Annexes to COM(2007)207 - Issues relating to Motor Insurance - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2007)207 - Issues relating to Motor Insurance. |
|---|---|
| document | COM(2007)207  |
| date | June 25, 2007 |
2.4.2. Potential impact on MTPL premiums
Member States as well as the insurance industry differ as to their estimate of whether and how far the inclusion of victims' legal expenses in the MTPL cover of the liable party would affect rates of MTPL premiums in their markets. In principle, apart from a few estimates made by individual insurers, no concrete numbers were provided in the consultation. Nevertheless, a general conclusion could be drawn that insurance markets of countries, in which legal costs already to a great extent constitute part of the victim's claim against the MTPL insurer of the liable party, would be very unlikely to be affected by an increase in premiums. On the contrary, in countries where either limited or no recovery of legal expenses applies, MTPL premiums would very probably rise since claimants would be encouraged to pursue their claims in court assisted by legal advisers, in the expectation of obtaining a higher level of compensation. In this context the Irish experience is worth mentioning where legal costs escalated in the past (to as much as 46% on top of the amount of compensation) as proceedings were issued routinely in almost all personal injury claims. In order to address this problem a State agency has been established handling claims in cases where court hearings are not required[32]. In this way the number of in-court claims settlements, which go hand in hand with increased legal costs, has been significantly reduced. Similar alternative claims settlement mechanisms serve the purpose of minimizing legal costs in Sweden and Finland.
2.5. Conclusion
In response to the question raised by the European Parliament, an EU action consisting in the obligatory inclusion of legal costs in the scope of cover of the MTPL insurance of the liable party would not seem to produce clear benefits.
As a result of different approaches taken by Member States in respect of the reimbursement of legal costs incurred by the victim and due to the fact that the law applicable to the claim is always the law of the country where the accident occurred, EU nationals may enjoy different treatment in different countries when settling cross border claims. However, an EU wide extension of the scope of cover of MTPL insurance to include legal costs, even if restricted to necessary or reasonable ones, would be very unlikely to provide an equivalent regime throughout the EU. Member States would retain the possibility of maintaining their national practice by interpreting the necessity of the legal costs recovery in accordance with their national specificities.
To ensure an EU wide equal protection of victims of road accidents in respect of the recovery of their legal costs, specification as to which legal costs and under which circumstances they would be subject to coverage by the MTPL policy of the liable party would have to be introduced. In this context, the question arises as to whether the motor insurance directives would be the appropriate place in which to deal with these issues since it might influence the definition of damage covered traditionally under national civil law.
A simple reference to necessary or reasonable legal costs would not attain the intended goal. On the other hand, a more specific approach at EU level might interfere with national civil law and also affect rules on reimbursement of legal costs governed by civil procedural law. In addition, a specific approach might even lead in some cases to distortion of well established national systems of motor claims settlement. For instance, an EU wide obligatory inclusion only of in-court legal expenses in the MTPL insurance might encourage victims to take judicial action without having first explored the possibility of extra-judicial claims settlement. In this way, the mechanism of the claims representative introduced by the 4th Motor Insurance Directive might also be threatened since victims, in the expectation of receiving a higher amount of compensation, would try to involve legal advisers and courts in the settlement of their claims instead of applying to the claims representative appointed in their country of residence. Moreover, the inclusion of legal expenses in the MTPL insurance of the liable party might lead to an increase in premiums in countries where either no or limited reimbursement of legal costs has been the practice so far.
Voluntary legal expenses insurance has proved to be available in the large majority of Member States. Since this insurance product allows the victim to recover his/her legal expenses regardless of the law applicable to the accident and irrespective of the success in the claim, it seems to be the comprehensive and satisfactory solution for meeting the interests of victims of road accidents. In this manner, national rules on reimbursement of legal costs, which differ from Member State to Member State and often reflect national specificities of the motor claims settlement systems, would not be affected.
However, the Commission Services observe that a better promotion of voluntary legal expenses contracts is necessary in some Member States in order to ensure a more balanced level of protection of EU citizens.
[1] According to Article 4(1) of the Directive, each Member State should ensure that all insurance undertakings appoint a claims representative in all Member States except the Member State in which they have been authorized to provide motor insurance (Home Member State).
[2] According to Article 4(4) and (5) of the Directive claims representative shall collect all information necessary in connection with the settlement of the claims and shall take the measures necessary to negotiate a settlement of claims. They shall also possess sufficient powers to represent the insurance undertaking in relation to injured parties and to meet their claims in full. They must be capable of examining cases in the official language(s) of the Member State of residence of the injured party.
[3] According to Article 4(6) of the Directive Member States have to ensure through effective and systematic financial or equivalent administrative penalties that the victim receives a reasoned offer of compensation or a reasoned reply in case of refusal within three months of the date when the claim was presented either to the insurer of the liable party or to its claims representative.
[4] The report on Article 4(6) could not be presented by the date foreseen in the Directive because it was agreed in 2005 during the negotiations on the 5th Motor Insurance Directive that the Commission would use this report to cover also the issue of legal expenses (see part 2 of this report ).
[5] In this respect it should be noted that an error appeared in the wording of Article 4(7) since the reference in that provision should have been to paragraph 6, first subparagraph dealing with the issue of national penalty provisions, and not to paragraph 4, which describes the tasks of the claims representative when settling a claim.
[6] This report has been drafted by DG Internal Market and Services.
[7] A questionnaire was sent in March 2006 to the 25 Permanent Representations and replies were received from all Member States apart from Italy in the course of May 2006.
[8] The CEA (Comité Européen des Assurances – European Federation of National Insurance Associations) was consulted in March 2006.
[9] See the website ‘ Your Voice in Europe’ http://europa.eu.int/yourvoice/consultations for all public consultations of the Commission, where an Interactive Policy Making (IPM) tool is used to improve governance by web-based questionnaires for collecting and analysing reactions.
[10] The results of this consultation are available on the following website: http://ec.europa.eu/internal_market/insurance/motor_en.htm#consultation
[11] See Article 10 of the Directive.
[12] With the exception of France which communicated its national measures on 30 January 2004.
[13] 201 in total (161 responses were received from individuals and 40 responses were collected from organisations) out of which only 57 addressed the issue of awareness of the claims representative. The outcome of this public consultation is published on the following website: http://ec.europa.eu/internal_market/insurance/motor_en.htm#20051222
[14] In this respect it should be noted that this sanction is explicitly required by the Directive and should therefore be obligatorily applied in all Member States.
[15] Such cases reported by Greece, Hungary, Italy, Poland, Sweden and the UK.
[16] Reported by Lithuania and Finland.
[17] Directive 84/5/EEC, OJ L 8, 11.1.1984, p. 17–20
[18] Before the adoption of the 2nd Motor Insurance Directive MTPL insurance covering damage to property was not mandatory in some Member States.
[19] Directive 2005/14/EC of the European Parliament and the Council of 11 May 2005 amending Council Directives 72/166/EEC, 84/5/EEC, 88/357/EEC and 90/232/EEC and Directive 2000/26/EC of the European Parliament and of the Council relating to insurance against civil liability in respect of the use of motor vehicles, OJ L149, 11.6; 2005, p. 14.
[20] See footnotes 9 and 10 for the reference on the publication of the results of this public consultation.
[21] Annex I to Directive 73/239/EEC.
[22] Council Directive 87/344/EEC of 22 June 1987 on the coordination of laws, regulations and administrative provisions relating to legal expenses insurance, OJ L 185, 4.7.1987, p. 77–80
[23] RIAD (The Association of Legal Expenses Insurers) provided some more concrete data in this respect. However, due to differences between Member States regarding statistics, presentation and data collection this did not provide an accurate picture concerning the spread of voluntary legal expenses insurance within the EU.
[24] Only Estonia, Latvia, Malta and Cyprus have not provided relevant information in this respect, in the other Member States, voluntary legal expenses is available.
[25] This is the case especially in the 10 new Member States.
[26] Sweden and Belgium provided an estimate of around 90% of households to hold legal expenses insurance. This is due to the fact that legal expenses insurance is automatically offered to policyholders with either a third party liability or a household insurance.
[27] Not in Portugal and Latvia, Greece provided no information in this respect. .
[28] Spain, France and Italy.
[29] Denmark.
[30] Luxembourg, Poland (acknowledges merely court fees).
[31] Sweden (only in respect of personal injuries legal assistance can be sought), Finland, Ireland.
[32] The PIAB Agency would currently dispose of 75% of claims for personal injuries.