In its resolution of 13 March 2012, the Supreme Court stated that costs of assistance in pre-trial proceedings cannot be automatically reimbursed to victims of accidents caused by the perpetrator and covered with the perpetrator’s liability insurance.
The Supreme Court rejected automatic reimbursement of assistance costs raised by the Insurance Ombudsman in a question addressed to the Court. Therefore, it is already the second time in the past few months (previous cases involved a substitute vehicle), when the Supreme Court decided that any costs incurred by the victims, must be reasonable and necessary.
The Supreme Court confirmed that each case must be considered individually. Today’s insurance practice indicates cases in which such an additional technical expertise (if its validity has been confirmed) is included in the amount of compensation.
At this stage, an unsolved issue is a question asked by the Insurance Ombudsman about the “cost of the victim’s replacement with a proxy.” The Supreme Court states in the resolution that assistance costs must be “reasonable”, “necessary” and “executed by a person with the necessary professional qualifications.”
— To obtain the exact interpretation of “necessary qualifications,” we have to wait for the Supreme Court’s reasons for the judgement. As of today, the most important thing for the insured is the lack of automation in refunding the costs of a proxy in each case of services provided by unqualified persons in an unjustified manner — says Jan Grzegorz Prądzyński, President of the Management Board of the Polish Insurance Association.
Today’s resolution of the Supreme Court states as follows:
“Reasonable and necessary costs of assistance provided by a person with the necessary qualifications, incurred by the victim in the pretrial proceedings conducted by the insurer may, in certain circumstances, constitute a property damage subject to compensation under the compulsory liability insurance of motor vehicle owners (Article 36 paragraph 1 of the Act of 22 May 2003 on compulsory insurance, the Insurance Guarantee Fund and the Polish Motor Insurers’ Bureau; Journal of Laws No 124, item. 1152, as amended.).”
We would like to present you with a brochure entitled “Good practices in cooperation between internal audit and a statutory auditor in insurance companies”, published by the PIU.
We invite you to read a report entitled “Motor Insurance in Poland 2006–2010“, a compendium of knowledge on that area of the market prepared by the PIU.
Insurance Journalist of the Year
Robert Lidke, Polskie Radio
Debut
Sylwia Wedziuk, articles published in Miesięcznik Ubezpieczeniowy
Editor of the Year
Rzeczpospolita
Insurance Article/Broadcast of the Year
Zuzanna Reda, articles published in Rzeczpospolita
Mariusz Gawrychowski, articles published in Dziennik Gazeta Prawna
Poles are increasingly willing to purchase insurance policies via the direct channel. In accordance with earlier forecasts of the Polish Insurance Association, the value of that market in Poland as at the end of 2011 exceeded PLN 1 billion for the first time in history.
Last year, over 4.9 million insurance contracts were concluded via the Internet and telephone. One year earlier, that number was almost one million lower. Just as in 2010, motor vehicle insurance dominated: third party liability policies of owners of motor vehicles constituted 58.4 percent, whereas motor hull insurance — 23.3 percent of the total number. Other types of insurance which were also sold via the telephone and Internet included: accident and sickness insurance (9.7 percent), assistance (5.6 percent) and other property insurance (e.g. of household and flats) (3 percent).
In 2011, the highest dynamics was recorded in the case of other property insurance and personal insurance. This is a consequence of the fact that direct Clients can benefit form the growing product offer: flat or household insurance, health policies or personal accident insurance.
– We do not have data representing the whole market yet, but already today we can state that the direct market has recorded a significantly higher growth than other insurance distribution channels for another year in a row. It proves that we are slowly taking to purchasing policies on the Internet and telephone. Soon we will enter the mobile direct era, which means selling insurance via smartphone and tablet PC applications. This will contribute to an even faster increase of the number of policies concluded remotely – says Paweł Zylm, the Head of the PIU Direct Insurance Team.
The fist insurance via the telephone was sold in Poland in January 2003. That event marked the beginning of the direct insurance market in our country. Years 2006 and 2007 were a turning point for the Polish market. In that period, the number of companies offering direct insurance exceeded ten. Each year, this group is joined by other companies which provide the possibility of purchase and support of insurance via the Internet or telephone.
– Now, as Clients, we can choose the most convenient way of concluding an insurance contract. Regardless of how and where we purchase a policy, we will be covered by insurance. At the same time, if we use modern solutions, we can more quickly contact the insurer when we need to and our insurer can help us faster, too – adds Jan Grzegorz Prądzyński, President of the Management Board of the PIU.
The PIU will constantly monitor the direct market and publish data on a quarterly basis.
The regulations included in the Act on patients’ rights, in force since the beginning of this year, include the right to seek damages relating to medical events more quickly and at a low cost. The costs of such a system, in accordance with the provisions of the Act, will be borne by hospitals — regardless of whether the insurance obligation exists or not.
Since the beginning of this year, every entity which carries out medical activities has a statutory obligation to conclude accident insurance for its patients. Such insurance provides patients with a full guarantee of receiving damages for medical events. “PIU had participated in consultations relating to the amendment since mid-2010. Already then, we were pointing out that the new law exposes hospitals to the necessity of coping with a financial burden amounting to several hundred million zlotys. We were also informing the legislator that due to the lack of vacatio legis, lack of tools for assessing new risk, as well as lack of tables or publications of court verdicts, only few companies would decide to prepare an insurance offer for hospitals,” said Andrzej Maciążek, Vice President of PIU.
Pursuant to the new regulations, damages for medical events will be awarded by voivodeship committees entitled to award damages in the maximum amount of PLN 100,000 in the case of a bodily injury and of PLN 300,000 in the case of the patient’s death, with the maximum amount of insurance of PLN 1.2 million per hospital for all events. The justification of the Act on patients’ rights includes information that the number of medical errors in 2009 was estimated at the level of 835,000. It should be noted that not every case of a medical error entitles the patient to seek damages. “If we assume that only 10% of cases of medical errors will be settled by voivodeship committees and average damages will amount to PLN 10,000, the total claimed amount will reach PLN 835 million. Such claims will arise regardless of the insurance,” emphasised Andrzej Maciążek.
Insurance is only an administrative instrument which provides patients with a guarantee of receiving damages. “High additional costs for hospitals result from providing patients with new possibilities of seeking damages. The costs of that right will always be incurred by the hospital, regardless of whether they arise from insurance premiums or actual payments of damages from its own budget,” said Dorota M. Fal, Health Insurance Consultant to the Management Board of PIU.
The introduction of the obligatory accident insurance has not abolished the obligation of holding a third party liability insurance policy. Therefore, since the beginning of this year, the legislator has required hospitals to hold two insurance policies. Additionally, guarantee amounts, i.e. insurer liability limits, in third party liability insurance were increased. “This, for purely mathematical reasons, creates a pressure on increasing premiums. The larger the liability, the higher the price,” said Andrzej Maciążek.
In the course of works on the Act, PIU was suggesting vacatio legis of twelve months so that both insurers and hospitals could prepare for new regulations. The suggestion was not accepted. Today, opinions appear that voluntary insurance would be more favourable to hospitals than compulsory insurance. “From the perspective of insurers, there is no difference. Regardless of whether the cost of the insurance premium or of paying out damages directly to patients will be more attractive for hospitals, this does not change the fact of a huge additional burden for hospitals,” said Andrzej Maciążek.
Schedule of works on the amendment to the Act on patients’ rights:
Consultations on the amendment to the Act on patients’ rights commenced in the 2nd half of 2010.
5 October 2010 — PIU informed the legislator for the first time that new solutions meant significant costs for hospitals. PIU did not provide any estimations yet, but pointed out that new solutions would require hospitals to conclude entirely new insurance agreements, next to the already applicable compulsory third party liability insurance agreements.
5 November 2010 — PIU provided the legislator with first estimations. According to them, current average costs of premiums for compulsory third party liability insurance amounted to PLN 100,000 and the proposed solutions would increase those costs several times.
19 October 2010 — a draft amendment to the Act on patients’ rights was submitted to the Sejm for the first reading.
Throughout the whole period of works on the Act, representatives of PIU participated in all meetings of the Sejm’s Health Committee, of the extraordinary sub-committee, as well as in works of the Senate committee.
5 January 2011 — PIU sent a letter to all members of the Sejm’s extraordinary sub-committee within the Sejm’s Health Committee. In the letter, the total cost of new solutions for all hospitals was estimated at several hundred million zlotys.
18 May 2011 — the Act was signed by the President.
22 September 2011 — a consensus conference was held in the Ministry of Finance on which PIU was asked to estimate the impact of new guarantee amounts in third party liability insurance of entities carrying out medical activities and of changes in the Act on patients’ rights.
28 October 2011 — in a letter to the Ministry of Health, PIU pointed out that:
– an increase of guarantee amounts in third party liability insurance would result in an increase of the average premium paid by hospitals and clinics,
– the new regulations in the Act on patients’ rights would result in a necessity of paying another premium amounting to PLN 300,000 p.a.,
– the estimations were based on calculations of the Ministry of Health, which stated in the justification of the Act that the annual number of medical errors should be estimated at approx. 835,000 cases.
1 January 2012 — the amendment to the Act on patients’ rights entered into force.
In the justification of the resolution of 17 November 2011, the Supreme Court stated that each case of reimbursing costs of renting a substitute vehicle had to be examined on an individual basis and the insurer was only obliged to reimburse adequate and economically justified costs.
In the opinion PIU, the resolution of the Supreme Court confirms the market practice applied to date by insurers:
• The fact that a driver cannot use his or her own car as a result of a loss does not result in the insurer being automatically obliged to reimburse the costs of a substitute vehicle to him/her.
• If the owner did not use the car, used it occasionally or owns another car which can be used, rental of a substitute vehicle may be unjustified.
• Expenditure on renting a substitute vehicle have to be adequate and economically justified.
The Supreme Court also stressed that “it is not justified to excessively extend the insurer’s liability for damages and, as a consequence, guarantee liability as this might lead to a considerable increase in insurance premium amounts.” “The Polish Insurance Association has been emphasising for a long time that an escalation of claims against insurers must result in an increase in premiums. This, on the other hand, will lead to an increase in the number of drivers without a valid third party liability insurance policy,” said Jan Grzegorz Prądzyński, President of the Polish Insurance Association.
The Supreme Court also referred to the matter of injured parties using means of public transport. It stated that although the possibility of using public transport itself could not be a reason for refusing the reimbursement of costs of renting a vehicle, there were cases in which it would be more justified that the injured party use other means of transport. Means of public transport were not precluded. “The opinion of the Supreme Court clarifies the rules of reimbursing the costs of renting a substitute vehicle, without generating additional costs,” said Grzegorz Prądzyński.
The resolution of the Supreme Court was as follows:
“The insurer’s liability under an agreement on compulsory third party liability insurance of owners of motor vehicles for a damage or destruction of a motor vehicle not used to pursue business activities encompasses adequate and economically justified expenditures on renting a substitute vehicle; the liability does not depend on the inability of the injured party to use means of public transport.”
The Polish Insurance Association presents a report on the bancassurance market after Q3 of 2011. It is the second study of this kind, developed by the Association through works of PIU Bancassurance Team; these data will be published regularly each quarter.
According to the report, the value of the bancassurance market as at the end of September 2011 amounted to PLN 13.6 billion. More than 90% of this amount is due to life insurance.
PIU’s initiatives related with the bancassurance market concern more than just collection of financial data. “Increasing significance of this distribution channel also involves higher responsibility for the customer; hence the initiatives taken jointly with the Polish Bank Association, aimed at introduction of good practices to the bancassurance market,” said Jan Grzegorz Prądzyński, the President of the Management Board of PIU.
The last three years saw establishment of good practices concerning protective products and financial insurance accompanying mortgage loans. The third recommendation, this time concerning investment insurance, will be prepared this year.
Bancassurance after Q3 of 2011
On 7 December 2011, the European insurance and reinsurance federation (CEA) submitted a report examining the impact of imposing prohibition against considering gender differences in calculating premiums and benefits for the European insurance market. According to the main theses of the report:
• retirement benefits received by men under disability insurance may be reduced by 5 percent or more
• premiums under term life insurance paid by women might be raised by 30 percent or more
• premiums under transport insurance paid by women might be increased by 11 percent or more
The survey also shows that changes in the amount of premiums is likely to reduce demand for insurance, which would discourage customers to accumulate savings for old age.
In the near future, CEA intends to commission a study to estimate the effects that will presumably affect customers following the introduction of restrictions on the use of age and disability factors in the area of insurance.
The report was commissioned by the German insurance association (GDV) and conducted by an independent consulting firm Oxera. It covers a statement made in March by the European Court of Justice. According to the statement, the provisions of EU directive which allow considering gender differences in calculating the amounts of insurance premiums and benefits where sex is an important risk factor, shall be repelled as of 21 December 2012.
According to data compiled by the Polish Insurance Association throughout the last three quarters of this year, insurers paid out PLN 10.3 billion as compensation to their customers. Benefits provided under life insurance reached PLN 19.4 billion. Both within life and non-life insurance markets, we can observe an increasing premium income.
Motor insurance market
The value of claims associated with liability insurance amounted to PLN 4 billion, whereas comprehensive motor insurance amounted to PLN 2.8 billion. Total compensation under motor insurance equals 66 % of all withdrawals within non-life insurance market. Insurers continue to record a technical loss in the area of liability insurance. At the end of September, the loss amounted to PLN 398 million. Costs of compensation for the recent years’ victims have significantly increased, hence the need for prices adjustment. Insurers are obliged to implement a conservative financial policy in order to guarantee due compensation to all victims. Therefore, it is impossible to tolerate a long-term technical loss within such a fundamental business line as liability insurance – explains Jan Grzegorz Prądzyński, the President of the Management Board of PIU. Adjusting insurance prices to market conditions could be observed on the Polish market for months. Data compiled at the end of third quarter confirm this trend. At the end of September, insurance premiums collected under liability insurance amounted to PLN 6.4 billion and were 15.4 % higher than last year. Comprehensive insurance premium exceeded PLN 4.2 billion, which indicates an increase by almost 13 %.
Non-life insurance market (except for motor insurance)
Within class II, in addition to the transport segment, the most visible factor is a decrease (by more than 40 %) of compensation relating to insurance against fire and other natural forces. This is natural, due to the fact that last year’s high amount of compensation was primarily a result of flooding. This year, fortunately, we were not affected by natural forces of similar size. However, damages of the past few days, caused by strong wind, show how important it is to appropriately insure one’s assets – says Jan Grzegorz Prądzyński.
Life insurance market
This market is still characterized by the increase of unit-linked insurance premiums (by 30 %, to PLN 7.6 billion), but it is no longer as dynamic as at the end of June. Then the annual growth rate reached 40 %. At the same time, the stock market situation is reflected in the increase of benefits associated with investment policies. In capital fund insurance, the value of benefits amounted to nearly PLN 4.2 billion, by 24% more than last year. Marginally lower premiums can be observed in class I, which includes conventional life insurance, structured products, and the so-called policy-investments. The decline in this class has reached 3.7%.
Profits
Net income from life insurance, which amounted to PLN 2.27 billion, was 21% lower than last year. The main reason for lower profit was the decline in investment income. Non-life insurers’ profits amounted to PLN 940 million (last year a loss of PLN 30 million), minus dividends paid each year for the biggest Polish insurer by its subsidiary. Adding this dividend to the result, non-life insurers’ profit exceeded PLN 2.9 billion.
Precise figures on the insurance market after the third quarter of 2011 can be found in the table below.
