION OBJECTIVITY A stable and predictable computing system, with objective criteria, established by specialists in forensic medicine for moral compensation NO DISCRIMINATION People with similiar injuries receive similar compensation FAIR COSTS Enables accurate estimation of costs for future unpleasant events EFFICIENCY Allows relieving courts and reduces waiting times for receiving compensation

What it implies? - Torts regulation for damages caused by vehicle crashes - Systematization and consolidation of legislation related to MTPL insurance and entities involved - Introducing a new evaluation concept for moral damages: a table system with points for bodily injuries and death • • • traumatic point (TP) persistent vegetative state (PVS) traumatic scale for 0 to 200 TP assumed average level of suffering maximum possible adjustment for compensation: 25% determining the TP value 05

What are the rules? PVS TL PC Permanent vegetative state 200 TP Traumatic lesion Posttraumatic complication Permanent posttraumatic complication Maximum point value Independently of no of lesions Each TL has a value in points. Each TL can have post traumatic complication estimated in points. All time will be used the highest no of points in case of more complication In case of PPC also highest value will be taken into consideration. Total value = TL+(max. PC)+(max. PPC) 05

Examples 05

Examples and final conclusion ü Scientific study done by Romanian National Institute of Legal Medicine network; ü Objective and neutral position toward insurance market; ü Treating all traumatic lesions but also posttraumatic complications; ü Complete “baremo” for any type of trauma and post trauma; ü Points between 0 and 200. 05

Thank you. www. unsar. ro 17