Consumer protection in the insurance market: the role of Consap

Consumer protection in the insurance market: the role of Consap Congress New instruments of consumer protection in motor insurance Warsawa, September 28, 2009 Warsaw, September 28, 2009 New instruments of consumer protection in motor insurance

Consap: a public insurer – overview…………………………………3 Funds managed and services supplied by Consap…………………10 Introducing the Clearing House……………………………………26 New features………………………………………………………….31 New instruments of consumer protection in motor insurance

Presentation of Consap: a public insurer Consap S.p.A. - Concessionaria Servizi Assicurativi Pubblici is a government-owned company created in 1993 by the privatization of the Italian National Insurance Institute (a former public entity) 100% of the equities are possessed by the State through the Ministry of Economy and Finance New instruments of consumer protection in motor insurance

Consap: a public insurer Consap: manages Guarantee and Solidarity Funds and supplies other relevant public services “handles institutional duties which exceed the simple supply of public services and resemble the typical commitment of a public function” (Council of State) New instruments of consumer protection in motor insurance

Consap: a public insurer Consap is an “in house” company therefore, according to the recent Decree Law n. 78 of July 2009, the Public Administrations can assign directly the management of public Funds and activities to the company: a public tender is not required New instruments of consumer protection in motor insurance

Consap: a public insurer Consap plays the role of “public insurer” according to a model in which the concept of “mutuality” typical of the insurance contracts is intended as “sharing risks reciprocally within the whole community” Consap is “subsidiary” to the traditional insurance market: some of the main Funds managed and services provieded by Consap are related to the insurance field Support to the Insurance Market is particularly remarkable when dealing with the Guarantee Fund for Victims of Road Accidents and the Clearing House New instruments of consumer protection in motor insurance

Consap: a public insurer Consap acts: on the basis of laws/regulations and of rules provided by Ministerial Decrees approving public licenses or agreements undersigned with Public Administrations (Treasury, Economic Development, Department of the Youth, etc. ) with the support/ advise + guidance provided by ad hoc steering committees New instruments of consumer protection in motor insurance

Consumer protection As experienced so far, the presence of a public insurer - as a body indipendent from the National Association - is a stimulus/help/challenge for the insurance market to: enhance the level of services offered by private competitors focus on the core business accomplish market strategies more efficiently foster rights of the Consumers’ Associations (which strongly endorse Consap) In other words, it can only benefit the whole society New instruments of consumer protection in motor insurance

Consap keeps a strong relationship with the Consumers’ Associations, which are involved in the administration of the Funds/services Representatives of the Consumers’ Associations – together with appointees of the competent Ministries - are members of the steering committees of the Funds Protection of consumers’ rights has become even more important after the financial crisis hit the market in 2008 The Consumer protection New instruments of consumer protection in motor insurance

Funds managed and services supplied by Consap Consap administrates: Guarantee Funds Solidarity Funds public services New instruments of consumer protection in motor insurance

Guarantee Funds The Guarantee Funds have been established with the aim of compensating armless victims of road accidents or other painful events, who could not otherwise obtain reparation, in those cases when a compulsory liability insurance cover is provided by law Guarantee Fund for Victims of road Accidents and Compensation Body Guarantee Fund for Victims of hunting accidents Guarantee Fund for catastrophic risks Guarantee Fund for insurance brokers New instruments of consumer protection in motor insurance

The Guarantee Fund for Victims of road Accidents The Fund was established, in 1969, when compulsory MTPL insurance was introduced (Law n. 990) The Fund is financially supplied by a levy of 2,5% on MTPL insurance premium rates paid by motorists and contributed through the insurance undertakings (in 2008: € 440,5 million) + administrative fines paid by insurance companies (in 2008: about € 40 million) + revenues deriving from assets of companies in liquidation (in 2008: about € 24 million)Total 2008 incomes: approx. € 500 million New instruments of consumer protection in motor insurance

The mission of the Fund is to compensate fairly and promptly victims of road accidents involving: untraced and uninsured vehicles or vehicles insured with insolvent companies (53 undertakings ended in a winding up procedure until 1998); the phenomenon stopped thanks to the excellent job of Isvap but.. freedom of provision of services vehicles circulating against the owner’s will (stolen vehicles),despatched vehicles or vehicles with a number plate not corresponding to the vehicle registration number The Guarantee Fund for Victims of road Accident New instruments of consumer protection in motor insurance

The Guarantee Fund for Victims of road Accident Assessment/Compensation is made through the major Italian insurance companies (designated by Isvap) Compensation is made within the minimum limit of liability (at present € 774.685,35; from next December 11th the minimum amount will be raised to € 2,5 million for body injuries and € 0,5 million for material loss) So far the Fund has compensated claims for a total amount of approximately € 5,5 billion, related to settlement of 1,2 million of claims New instruments of consumer protection in motor insurance

The Guarantee Fund for Victims of road Accident Figures New instruments of consumer protection in motor insurance

The Compensation Body was established in 2003, managed by Consap, guarantees compensation of road accidents occurred abroad within the European Union (network) An Information Centre was also established at ISVAP The Compensation Body New instruments of consumer protection in motor insurance

The Compensation Body Cases of intervention: no Claims Representative appointed insurer fails to present a reasoned reply within three months of the date when the visiting victim presented his/her claim for compensation to the insurer of the liable vehicle or its Claims Representative untraced vehicle responsible for the accident non identification of the insurer of the vehicle within two months after the accident New instruments of consumer protection in motor insurance

Guarantee Fund for victims of Hunting accidents The Fund compensates accidents involving untraced and uninsured hunters or hunters insured with an insolvent company (levy of 5% on the insurance policies paid by hunters) So far it has compensated damages for € 4,6 million New instruments of consumer protection in motor insurance

Guarantee Fund for catastrophic risks The Fund was established in 2005 with an initial budget of € 50 million and assigned to Consap The aim is to create a voluntary insurance system against catastrophic risks unfortunately the Law provision has not been enforced so far, with the consequence that the loss due to the recent earthquake in the territory of L’Aquila is being repaired by the State New instruments of consumer protection in motor insurance

Guarantee Fund for insurance brokers The Fund compensates damages caused by insurance brokers, in case of fraud or culpable neglicence of an insurance Broker The Fund was previously managed by Isvap New instruments of consumer protection in motor insurance

Solidarity Funds The Solidarity Funds have been established not to leave uncompensated the victims of mafia related crimes, extortion, usury and loss of estate property Solidarity Fund for victims of extortion and usury SolidarityFund for Victims of Mafia related crimes Solidarity Fund for house buyers New instruments of consumer protection in motor insurance

Solidarity Funds Since the date of establishment until the end of 2008, these Funds have supplied more than € 250 million more than € 47 million to victims of usury (loans/mortgages) about € 91 million benefits to victims of extortion more than € 115 million to victims of mafia related crimes New instruments of consumer protection in motor insurance

Solidarity Fund for house buyers This Fund provides compensation for those buyers of houses under construction who have paid an advance sum to a building company which eventually ends up in bankruptcy before the house has been completed and delivered Consap has received more than 12.000 claims for an estimated amount of damages of more than € 780 million New instruments of consumer protection in motor insurance

Other Funds / services: Fund for credit to young people This Fund was created in 2007 (budget of € 30 million) to ensure young people (18 to 35 years old) an easier access to bank credit Young people can get access to bank loans (with a limit of € 6.000)guaranteed by the Fund if a consumer fails to refund a bank (50%) the aim is to have a boosting effect on both family consumes and domestic economic growth New instruments of consumer protection in motor insurance

The credit helps students to afford the payment of university taxes and masters, to purchase a pc or to pay the rent of an apartment within the first year (01/03/2008 – 31/12/2008) the Fund has released905 guarantees in favor of 52 banks, corresponding to loans amounting to € 1,12 million Fund for credit to young people New instruments of consumer protection in motor insurance

Other Funds / services: the Clearing House within the system of direct claims settlement Legal framework: introduced by art. 150 of the Legislative Decree n. 209 of 2005, and implemented by Presidential Decree n. 254 of 2006 The innovative procedure states thatin case of minor body injuries (within 9% of permanent disability) and loss of property consequent to a car accident the damaged party can address the claim directly to the insurer of the non responsible vehicle New instruments of consumer protection in motor insurance

the Clearing House within the system of direct claims settlement A passenger (even reporting serious body injuries) can also claim on the transporting car’s insurer regardless of the responsibility of the driver Claims by transported parties must be settled within the minimum limit of liability cover New instruments of consumer protection in motor insurance

the Clearing House within the system of direct claims settlement The damage is settled by an agreement: a party who chooses to get compensated with the system of direct claims settlement is not supported by legal aid but could still start a litigation if the sum offered by the insurer is not considered satisfying A passenger can claim on the insurer of the transporting car regardless of the driver’s responsibility but these claims must be settled within the minimum limit of liability cover New instruments of consumer protection in motor insurance

the Clearing House within the system of direct claims settlement Pros: companies are keen on keeping the injured party satisfied with the best level of service offered, as the damaged party is their customer Damaged parties are more confidant as they deal with their insurance company Legal costs are not envisaged and handling costs are cut New instruments of consumer protection in motor insurance

In order to ensure a correct and impartial functioning of the system, Consap has been approved as manager of the Clearing House by the Ministery of the Economic Development the Clearing House within the system of direct claims settlement New instruments of consumer protection in motor insurance

Forthcoming duties will include the management of: a fund for victims of financial frauds a fund to ease access to credit for newborns’ parents Future perspectives New instruments of consumer protection in motor insurance

Fund for victims of financial frauds The fund is established at the Ministery of the Economy and Finance It collects revenues deriving from “sleeping accounts” (i.e. accounts classed as dormant after having been inactive/ untouched for 10 years and on + cheques / unclaimed life insurance policies). No reaction = cash goes to the State The task: to restore victims of financial frauds, as well as to refund the investors of Alitalia in liquidation and to finance the “social card”, a social initiative for poor retired people > 65 yrs old New instruments of consumer protection in motor insurance

Fund for victims of financial frauds • Consap will handle the Fund on behalf of the Treasury, in force of an agreement to be soon undersigned • 1st step: Consap will try to reunite customers - who want to claim funds from and/or re-open a dormant account - with their forgotten cash • So far, revenues amount at € 1 billion New instruments of consumer protection in motor insurance

Access to credit for newborns’ parents The fund is established at the Department for the Family and will be handled by Consap (budget: € 85 million) The fund will guarantee 50% of the bank loans requested by newborns’ parents for consumer credit (limit of € 5.000 loans) In case of insolvency, the Fund will refund the Bank with the residual amount due, within the limit of the warranty New instruments of consumer protection in motor insurance

www.consap.it New instruments of consumer protection in motor insurance

Consumer protection in the insurance market: the role of Consap