The Bulgarian Financial Supervision Commission’s (“FSC”) Insurance Supervision Division – in cooperation with the Guarantee Fund and other authorities – is working on a draft ordinance implementing a bonus-malus system to be used in determining premiums for compulsory motor third-party liability (“MTPL”) insurance. A bonus-malus system (also known as a no-claims bonus or no-claims discount) uses a merit rating to determine insurance premiums. Accordingly, drivers who have not been at fault during preceding periods will be offered discounted insurance premiums.
At the end of 2016, the FSC appointed a consultant with international experience in risk assessment and actuarial science to propose a comprehensive model of a bonus-malus system. The main objective in introducing this system is to reduce the number of road traffic accidents, particularly those resulting in physical injuries or death. Based on an analysis of data on road traffic violations and accidents, the consultant must propose a model bonus-malus system with an adequate number and type of risk factors to determine adjustment coefficients (reduction or increase) of base premiums defined by insurers. The risk factors must include the driver’s road traffic behavior and the number of caused insurance events/at-fault accidents.
Among the difficulties in setting up a fair bonus-malus system is the fact that under Bulgarian law, MTPL insurance is taken out in connection with the motor vehicle and the insurance contract may be entered into by any person with an insurable interest (the insured may not necessarily be the primary driver). As a result, the insurance premium and the bonus must be calculated taking into consideration various scenarios in which the primary driver of the car is not its owner.
The FSC will likely discuss the draft ordinance at the end of January 2018 and is expected to approve the draft in March 2018.
MTPL insurance is obligatory for all motor vehicles registered or driven in Bulgaria. Failure to take out MTPL insurance may render the driver liable for an administrative penalty and the vehicle may be suspended from operation or even deregistered until insurance is bought. Currently MTPL insurance and automobile property insurance are the best-selling policies in the general (non-life) insurance sector in Bulgaria.