The Evolution of the Legislation in Romania as regards the Motor Third Party Liability Insurance

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The Evolution of the Legislation in Romania as
regards the Motor Third Party Liability Insurance

• Viena 14th September 2006

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GARANTA INSURANCE Co.
Share Capital 5,8 mill
EUR SHAREHOLDERS The ETHNIKI
93,02 OTHERS 6,98
RANK 18 out of 36
Insurers Network 10
branches Social Headquarters 19-21 Ion
Mihalache Bld., Sector 1, Bucharest, Romania Tel
00 4021 307 99 71 - 78 Fax [phone]
70 E-mail info_at_garanta.ro www.garanta.ro
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Topics
A few words about the Romanian insurance market

• Laws in the insurance field in Romania

How to act as to defend the interests of a
foreign citizen who was damaged / injured in a
road accident on Romanian territory
Conclusions
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Romanian insurance market (1)

• Information about Romania
• Country surface is of 237,500 km2
• Population is of 22 million
• There are 198,776 km of road open for public
  circulation

There are 4.2 million vehicles registered (85
with motor TPL insurance) There are 36 insurance
companies, out of which 16 issuing motor TPL
insurance policies
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Romanian insurance market (2)

• The gross written premiums for general and life
  insurance as per 2005 are of 1,220.77 million EUR

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Romanian insurance market (3)

• The gross written premiums for motor insurance as
  per 2005 are of 632 million EUR

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Romanian insurance market (4)
The average claim for material damages is of 500
EUR in 2005
The average claim for bodily injuries is rather
small (representing app. 1 out of total TPL
claims) in 2005
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Laws in the insurance field in Romania

• Law no.136/1995 as regards the insurance and
  reinsurance in Romania, with its further
  modifications and completions (there are numerous
  modifications, especially in 2005 and 2006)

Law no. 32/2000 as regards the insurance activity
and surveillance, with its further modifications
and completions (there are also several
modifications especially in 2005)
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Motor TPL insurance is settled by

• Norms issued on the basis of the law as regards
  TPL insurance, which have been several times
  modified on a yearly basis and which today are as
  follows

a) Ordinance no. 3108 / 2004 issued by the
Insurance Supervisory Committee valid since 2005
and up to the moment when Romania adheres to the
European Union,
b) Ordinance no. 3116 / 2005 issued by the
Insurance Surpervisory Committee, valid since the
moment Romania adheres to the European Union.
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Motor TPL insurance is obligatory for all classes
of vehicles subject to registration as follows

• Vehicles and trailers (trailers only starting
  with 2007) if registered in Romania, must be
  insured for a 6 or 12 months period

Also the following vehicles must be insured as
above (which in other countries are exempted) -
vehicles owned by state authorities - military
vehicles - trams - troleys To be mentioned that
certain agricultural or site machines,
motor-scooters not exceeding 49 km/hour,
carriages do not have to be registered.
Vehicles and trailers which are not registered in
Romania must have either registration numbers
which certify the insurance validity or
international insurance documents valid in
Romania.
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Law Applicability Limits

• The legislation as regards motor TPL insurance
  is applicable also to the foreign visitors and is
  applied for liabilities both in case of bodily
  injuries and material damages.

TPL insurance has compensation limits which are
not minimal for the moment, but are maximum
limits falling under the Insurers liability.
After the adhesion to the European Union, the law
allows that the limits of compensation be
minimal.
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COMPENSATION LIMITS FOR MOTOR TPL CLAIMS AS PER
2006

• The maximum limits of compensation which can be
  granted by TPL insurers for damages/injuries
  caused due to one and the same accident, no
  matter the number of persons responsible for the
  accident, applicable to the obligatory TPL
  insurance policies whose validity starts in 2005
  and for those accidents occurred in the calendar
  year 2006 are as follows

a) starting from 30 EUR up to maximum 100,000
EUR, no matter the number of damaged parties, in
case of damage or destruction of property, for
direct and indirect material losses of over 30 EUR
b) up to 55,000 EUR for each person, but not more
than 270,000 EUR, no matter the number of injured
parties, in case of injuries or death, including
for losses without patrimonial character
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COMPENSATION LIMITS FOR MOTOR TPL CLAIMS YEAR
after the adhesion (1)

• The maximum limits of compensation established by
  the TPL Insurers must be a) at least
  100,000 EUR, in RON equivalent as at the date of
  accident, no matter the number of damaged
  parties, in case of damage or destruction of
  property, for direct and indirect material
  damages b) at least 350,000 EUR, in RON
  equivalent as at the date of accident, for each
  person, in case of bodily injuries or death,
  including for losses without patrimonial
  character.

The insurance contracts will be concluded with a
reached deductible - minimum limit of
compensation - of 50 EUR in RON equivalent as at
the date of accident.
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In case of accidents occurred outside Romanian
territory, but within the territorial cover
limits, the insurer grants compensations
according to
COMPENSATION LIMITS FOR MOTOR TPL CLAIMS YEAR
after the adhesion (2)

• a) the legislation in force in the state where
  the accident occured and according to the highest
  level of compensation as between the respective
  country and Romania

b) the Romanian legislation in force, if the
damaged parties are citizens of the EU states,
during a trip connecting directly two territories
where the institution treaty as of the EEC is
valid, if there is no national Bureau on the
territory crossed where the accident occurred.
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Compensation Payment (1)

• In case of bodily injuries or death, the
  compensations are granted both for the persons
  outside the vehicle which caused the accident, as
  well as for the persons who were in that vehicle,
  except for the driver of the respective vehicle.

For the damage or destruction of property,
compensations are granted for the goods outside
the vehicle causing the accident and for the
goods inside that vehicle, only if they were not
transported on the basis of a contractual
relation with the owner or user of the respective
vehicle, as well as if they did not belong to the
owner, user or driver of the vehicle causing the
accident.
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Compensation Payment (2)

• Compensations are granted also when the persons
  submitting a claim are the spouse of or the
  persons supported by the owner or driver of the
  insured vehicle, liable for the accident.

IN 2006 a databases was elaborated with all MOTOR
TPL INSURED. At CEDAM information center, one
can search on the site www.cedam.csa-isc.ro/engli
sh/index.php for the identification of the
Insurer of one vehicle (if the registration
number of the vehicle is known).
There are guarantee funds and protection funds
for street victims (which, as in many countries,
do not validate in case of CASCO recoveries).
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Court Actions

• The damaged party or the authorised party may
  act
• against the guilty party
• against the TPL Insurer in Romania, but with the
  compulsory subpoena of the guilty party.

If the guilty party has an external insurance
(green card) and the accident takes place in
Romania, the action in court can be initiated
against the Motor Insurers Bureau in Romania or
against its correspondent.
A claim falls under prescription after 3 years
since the date of the accident.
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Cases in which the Insurer has the right to
refuse the compensation payment

• Several aspects can fall under the above
  category
• - the lack of responsibility due to the policy
  validity period (there is no grace period)
• - there is a series of exclusions depreciation
  of goods after the damage, damages due to events
  occured while the vehicle plays the role of
  machinery or work installation, while loading or
  unloading procedures
• - if the agreement of the guilty person does not
  exist (but this stipulation is no longer valid in
  case of a court action)
• - for claims related to lack of usage (but this
  stipulation is no longer valid in case of a court
  action)

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How to handle a claim in Romania (1)

• Until Romania adheres to the European Union,
  recovery actions as of compensations from
  Insurers in case of an accident occurred in
  Romania are as follows

• 1. In case of a CASCO recovery
• one verifies the Insurer at CEDAM Information
  Center
• one contacts directly the Insurer in Romania or
  the Motor Insurers Bureau in Romania (BAAR), if
  the guilty party has a green card insurance
  issued by an external Insurer
• the documents proving the right for recovery are
  submitted
• all documents regarding the file are submitted
  (see List 1 attached), only after the Insurer
  replies in order not to lose the originals

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How to handle a claim in Romania (2)

• For CASCO recoveries, the law obliges the TPL
  Insurer to accept loss evaluations which can be
  elaborated by either the CASCO Insurer or by an
  independent expert
• The equivalent of the survey is not borne by the
  TPL Insurer according to TPL norms, but it can be
  recovered from the guilty party.

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How to handle a claim in Romania (3)

• The CASCO insurer can subrogate in the rights
  of the damaged party only to the extent of what
  it actually paid on CASCO, any possible
  deductible must be recovered by the insured or
  authorised person directly.
• Whatever the CASCO insurer cannot recover from
  the TPL insurer, as for instance the depreciation
  of the good after the damage which was enlisted
  previously as an exclusion, cannot be recovered
  either from the guilty party.

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How to handle a claim in Romania (4)

• 2. In case of a direct action of the damaged
  party (or an authorised party)

• one verifies the Insurer at CEDAM Information
  Center
• one contacts directly the Insurer in Romania or
  the Motor Insurers Bureau in Romania (BAAR), if
  the guilty party has a green card insurance
  issued by an external Insurer
• the representation mandate is submitted in copy
• all documents regarding the file are submitted
  (see List 2 attached), only after the Insurer
  replied, in order not to lose the originals

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How to handle a claim in Romania (5)

• If it is not the case of a CASCO recovery, only
  the loss evaluation elaborated by the TPL Insurer
  in Romania is accepted and no external survey is
  accepted in case the evaluation of the TPL
  Insurer is missing, the law says that the due
  compensation is paid according to the information
  recorded in the documents issued by the competent
  authorities.

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COMMON ASPECTS IN CLAIMS SETTLEMENT (1)
At present, the police officer establishes in all
cases the guilt and issues a police report, but
the Constat Amiable is expected to be
introduced in 2007, as it is at the moment in
many European countries. An exception would be
the cases of bodily injuries, where the guilt is
established after a penal investigation.
The damaged party can at present challenge within
15 days the police report.

• In case of accidents with victims, the procedure
  is much more complicated, it lasts quite long,
  though the law allows settlements even without
  the resolution of the court in certain
  conditions.

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COMMON ASPECTS IN CLAIMS SETTLEMENT (2)

• Another aspect is the fact that at present the
  law requires that an amiable payment is made by
  the TPL Insurer only if the TPL Insured and the
  damaged partys agreement also exist, otherwise
  the case must go to court.

Another agreement which leads to delayed payments
is that imposed by law through which the damaged
party must declare that he was fully compensated
by the Insurer. Though the initial intention was
to protect the Insured who must have the chance
to check the amount due, such an agreement blocks
almost all cases of CASCO recoveries, where
surely this agreement is not obtained.
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COMMON ASPECTS IN CLAIMS SETTLEMENT (3)

• As regards the compensations for bodily injuries,
  the covers for amiable payments are very low
  (only expenses provable with documents) and for
  damages without patrimonial character, though for
  app. 2 years amiable and not through court
  payments have been allowed, at present there is
  no evaluation system so that the Insurers do not
  grant compensations amiably claiming it is
  impossible to establish the damage.

Multiple problems are also on the technical
evaluation side, for instance as regards damaged
vehicles, there are norms also as regards the
calculation of the wear and the carcasses (for
amiable payments).
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List 1LIST OF DOCUMENTS NECESSARY FOR A CASCO
INSURER RECOVERY (1)

• - the motor TPL or green card insurance policy of
  the guilty party

- a copy of the CASCO insurance policy valid at
the date of accident of the person in whose
rights the CASCO Insurer subrogates
- the loss evaluation elaborated by the CASCO
Insurer (adopted technological solutions, the
evaluation and establishment of the
compensations) and any possible photos of the
damaged good
- the declaration of the damaged party in
original, according to which by receiving the
compensation afferent to the respective accident,
he has no further claims whatsoever from the TPL
Insurer (guilty person)
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LIST OF DOCUMENTS NECESSARY FOR A CASCO INSURER
RECOVERY (2)

• - a copy of the document proving the payment made
  by the CASCO Insurer for the damages suffered by
  the damaged party

- the compensation claim together with the
afferent proving documents, in original

• a copy of the act of property of the good for
  which compensations are requested

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LIST OF DOCUMENTS NECESSARY FOR A CASCO INSURER
RECOVERY (3)

• - the documents in original issued by the
  competent authorities in Romania which state the
  cause, the guilty party, the damaged party and
  the damages afferent to the notified event

- the compensation claim together with the
afferent proving documents, in original
- the agreement of the guilty party to pay amiably
- the authorisation in original for the person
having signed on behalf of the damaged party all
documents afferent to the claim file, if the case
should be.
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List 2LIST OF DOCUMENTS NECESSARY FOR RECOVERIES
BY MANDATE (1)

• - the TPL or green card insurance policy of the
  guilty party

- the representation mandate (including for legal
assistance)
- the loss evaluation elaborated by the TPL
Insurer in Romania (or by the Bureaus
correspondent for a green card case)
- the declaration of the damaged party in
original, according to which by receiving the
compensation afferent to the respective accident,
he has no further claims whatsoever from the TPL
Insurer (guilty person)
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LIST OF DOCUMENTS NECESSARY FOR RECOVERIES BY
MANDATE (2)

• - a copy of the document proving the payment for
  the repairs effected

- the compensation claims together with the
afferent proving documents in original
- a copy of the property document of the good for
which compensations are claimed
- the documents in original issued by the
competent authorities in Romania which state the
cause, the guilty party, the damaged party and
the damages afferent to the notified event
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LIST OF DOCUMENTS NECESSARY FOR RECOVERIES BY
MANDATE (3)

• - the agreement of the guilty party to pay amiably

- the authorisation in original for the person
having signed on behalf of the damaged party all
documents afferent to the claim file, if the case
should be.
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Conclusions

• Certainly, 10 years ago, our reception of the
  need to protect damaged parties was almost
  inexistant, but I believe that also at present
  there are a lot of stepts to be taken and even
  though there are always good intentions, new
  factors appear which will delay the evolution of
  the system in Romania.

Additional obstacles in the system evolution will
be- the increase of the loss ratio as up to the
level of that in the EU. In Romania profit was
recorded out of TPL business for a long time at a
loss ratio of below 70, which endured up to the
time when the TPL premiums were liberalized. -
the occurence of the first financial problems
(bankrupcies), experienced by many European
countries in the past, after the TPL insurance
was liberalized. - the increase of the standard
of living, the prices for utilities and services,
but also the level of education.
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THANK YOU!
PLEASE DO NOT HESITATE TO CONTACT US FOR ANY
CLAIM CASE OCCURED IN ROMANIA.