Direct compensation proceedings were introduced in 2007 in relation to certain damages arising out of, or in connection with, accidents involving insured motor vehicles allowing non-fault parties to be compensated directly by their own insurer, rather than from the insurer of the at-fault party for certain damages suffered. The current system provides that insurers of non-fault parties, having compensated the insured, can claim a certain amount from the insurer of the at-fault party. The amount that can be claimed is fixed annually by a technical committee of the Ministry of Economic Development, therefore, may be higher or lower than the sum paid by the non-fault insurer. The respective credit and debt positions amongst the various insurers which adhere to this procedure is then settled through a clearing house.
Although the direct compensation procedure has generally proved to have a positive effect on insurance services, mainly by decreasing the costs of indemnification, some inefficiencies were found in the subsequent economic settlements among insurers, currently based on a lump-sum system. To address this, IVASS recently issued a new draft measure for consultations which sets out new criteria for calculating costs and deductibles that will serve as a basis to settlement procedures for insurers in connection with motor third party liability direct compensation procedures (the Proposed Measure).
The Proposed Measure has introduced new operational models of claims management, depending on whether these claims have been raised by an injured party or by passengers:
- With regard to the management model for claims raised by the injured party, which continues to be based on a lump-sum reimbursement system, the Proposed Measure has introduced a system of incentives and penalties aimed at encouraging firms to limit costs and speed up liquidation. The calculation of the incentives/penalties will take into account the indicators of the Archivio Integrato Antifrode (AIA).
- With regard to the management model for claims raised by passengers, the previous settlement mechanism has been replaced by a model of compensation based on the real value of the indemnified amount, net possible fixed/perceptual deductibles.
Public consultation ended on May 31 and, when adopted in final form, the Proposed Measure should enter into force on January 1, 2015.
The new models, as described above, should offer insurers more incentive to adopt better claims management practices and discourage opportunistic and fraudulent actions, therefore enabling insured parties to benefit from lower compensation costs and quicker liquidation procedures.