Cornel COCA CONSTANTINESCU
ASF - the Financial Supervisory Authority, Romania
Cornel COCA CONSTANTINESCU: The Romanian insurance market is facing a reset moment, after the consolidation at legislative level, following the transposition and the implementation of the Solvency II Directive and, also, the promulgation of the new MTPL law.
The new information contained by the MTPL law refer to concepts and mechanisms that create a general framework for market stabilization and set up the premises of a predictable evolution, from the perspective of premiums' level and policyholders' protection, including in their quality as injured. Regarding this particular aspect, I would like to mention: defining the category of high-risk customers by reporting to the reference tariff - also a new concept -, designed as an option to regulate the distortions appearing in the market. The reference tariff, calculated once a semester by an independent company with expertise in the field, aims to both inform and protect the consumers.
In order to increase the consumer protection levels, the secondary legislation issued by ASF to implement the MTPL law emphasizes the fact that the customer needs to be correctly and fully informed on all aspects, when the customer buys the insurance policy, as well as in the claims handling moment, e.g. specifying the bonus-malus class and pointing out separately the cost of the direct settlement service. At the same time, the secondary legislation aimed to clarify the sale of policies through electronic and online channels, given their increasing popularity, establishing the obligation to follow, at any given time, the same requirements, regardless of the communication means used.
In order to increase insurance coverage without using coercive means, the term for which an insurance contract can be signed became more flexible, now allowing for policies valid for one month or one-month multiples, although we would like this possibility to be an exception to the rule.
The desire to insure the continuity of insurance policies was materialized by introducing the obligation to inform the client about the policy's expiration date simultaneously with submitting a new offer, the client being able to opt for other insurance companies' policies.
Considering the importance of claims handling in the insurance economy and due to irregular and, sometimes, unfavorable practices, the need to regulate this activity more thoroughly was strongly felt.
The bonus-malus system has been redesigned to encourage responsible and cautious driving behavior and to sanction negligence and recklessness, including the possibility of taking into account the driver's history.
XPRIMM: Romania has for the first time a dedicated law on MTPL insurance. Which do you think will be the main effects that these legislative changes will have on the local market?
C.C.C.: The application of these new concepts, such as the reference tariff, the high-risk customer and the direct settlement, at the Romanian insurance industry level aims to ensure a balance between the interests of the insured persons and the interests of the insurers, and to eliminate those premium prices "sideslips" that have affected the market lately, simultaneously creating additional protection for policyholders.
XPRIMM: What other actions is ASF planning, in the future, for the stabilization and standardization of the Romanian insurance market?
C.C.C.: ASF is currently working with several state institutions, including the Ministry of Health, which has an important contribution in establishing criteria for assessing compensation for injured persons. The aim is to determine indicative standards which can help achieve a unitary and predictable practice in dealing with these cases, which will impact the premium prices as well.
XPRIMM: Do you believe that these legislative changes will make the Romanian insurance market more attractive to investors? Do you anticipate new entries on the market (including companies with Romanian capital)?
C.C.C.: We always want new insurance companies to enter the Romanian market, we believe that the market has reached a stage where it is consolidating after a more difficult period, so an increase of competition and a diversification of offers are both welcomed. The Romanian insurance market has a high potential on the non-life insurance segment, and an even higher one on the life insurance segment and I am convinced that the investors know this and will want to take advantage of this opportunity.
XPRIMM: Consumer protection is very important for ASF. What measures does ASF take in order to continuously improve this aspect?
C.C.C.: Consumer protection is a continuous process: the measures are tactical and strategic, proactive and reactive, starting from the consumers' legitimate interests and rights, completing the classical supervision that ensures market stability.
The means used are both reactive (solving complaints and reporting problems identified in their instrumentation) and proactive by monitoring and identifying unlawful or inappropriate behaviors, as well as potentially incorrect, unfair or fraudulent practices, deduced by analyzing the indicators resulting from petitions, as well as from mystery shopping activities, website monitoring and social media, as well as by analyzing contracts in order to eliminate potential abusive clauses. Also in the proactive area, we include an advanced system of assistance and information dedicated to the consumer, as well as financial educational campaigns aimed at all levels, consisting in the production of full-text presentation materials written in a language accessible to non-professionals.
Another component contributing to consumer protection is financial education, through which consumers develop skills that enable them to interact with financial intermediaries, to know the defining elements and risks of non-bank financial products, so as to make the best use of their rights and to fulfill their obligations.
XPRIMM: ASF recently modified the consumer petition procedure (Rule no. 18). What are the main changes brought to consumer's benefits?
C.C.C.: ASF standard no. 18/2017 on the procedure for dealing with petitions relating to insurance and reinsurance companies and insurance brokers' activity focused mainly on consumer protection issues, such as informing the consumers on their rights to seek alternative dispute resolution and insuring, by the executive management of insurers and brokers, the participation in alternative dispute resolutions, either by conciliation through SAL-FIN, or by mediation or arbitration, when requested to do so.
Other issues involved include the obligation to inform insured persons or injured parties about how damages are settled and about the legal basis of the solutions adopted to address all the issues contained in the received notifications.
XPRIMM: The Romanian insurance industry is adopting the European regulations. After the implementation of Solvency II, the IDD - Insurance Distribution Directive comes next. Are the local players ready to cope with this changes?
C.C.C.: The IDD Directive brings substantial changes to the way business is carried out, the relationship with the customer being, in particular, targeted by changes, becoming more standardized and "client oriented".
The aim was to create a "level playing field" between investment products and insurance products with an investment component by implementing similar requirements regarding customer behavior rules (e.g. disclosure of conflicts of interests, differentiation between sale and advice).
New stipulations have been introduced regarding the packaged sale of products in order to protect consumers against possible "abuses" that may arise given the information asymmetry and the low level of financial education.
Taking into account the newly introduced requirements on the governance system, the implementation of the IDD Directive will trigger a review of processes and documentation of working with clients. The impact will be stronger for those intermediaries selling life insurance products, especially those with an investment component.
XPRIMM: What other insurance market development projects are on ASF's agenda?
C.C.C.: One of ASF's particular interests is directed towards boosting mandatory housing insurance, inclusively by adjusting the legal framework to the current realities, so that this type of insurance will be accessed by as many real estate owners as possible.