During a recent Webinar, the Secretary General of IVASS (i.e. the Italian Insurance Supervisory Authority), Mr. Stefano De Polis, made important statements regarding the main features of the Arbitrator of Insurance Disputes (AAS).
The body, which is expected to finally see the light of day by the end of 2021, is the result of the implementation of Article 15 of the European Insurance Distribution Directive (EU) 2016/97.
The AAS will offer the possibility to quickly and economically resolve the so-called small claims with the ultimate aim (hopefully) of deflating legal disputes – since the AAS will not only be a tool to resolve disputes out of court, but also a potential real preventive system. On this point, Mr. De Polis pointed out that the value of the body's decisions will go beyond the individual case, thus generating what could be defined as a "case-law" of Insurance Arbitration in order to prevent the emergence of disputes having similar topics.
The structure of the Insurance Arbitrator will be inspired by those of industry arbitrators, whose criteria are governed by European Directive 2013/11 on Alternative Dispute Resolution, transposed into the Italian Consumer Code.
However, while the body will have identical features to those of the ABF (Financial Banking Arbitrator) of the Bank of Italy and the ACF (Arbitrator for Financial Disputes) of Consob (The National Commission for Companies and the Stock Exchange), it will necessarily have to take into account the peculiarities of the system in which it operates.
In the light of this, a first difference will concern the modalities of adhesion. For the ABF and ACF this takes place on demand; whereas for the Insurance Arbitrator the procedure is automatic with the registration in the Register of Companies, the Single Register of Intermediaries or the relevant Lists, without therefore the need for further communications to IVASS: a choice dictated by the large number of operators in the insurance market.
Only EU companies and intermediaries operating in Italy under the freedom of services will be able to apply for exclusion, subject to notification of membership of another ADR system in their country of origin.
Recourse to the AAS may be made by the policyholder, the insured or the injured party who has the right to act directly against the company (at the moment, this right is provided only in the case of motor liability policy and third party liability for hunting activities).
With regard to the composition of the body, which will be independent and impartial, IVASS will provide the means, structures and personnel necessary for its running. The panels, designated and appointed by IVASS, to which the disputes will be submitted, will each consist of five effective members, plus alternates, chosen from persons with high professionalism, competence, integrity and independence.
Given the complexity and variety of the structure and operating models of the national insurance system, the composition of the panels will vary not only with regards to members representing consumers (such as for the ABF), but also with respect to those representing the Italian insurance market (e.g. consumers, insurance companies, intermediaries, etc.).
As for other arbitrators, there will be no need to be assisted by a lawyer and at very low costs. The entire process will also be digitalised with clear benefits in terms of time and efficiency. To date, a dedicated computer system and website have already been set up.
As regards the procedure, it will be necessary, before recurring to the AAS, that an attempt to resolve the dispute between the parties has been made through a complaint to the company or intermediary. In the event of a failure to respond or of an unsatisfactory response, it will be possible to present a recouse to the Arbitrator, but always within 12 months of the submission of the complaint. After this period, the complainant is presumed to have no more interest (without prejudice to the possibility of submitting a new complaint and thus reopening the deadline).
The timeframe envisaged, unlike judicial procedures (which last several years), is very short: within 90 days from the submission of the appeal, the file will be compiled through the exchange of preliminary documents and, subsequently, within 90 days - which can be extended in the case of complex disputes - a decision will be reached.
With regard to the outcome of the procedure, it is important to note that the final decision will not be binding. However, the non-compliance with the decision of the Insurance Arbitrator will be announced by means of publication on the website of the body and of the operator, which is equivalent to a real reputational sanction (procedure similar to what is provided for the decisions of other arbitration boards: so-called moral suasion, already typical of the ABF).
Finally, Mr. De Polis, focused on two peculiarities of the Insurance Arbitrator.
The first aspect concerns the diversified limits of competence by value. The Ministerial Decree will establish diversified value thresholds in relation to the various business risks with the possibility for IVASS to extend them through the implementing provisions.
It will be possible to appeal to the arbitrator to ascertain the rights, obligations and faculties inherent in the insurance services arising out from an insurance contract, including the right to compensation for damages suffered as well as the failure to comply with the rules of conduct relating to the distribution of the insurance product, provided that the contract has been concluded.
In particular, the documentary nature of the proceedings will be decisive and the arbitrators will not be allowed to conduct investigations, under penalty of inadmissibility of the appeal.
The second aspect relates to the possibility of an equity judgment in cases where the petitum (i.e. the subject) falls within the amounts provided for by Article 113, paragraph 2, of the Code of Civil Procedure (and therefore for disputes in which the compensation sought does not exceed EUR 1,100, a limit that will be raised to EUR 2,500 from 2025) or where the parties make a mutually agreed request. The rationale behind this method of judgment is to facilitate and speed up the finding of a solution, with positive repercussions for both consumers and the justice system.
Cooperation between ADRs
The Secretary of IVASS then dealt with another fundamental aspect, namely the boundary between the competences of AAS and those of ABF and ACF in order to avoid overlapping or gaps in attributions, especially in disputes concerning bancassurance contracts.
With reference to the possible interconnections between AAS and ABF, it will be necessary to define the boundary of operations of the two bodies with regard, for example, to the so-called PPI (Payment Protection Insurance) policies, which are offered in conjunction with loans (i.e. mortgages, consumer credits, loans against salary or pension transfer) to guarantee the repayment of the sums paid out.
In this regard, it could be assumed, as pointed out by the Secretary, the competence of the ABF on issues concerning the banking service in the strict sense (i.e. disputes on the APR of the consumer loan as a result of non-inclusion of the insurance cost, which must necessarily be included in the calculation of the APR given the mandatory nature of the policies for these operations), while the AAS could be competent for disputes relating to the interpretation, execution of the insurance contract.
As regards, instead, the possible areas of contiguity between the AAS and the ACF, we consider the distribution of insurance investment products, the so-called IBIPs, placed on the market by banks, Poste Italiane, but also traditional insurance intermediaries (insurance agents, brokers).
Under the current regulatory framework, Consob is responsible for placing IBIPs through banks and post offices, while IVASS is responsible for products distributed by insurance agents and brokers, as well as insurance companies. The contract execution, product governance and control (Product Oversight Governance) phases would take place under the supervision of IVASS.
Therefore, in light of the above division, the Insurance Arbitrator should similarly have jurisdiction over disputes concerning the placement of IBIPs by insurance agents and brokers.
Sustainability of the model
It is of fundamental importance to note the role that, for the sustainability of the new body, will be played by the aforementioned limits of competence by value of the AAS, but even more by the future implementing provisions of IVASS aimed at defining the subject and scope of disputes for which recourse to the insurance arbitrator is possible.
All these provisions will be included in order to avoid the large number of recourse that the AAS would otherwise not be able to handle. IVASS has estimated that no less than 5,000 recourses per year could come from the motor liability sector only.
Moreover, recourse to the Insurance Arbitrator will be equivalent to the prior experimentation of the alternative dispute resolutions in cases where they are a procedural condition for the exercise of legal action.
In conclusion, although the regulatory framework is still being defined, these will be some of the main features of the new body. As of today, the ministerial decree (of the Ministry of Economic Development), in agreement with the Ministry of Justice, is in the consultation phase with the main market and consumer associations. Once defined, the public consultation of the IVASS Implementing Regulation will follow. The Insurance Arbitrator system should therefore see the light of day, as mentioned, by the end of 2021.