Transcript Compensation of damages in Germany

Gesamtverband der Deutschen Versicherungswirtschaft e.V.
Compensation of damages in Germany
Thomas H. Schaefer Moscow, September-12-2006
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
Agenda
1. Legal scope of MTPL in Germany
2. Handling of traffic accidents
3. Liability law and claims settlement
4. Claims management
5. Claims net
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
1. Legal Basis
 In Germany every registered user of a motor vehicle or a trailer
(= keeper of the vehicle) is obliged to take out and maintain TPL insurance.
 MTLP insurance must cover any bodily injury, material damage and economic
loss caused by the use of the vehicle or trailer.
 MTPL must not only provide insurance cover to the owner, but to other persons
as well, such as the keeper of the vehicle and every entitled driver. (Sect. 1 of
the Law on Compulsory Insurance):
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
1.2 Direct claim for the road traffic victim
 Protection of the road traffic victim is given highest priority.
 Therefore, apart from the claim on the person being liable of the accident, the
victim is granted a direct claim on the motor TPL insurer.
 Direct claim of the victim is maintained even if the insurance contractual
relationship with the perpetrator of the accident is disturbed due to breach of
the contract, but in that case
 Insurance company has the right of recourse against the policyholder.
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
1.3 Scale of coverage of MTPL
 Refusal of unfounded claims (= legal protection) and
 Satisfaction of justified claims if
 damage occurred during the use of the vehicle
 damage has to be compensated under the regulation on liability
stipulated in private law
 What kind of damages are covered?
 personal injury
 Material damage and
 some kinds of economic loss
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
1.4 Exclusions in coverage are only allowed if exclusion
meets the following reasons:
 Material damage and economic losses of the MTPL-policyholder himself
and additional insured persons
 Damage of cargo transported by the insured vehicle
 Economic losses caused by failure of delivery date
 Intentionally caused accidents
 Damage caused by motor-vehicle-races (regardless if authorized or not
authorized by the authorities)
 Damage caused by nuclear energy
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
1.5 Minimum amounts of Cover
The following are the minimum amounts of cover currently applying in
Germany:
 for bodily injury per person
 in the case of three or more victims a total of
 for material damage
 for mere economic loss
€ 2.500 000
€ 7.500.000
€ 500.000
€
50.000
However more the 96 percent of the customers chose a
higher amount of cover ( = 50 Mio. € per claim).
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
2. Handling of accidents in Germany
2.1 Role of Police in case of an accident
 Police must be called if the accident caused bodily injury
 Otherwise it´s up to the persons involved in the accident to call police is
or not
 After German law Police must come to the place of accident if called, but
 will ask for the type of accident before and
 in case of minor accidents maybe not show up before 1 or two hours
 Whether and to what extent Police take accident particulars depends on
the circumstances of the accident
 complete documentation of accident if persons are killed, severely injured
 If only material loss occurred police regularly Police only checks and
records vehicle date and personal detail of the drivers involved
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
2. Handling of accidents in Germany
2.2 Obligations of the policyholder / driver
 Policyholder is obliged to inform his MTPL Insurer about the accident
without delay at least within a week after the accident
 After that insurance companies requests the policyholder to deliver a
complete report of the accident using a form sent to him with the request
 Policyholder is obliged to support his insurer in any effort to clarify claim
and to minimize the loss
 Policyholder/driver are not allowed to give any acknowledgment of fault
to the other party of the accident without permission of the insurer
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
2. Handling of accidents in Germany
2.3 Obligations of the claimant
 Claim should be notified immediately (by phone or in writing) to the local
office of the third party insurance company of the author of damage
 As claiming compensation is a matter of civil law, the claimant in principle
has to prove every particulars of his claim, therefore
 Claimant should take an accident report at the scene of accident, such as
 Sketch or photograph of the scene,
 all damages occurred
 Braking and skidding marks …
 Insurance company will request the claimant details to deliver a complete
report of the accident using a form sent to him with the request
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
3. Liability law and claims settlement
3.1
3.2
3.3
3.4
3.5
3.6
Scope of Liability law
Crucial provision of liability
Compensation for vehicle damages
Compensation for bodily injury
Compensation for legal advice
German figures
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
3.1 Legal basis of claims
liability based on fault
Sect. 823 of the Civil Code
unlimited
compensation for pain and
suffering
strict liability
Sect. 7 of the Road Traffic Act
material damage 300 000 €
bodily injury
600 000 €
bodily injury
3.000.000 €
compensation for pain and
suffering
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
3.2 Crucial provision of liability = Art. 249 BGB
Sentence 1:
“Anyone liable in damages must restore the condition that would
exist, if the circumstance obliging him to pay damages had not
occurred…”
Sentence 2
“Where there is liability …..for damage to a thing the obligee may
demand the required monetary amount in lieu of restoration...“
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
3.3 Compensation for vehicle damages
3.3.1 Types of claims to be compensated
 Total loss = if no repair is possible replacement value is compensated
 Repair costs = amount necessary to restore the damaged vehicle to its
former condition
 Towing charge
 Costs of experts report
 Hire car costs or
During the period of repair
 Compensation for loss of use
 Reduction in value
 Finance costs
 Costs of overnight accommodation and meals
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
3.3 Compensation for vehicle damages
3.3.2 Cash in lieu settlement
 Decision of injured party
 not to repair the damage but
 to settle the claim on basis of expert´s report
 Maximum amount = difference between replacement value and the
value of the remain (salvage)
 Compensation is reduced by the turnover tax not payable by the
injured party
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
3.4 Compensation for bodily injury
 Costs of medical treatment
 Costs of care and increased needs
 Loss of earnings
 employed person = income during period of absence
 unemployed persons = if running a household costs for engaging a
substitute
 Damage for pain and suffering
 Funeral expenses
 Loss of maintenance owed to a surviving dependant
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
3.5 Compensation for legal advice and general expenses
As “add on” to claims for vehicle damages and bodily injuries as well,
compensation can be claimed for
 Solicitors´ fees
 Court fees and
 General expenses
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
3.6 German Claims figures (MTPL 2004)
 Total number of MTPL-Claims
3.5 Mio
 Claims expenditure
12.6 bn €
 Number of bodily injury claims
 Amount of payments
 Number of material damage claims
 Amount of payments for material damage claims
362.667
5.1 bn €
3.2 Mio.
7.2 bn €
 More than 95 percent of claims for vehicle damage are settled out of
court
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
3.7 Figures of the German motor insurance market
Statistical Year 2005
Fully Comprehensive
insurance
MTPL-Insurance
Partial
Comprehensive
insurance
Number of
contracts
54 Mio.
22.1 Mio
18 Mio
Premium income
13 bn €
6.6 bn €
1.7 Bn €
Number of claims
3.5 Mio.
3.2 Mio
1.4 Mio
Claim expenditure
12.6 bn €
5,3 bn €
1.04 bn €
66/1000
152/1000
77/100
91
81
63
3.516 €
1.529 €
737 €
Net risk premium
225 €
232 €
57 €
Average Premium
254 €
307 €
95 €
390 Mio €
400 Mio €
264 Mio €
Claims frequency
Loss ratio
Average claim
Technical result
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
4. Claims management
 Strategies to minimize claims payment and operating costs of MTPL claims
are difficult to put into practice
 In Germany Settlement of MTPL Claims takes places in a market where
market forces do not work properly , because
 the claimant is shopping with the insurer´s wallet
 therefore he does not care about the costs
 Service provider in the area of MTPL claims do not have to compete
providing best and inexpensive service
 He who will be the first in contacting the claimant will make the running.
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
4.1 Market forces do not work properly
has to pay the invoice
Insurance
Company
Service
Provider
Simply passes on
the invoice to the
insurance company
Claimant
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
4.2 Instruments used by Insurance Companies
 Company-own Call centres / service card
 Additional coverage of assistance service tied to the MTPL insurance
policy ( contracts with assistance companies)
 Comprehensive service




Picking-up the damaged car
Providing the customer with a rental car
Repairing the car
Bringing the car back to the customer repaired and freshly cleaned
 Network of repair shops and car rental firms
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
4.3 Claims sharing agreements
Agreements between
(a) MTPL insurer and MTPL insurer
(b) Motor comprehensive insurer and MTPL insurer
to settle controversial cases (where it is not quite clear which insurer is
liable to which degree) in a standardized way.
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
4.3 Claims sharing agreements
4.3.1 Advantages of claim sharing agreements
Policyholder
 Allows speedy settlement of claim. Claim can be settled even if it is not quite
clear to which degree the other participant in the accident (the victim) is
responsible to the event. If the claims settling insurer realizes that the other
participant is partly or completely to blame for the event, the insurance company
can recourse the liable insurer of the other afterwards.
Insurance Company
 Controversial cases are in general time consuming and expensive. In so far
agreements on simple standard can spare a lot of money
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
4. Claims sharing agreements
4.3.2 Essentials of claim sharing agreements (1)
Standards on recourse
 not applied for minor losses (a) or for major claims (b)
a  standards on recourse  b
 Recourse according to
 circumstances and legal position or
 by means of a tableau showing typical events and stipulating
which proportion of liability is applicable to the participants (but
not applicable major losses)
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
4.3 Claims sharing agreements
4.3.2 Essentials of claim sharing agreements (2)
 Company‘s own costs for claims settlement (e. g. costs for claims experts and
loss assessors) cannot be recovered
 The claimant is not to refer to another (involved) insurance company but the
company being claimed the frist has to settle the claim and if necessary
recourse the other involved company
 If both the involved insurance companies disagree on the question which
participant is liable to which degree, so called arbitration board has to decide
and clear the situation.
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Gesamtverband der Deutschen Versicherungswirtschaft e.V.
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
4.3 Claims sharing agreements
4.3.3 Experiences with claim sharing agreements
 Enjoy a long tradition in Germany, but
 have been vividly debated in the last decade
 some major insurance companies think they would systematically
lose money by such agreements, if recourse is done in the form
of a lump-sum.
 Today: Different (bilateral and multilateral) agreements common in the
German motor insurance market
 Differing in particular in the way the recourse is done
 Either in the form of a lump-sum or according to accident facts and
legal position.
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
5. Network of repair shops, experts and rental car firms
 Company instrument to assert itself within the motor insurance market.
 The idea is to reduce repair costs, costs of expert‘s report and the costs of
rental cars by using an all-over-the-country network.
But that only works if the repair shops etc. are working to full capacity.
 2 approaches of „repair shop management“:
 Company own network of repair shops
 Buying the services from a provider of such a network
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
5.1 Purpose of Claimsnet
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Agent
Administration
Insurance company
Other
Service provider, e. g. repair shops etc.
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Gesamtverband der Deutschen Versicherungswirtschaft e.V.
5.2 Importance of claims net
 Improving claims management by means of gaining quick information on the
claims event for the purpose of minimizing the amount of claims and the
costs of claims settlement.
 Claims net is a system available for all companies and institutions (service
provider) playing a role in the process of claims settlement.
 95 % (referring to the premium income) of all motor insurance companies in
Germany participate in the GDV claims net.
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
5.3 Supported business processes are








Report of the claim
Acceptance of repairing the vehicle
Acceptance of carrying the costs
Calculation of costs for repairing the vehicle
Expert‘s report
Rental car
Authorising the claims expert
...
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
5.4 Uniform data format
Data on those
participating in the
claims settlement
process
Inquiries
Claims
data
Portrayal of
the way the
accident has
happened
Vehicle
data
Commentaries
Data on the damage
done to the vehicle
Images
...
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
5.5 Claims net is part of the GDV service net
Policyholders
Repair shops and
other service
providers
Agents
GDV
Admission
office
Other
administrations
GDV
Service Net
Insurance company
Insurance company
ICHEIC