Car owners are promised a reliable barrier against fraud of bankrupt insurance companies, and on the “makeweight” – policies at European prices.

The law on compulsory civil liability insurance of car owners has been operating in Ukraine since 2005. The last changes in it were made 6 years ago. And although not so much time has passed since 2012, both European and world legislations in this area have been updated

In addition, car owners, who face insurance companies not only when they formalize the policy, but also when they turn there to receive payments after an accident, have many questions for insurers, among which unfair market players come across. Therefore, the people’s deputies decided to modernize the legislation by proposing bill No. 3670-d  for the Parliament’s consideration. If it is accepted already this year, drivers should prepare for changes.

Several major changes in the civil liability insurance market for car owners fell on last year. One of them – the transition of the market to a direct settlement of losses under the car insurance policy. This is a project “Direct settlement”, in which almost two dozen insurance companies have joined on a voluntary basis. The driver for its part, would be able to settle the insurance case not in the company of the culprit of the accident, but in the one, where he bought the policy himself. But provided that both insurance companies are participants in this project.

Direct settlement and policy via Internet

The role of the “conductor”, which provides further calculations between the IC, is Motor (Transport) Insurance Bureau of Ukraine (MTIBU). Over the past year, according to the Director General of MTIBU Volodymyr Shevchenko, the insurers-members of the direct settlement system for motor vehicle policies settled almost 7.5 thousand insurance claims for 112 800 000 UAH. Now this amounts to 15% of the total number of insurance payments, both on the amount and on the number of claims. The size of the average payment in the direct settlement system is 15 420 UAH, on the market in general – also about 15 thousand UAH. In MTIBU they say that they want to extend this experience to the whole market, so the transition to a direct settlement for all insurance companies, that are players in the Ukrainian market, is only a matter of time.

Another innovation, which so far could only be read by those, who issued an auto insurance policy after February 7 this year – the opportunity to do it online. It was from this day that the order of the National Financial Service No. 3631 from August 31, 2017 came into force, which amended the Regulations on the specifics of contracting compulsory civil liability insurance of car owners. You can do it yourself – through the website of the selected insurance company, and by contacting its office or by using the services of an insurance agent of this insurance company.

“If one of the drivers is interested in this system of registration of electronic policies of an auto insurance policy, but has not yet had time to get acquainted with the mechanism of such registration, all the tips can be obtained on the official website of MTIBU,” explains in Opinion commentary lawyer Stanislav Shevchenko, who specializes in automotive matters. – In addition, on their website it is possible to check the insurer for the validity of its membership in MTIBU, get acquainted with the assessments of its activities for the previous period and see if this insurance company is a participant in the system of direct settlement of losses.

In this case, the policyholder chooses the way to sign this agreement, it can be with the help of an electronic digital signature, as well as in the usual way – in the representation of the insurance company. If you still chose the modern way of processing the policy, you should take into account that the online policy is not made on the MTIBU website, but directly on the website of the insurance company, whose services you decided to use”. However, while this option is not mandatory, although, this is also only a matter of time, since all these innovations, subject to the adoption of a new law on insurance of civil liability of car owners, can turn into legislative norms.

Bill on low start

The Draft Law No. 3670-d (just such a number received a revised version of the document, combining the positive proposals of several previous similar bills) was registered in Parliament in March of this year. “The imperfection of the system of compulsory insurance of civil liability causes a number of problems that hinder the effective performance of the system assigned to it by social functions,” the explanatory note to the project says. Among the most sensitive problems, as noted by lawmakers, are, first of all, a significant understatement by unscrupulous insurance companies of the cost of the policy, which often results in further insolvency of such insurers, unreasonable refusals to pay victims of insurance claims, widespread distribution of counterfeit insurance policies. At the same time, the current system of insurance compensation, the authors of the bill stress, allows unfair companies to delay the payment deadline through unclearly defined rules for making a decision on payment.

Also, numerous contradictions arise when they begin to calculate the amounts of payments. Complained of drivers and low level of care for victims in the IC. According to the current legislation, the victim applies for compensation to the insurer, insured the liability of the person guilty of committing an accident, and the policyholder has no direct relationship with the insurer from whom the policy was purchased. As a consequence, the victim does not deal with the insurer he chose. Therefore, the IC is often not sufficiently interested in providing quality services to the victim.

In the opinion of Mykhailo Dovbenko, the First Deputy Chairman of the Verkhovna Rada Committee on Financial Policy and Banking Activities (namely, he is one of the main drafters of the bill), European experience shows that the system, when a victim (in case he is not a pedestrian) applies for compensation to the insurer, insured his civil liability, better meets the needs of the client. Therefore, the need to switch to the electronic form of the contract on compulsory insurance of civil liability of car owner’s “is dictated primarily by the need to improve customer service and prevent dumping, signing contracts “retroactively”, the sale of invalid policies that are taken into account by insurers as lost or even counterfeit policies”.

Online registration of insurance policies, as lawyer Stanislav Shevchenko points out, has a number of advantages in comparison with the traditional registration of car insurance policy, so it can be called a step forward in the field of auto insurance. The most important among the advantages is, first of all, guarantees against fraud on the part of dishonest representatives of insurance companies, since all electronic policies automatically registered in the Centralized Database of the Motor (Transport) Insurance Bureau of Ukraine (MTIBU), guarantees to the policyholder that his policy will indeed be acting.

Civilized rules of the game

General Director of the Ukrainian Federation of Insurance (UFI) Galyna Tretyakova, on explaining to Opinion what will change for drivers, who will buy policies of compulsory insurance of civil liability, notes: “The policy is electronically executed by an insurance representative, who is an intermediary between the owner of the car and the IC. Directly to a person, the procedure remains almost unchanged. However, as a result, a non-paper and electronic policy can be requested to print out an extract from the database (if the consumer is afraid of possible misunderstandings with structures that can check the availability of the policy) or not to take any paper documents at all. The information on the concluded contract is kept in the database of MTIBU”.

The structure that can verify the existence of a policy is primarily the Police. If you already want to buy an e-car insurance policy, but you are not sure that the Police know exactly where to find it, experts suggest that you better print out this document and put it in your driver’s license. In addition, Auto Attorney Stanislav Shevchenko adds that it is now better to conclude a compulsory insurance contract (regardless of whether online or in the office) with an insurance company that is a signatory of a direct loss settlement agreement. This will provide guarantees for the rapid receipt of insurance compensation, since in this way of settlement, the amount of losses to the owner of the vehicle is paid by his own insurance company, and not by the insurance company of the other driver – the culprit of the accident.

By the way, the key requirement for the conclusion of a contract, under the draft law, is its inclusion in a single centralized database of MTIBU. This database contains information about all contracts of compulsory insurance of civil liability, insurance cases that occurred, vehicles and their owners. It is through a request to the centralized database of the MTIBU that policemen must determine whether the car owner owns the compulsory insurance of civil liability policy or not. And the electronic policy itself, as the authors of the bill note, will primarily deprive insurance companies that for some reason do not have the right to insure civil liability of car owners (for example, bankrupt), the possibility of continuing selling policies, misleading people.

There is no 100% guarantee

Galyna Tretyakova recalls that the bill wants to consolidate at the level of the law an electronic policy, which has been already implemented for the drivers since February this year. “It also eliminates obstacles to payments from MTIBU funds when the insurer fails to fulfill its obligations without waiting for the bankruptcy procedure to start,” the expert notes. – However, I hope that the number of such companies will decrease after the adoption of the bill No. 2413-a (on amending some legislative acts of Ukraine on the consolidation of functions on the state regulation of financial services markets – author’s note). In addition, the bill No. 3670-d secures a direct settlement for all, not just those, who are now part of the system of direct settlement”.

The electronic policy, according to the authors, should become the main protection of car owners from scammers in the sphere of insurance of civil liability of drivers. And for the transition to a modern system, drivers are planned to give a whole year from the moment the law comes into force (if it is accepted), during which it will be possible to purchase both a paper policy and its electronic version. Of course, drivers are primarily interested in, if there is a high percentage of the guarantee of such protection and are there other options for protecting drivers from scammers in this area? “There is no 100% guarantee anywhere. Scammers develop their skills actively, – Galyna Tretyakova believes, – but it is a matter of a significant reduction in fraud and the elimination of the prerequisites for it. The issue of fraud is being worked out on the stage of drafting this bill, and it requires a separate systemic approach”.

How much will car owners pay for innovation?

It is clear that any modernization of the legislation is difficult to imagine without increasing the expenses of people, in this case, car owners for the acquisition of policies of car insurance. This document was not an exception: the authors of the bill propose to gradually increase the insurance costs to the level of the countries of the European Union. This means that the policies themselves will rise in price. Most likely, also to the European level. According to the official data, in 2014, policies were cheaper in Latvia (62 euros), Hungary (67 euros), Estonia (94 euros) and the Czech Republic (101 euros). The most expensive they are in Italy – the citizens of this country paid for the policy of civil liability up to 403 euros. To the level of what countries our policies will “grow up”, it is not yet known, but our drivers are unlikely to be guided by the cheapest.

“There is another important problem here – the methodology for calculating insurance compensation,” notes Galyna Tretyakova. – Common European practice – payment of actual damage, which is compensated in most cases by payment for repair of the injured car at the service station”. According to the expert, here it should be noted that in accordance with the Association Agreement with the European Union, Ukraine by September 1, 2025, undertook to implement the 9th article of EU Directive No. 2009/103 / EC MTPL, and according to this article the minimum amount of coverage – if there are victims – one million euros per one victim or 5 million euros for the event, regardless of the number of victims.

“That is, 5 million is the maximum amount that can be paid on one insurance event, but in any case it will be equal to the amount of real damage,” says the head of the Ukrainian Insurance Federation. – Insurance companies in Europe prefer to repair the car, and for the period of repair provide the owner a replacement. In Ukraine, in 80% of cases, drivers are paid monetary compensation, which results in a large number of disputes, regarding the determination of this amount (with depreciation or not, the cost of spare parts is calculated, whether or not the maintenance station is certified, they pay VAT or repair was carried out “in the garage” by payment to the subject of entrepreneurial activity, etc.). Guided by the alleged interest of the consumer, some people’s deputies want that the calculation of the cost of spare parts should be without wear and tear, will provoke from its side an increase in the price of the policy, as well as fraud in order to update one’s car. The latter also provokes a rise in value”.

As we can see, the European vector of Ukrainian development is offered in all directions, including the level of payments for insurance cases in road accidents and the cost of policies, except perhaps for salaries that are still very long for European ones. Against this backdrop, the question of whether the cost of a compulsory insurance of civil liability policy will be feasible for all drivers seems rhetorical.

Text: Larysa Vyshynska

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