Insurance and insurance mediation partial reform: the Legislative Decree "Growth 2.0"

By the Legislative Decree dated 18th October 2012, n. 179, concerning "Further urgent provisions for the Country’s growth" (“Decree - Growth 2.0”) converted by Law n. 221 dated 17th December 2012, the following changes have been implemented, amongst other, in the insurance sector and becoming effective on the 19th December 2012.

A  Motor-vehicles insurance fraud identification and detection measures (Article 21)

• As of 1st January 2013, “IVASS - Istituto per la Vigilanza sulle Assicurazioni” – (the Italian Insurance Regulator) took the place of “ISVAP” with regards to all its powers, functions and responsibilities.
• Through the Decree – Growth 2.0, IVASS was also given, in order to to prevent frauds in the motor-vehicle insurance, the following further tasks and powers:
• studying, processing and evaluating all information obtained from the electronic integrated archive (to be established) together with those received from insurance companies and insurance intermediaries in order to identify suspected cases of fraud and to set an preventive alert mechanism against fraud;
• requesting insurance companies and insurance intermediaries for information and documentation concerning initiatives taken so to prevent and detect insurance fraud, identify fraudulent behaviors and acquire information on the activity actually implemented against fraud
• reporting to the insurance companies and the Authorities any suspect detected following an analysis, data processing in correlation with the electronic integrated archive - ,inviting them to provide information on investigations undertaken, their results and any complaint filed;
• providing assistance to insurance companies and the Authorities in order to prevent and stop insurance fraud;
• promoting any other action within its power in order to prevent and stop fraud in the insurance industry;
• drafting an annual report on the activities performed relating to fraud prevention and detection and developing criteria as well as procedures in order to evaluate companies with regards to the fight against fraud, and making public the evaluation results.

B  Insurance market competition and consumer protection measures (Article 22)

• right of free cooperation amongst insurance intermediaries (agents, brokers, banks, investment companies, financial intermediaries and the Italian Post Office-Banco Posta Department) - to be disclosed to the client (as of 1st January 2013 any clause preventing or limiting such right of cooperation are void; the rule applies to all insurance products’ distributors; IVASS might adopt implementing provisions, although this is not necessary for such rule enforceability);
• right of insurance agents registered with the Italian RUI (Section A) to place and promote loan agreements - directly commissioned by banks and financial brokers with no further obligation to register in any other list or register;
• 10 year prescription (previously: 2 years) of rights deriving from life-insurance policies (with the exception of the right to premiums payment - 1 year prescription - and the rights deriving from non-life insurance and reinsurance policies - 2 year prescription);
• prohibition of tacit renewal for motor-vehicles insurance policies;
• 1 year maximum duration of such policies validity (plus a fraction if so requested by the insured) with automatic termination upon expiry);
• 30 days minimum termination notice for motor-vehicle insurance policies, and coverage extension for the following 15 days after the due date and until the new policy comes into force (the rules apply immediately for all new policies and as of 1st January 2013 for those policies with tacit renewal clause entered into before the Decree - Growth 2.0 came into force);
• basic motor-vehicle policy definition with predetermined clauses that companies shall offer to customers – also via internet granting the freedom to negotiate premiums (implementing measures by the Ministry of Economic Development needed);
• providing the insurance contract parties with accessible consultation areas via internet, enabling on-line policy renewals and premiums payment (the provisions apply to all branches; IVASS implementing regulation needed);
• using the common interface platform amongst companies, for the management and inception of policies, limited to non-life insurance policies information and estimation activities (IVASS implementing regulation needed);
• simplification of the non-life products procedures, bureaucracy, s paperwork and forms to be used with customers (IVASS implementing regulation needed);
• remaining premium reimbursement obligation in case of early termination or transfer of the loan/financing granted by insurance policies with unique premium payment (applicable to all policies, including those marketed before the entry into force of the conversion law); such new rule also applies to administrative costs specified in the policy.

Conclusion

Through Legislative Decree - Development 2.0, the Government has focused its attention on the Italian insurance market, on the one hand, giving IVASS new anti-fraud tasks in relation to the motor-vehicle insurance sector which has been stormed for a while now and spoiled due to adverse effects of widespread fraudulent behaviors, on the other hand, introducing new rules providing incentive to the competition between insurers and/or intermediaries thus opening to the possibility of a free cooperation amongst them, and increasing the level of consumer protection.

Within such measures - aimed at facilitating the Country’s development - the most debated one amongst the insurance market players is that opening to intermediaries’ free cooperation , given the potential prejudice it might bring to insurers having invested throughout time significant resources in order to establish their own distribution networks according to previous regulations.

In any case the actual results of such reform - in terms of achievement of the desired development of the insurance sector in the Country - will not be appreciable before the end of 2013.