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ASF unequivocally rejects COTAR accusations

Bucharest, April 30, 2020 – Considering the information disseminated in the public space by the Confederation of Authorized Operators and Transporters in Romania (COTAR), the Financial Supervisory Authority (ASF) provides the following clarifications:   

COTAR is an organization representing the interests of a reputable profession that brings significant contributions to the Gross Domestic Product, but without connection to the nonbanking financial markets regulated and supervised by ASF.   

Consequently, we appreciate that COTAR representatives do not hold the necessary abilities and expertise in order to express an opinion with regards the surveillance activity and even less when it comes to the mechanisms of operation of the insurance market.

This fact clearly emerges also from the analysis and data comprised in the open letter recently published by COTAR.            

The position of the Confederation of Authorized Operators and Transporters in Romania is built on disparate data, mistakenly construed, which indicated the absence of elementary knowledge in what regards the principles based on which the insurance market operates.

ASF publishes, since its establishment, relevant data for the evolutions of the markets and regulated and supervised entities, in full transparency, within its reports – quarterly, half-yearly, annual – especially for providing a clear image on the evolution of these markets and in order to avoid any kind of misunderstandings. 

Therefore, ASF does not understand how, from this position, COTAR can issue sentences with regards to insurers market, by containment of some data and the interpretation thereof in a key that, if not showing ignorance, then is shows bad faith.  

Referring to ASF business, COTAR adopts anachronical stands, where the regulations based on which an entire market should operate are regarded in a narrow and partisan manner, where the business digitalization is being perceived as a limitation of consumers rights (particularly in one of the markets offering financial services), where commercial activities are being mistaken for regulatory activities.

ASF supervises with full responsibility the nonbanking financial market, and, in all situations where it has found a breach of the legal framework, it has taken the measures required, which have also been publicly communicated. ASF business targets constructive and coherent endeavors, the more so during this period, when the entities activating on the financial markets need a strong support.

The consumers protection activity doesn’t mean, as COTAR tries to accredit, only the investigations of the petitions. This activity is much more complex and targets different plateaus at the level of sectors within ASF.

Thus, the Authority considers COTAR attitude as inacceptable, attitude revealing a hashed reality, twisted and partisan, built on an entire scaffold of groundless accusations directed to the manner in which ASF exercises its attributions.   

In what follows, we present to you some points of view meant to fully clarify the accuracy of the information revealed in COTAR open letter. 

The excessive number of petitions registered at ASF - the increase by 300% invoked by COTAR in the open letter has been established by a deliberately wrong calculation in order to distort reality, namely by reporting the total number of petitions registered in 2019 (25,679 petitions) to the number of unique petitions registered in 2018 (8,313 petitions) and not to the total number of 10,549 petitions, recorded at December 31, 2018, as it would have been correct for a unitary comparison.  

In this case, one can notice the double measure with which COTAR construes the statistical data. On the one hand, it argues that the registration of the petitions uniquely per complainant represents a manipulation of the figures, and, on the other hand, it refers to this indicator, when the situation is convenient to it for claiming its obvious bias judgment.

In fact, the increase of the total number of petitions registered in 2019 is of 143.43%, and for the petitions registered uniquely per complainant the increase was by 150.66%.

From the analysis of the petitions submitted to ASF, there were indeed numerous cases where have been found breaches of the legislation in matters of investigating damage claims.

Beyond these situations that obviously led to the increase of the petitions number, the complaints, in growth, registered in the total statistics of ASF were based also on certain discordant practices, such as: submission of recoveries of petitions registered in the previous years, of which certain ones have already been favorably settled (integral payment + penalties); the submission of several petitions by the restorative units or by the consultancy firms, some repeatedly, without making available to the authority the proof of quality in the reported damage record; submission of distinct petitions to the same complainant – trustee (service unit), formulated for the same damage record, by which is being claimed a different aspect connected to the respective damage record, given that these aspects could be subject to a single petition; the submission of petitions having the same contents, by the same complainant, through different channels: online ( on ASF portal), e-mail and by post/courier; the submission of petitions with the same object, by the same complainant, both to ASF, as well as to other entities, all petitions being subsequently redirected to ASF by the respective entities and distinctly registered; the submission of petitions to ASF, with the same object, both to the injured person, as well as to the trustee, both being distinctly registered.

From the analysis of the number of petitions registered during 2017-2019, it was found that, in 2019 was registered an exponential growth of the number of complainants that have submitted more than10 petitions/complainant for the market of insurances – reinsurances during the analyzed period, as follows:  

-       23 complainants have submitted 9.84% of the total number of petitions registered in 2017;  

-       30 complainants have submitted16.69% of the total number of petitions registered in 2018;

-      162 complainants have submitted au 42.47% of the total number of petitions registered in 2019.

It is important to underline the fact that the 20,837 analyzed petitions and uniquely settled per complainant, in 2019, represent 1.28% of the total number of damage records endorsed, last year, by the insurers and 0.13% of the total number of insurance contracts in force at 31.12.2019. ASF considers these figures as being eloquent in terms of the magnitude of this so-called phenomenon. 

Comparisons with EU at European level, the average of the analyzed and settled petitions represent approximately 0.3% of the total number of insurance contracts, as compared to 0.13% in Romania in 2019, year that includes however a significant growth as compared to the previous years. 

In COTAR open letter is being mentioned the fact that the number of petitions registered in Romania is 22 times higher than the one recorded in Germany. The last data available on BaFin site (the regulation authority in Germany) indicates the fact that, in 2018, the number of the petitions in Germany was of 5,608, figure somehow similar with the one in 2017. During the same reference period, in Romania, the total number of petitions was of 10,549. Considering that BaFin has not yet published the data related to 2019 and if we reckon that, in Germany, was kept constant an average figure 5,500 petitions per year, then the number of petitions registered in Romania, in 2019, is approximately 4 times higher as compared to Germany, and not 22 times higher.   

Nevertheless, the comparison between the systems between the two countries is pushed, extreme even, given the major differences, right from the level of the two states economies, which shows the bad faith defining the rhetoric of COTAR representatives.  For a good-faith analysis there should be used other indicators, such as: the cost of an insurance in the two countries, the ratio between the urban population vs rural population, the buying power, the quality of the infrastructure, the profile of the drivers in both countries, the legislation in the road field and the power implementation thereof, the insurance legislation, the MTPL price and the criteria of settlement thereof etc.  

The unique complainant distorts the number of petitions – The syntagma unique complainant, qualified by COTAR representatives as being invented in order to manipulate the data is being used in the statistics in order to have a real and clear image of the number of petitions received by ASF.  

By means of this segmentation, out of the total number of petitions are being identified the complaints subject to ASF core business and that are being drafted as per the legal provisions, so that they enter the investigation circuit.

However, it must be noted that, all the petitions addressed to the Authority receive an answer, even the classified ones (anonymous or to which has already been sent an answer) or connected (multiple requests on same subject), as per the legal provisions on the regulation of the activity of settlement of disputes (GO no.27/2002).  

Also, is should be mentioned the fact than all the petitions submitted to ASF, which have brought new elements in the assessment as compared to the ones presented in the initial petition, were registered as new petitions and entered the workflow, even though they have been submitted by the same complainant and had the same object as the initial petition.

In conclusion, the segmentation of the petitions, according to the unique complainant syntagma does not mean a manipulation of figures, but a presentation thereof in a clear and concise manner. 

ASF cannot intervene in the support of the prejudiced – the authority has settled, in favour of the claimants, almost 60% of the petitions uniquely analyzed per claimant and has also disposed penalties with regards to these aspects.    

Among these, 75.42% were finalized through payment, the requests having legitimacy and legal settlement framework. The rest has as object procedural nature requests, non-quantifiable materially (opening of damage record, restatement, submission of payment accept to service units etc.).

Out of the analysis of the aspects claimed in the petitions, it is ascertained however that, in most cases, the divergency elements do not reside in the exclusive application of the insurance legislation, but are being determined by the non-acceptance by the insurers of the amounts requested by way of compensation by the trustees/assignee, for commercial reasons.

The authority does not have the attribute of the law court, in order to establish which of the two parties has determined the fair amount of the damage, when there is no possibility that understand each other amicably.

As per the legal provisions extremely clear in this regard, the Authority does not have competences to settle, by petitions, the aspects of commercial nature (labor tariffs/lease, additions to parts/materials) or of technical nature (the conclusions of expertise/investigations regarding the dynamics of the accidents or technical repair/replacement solutions of the damaged landmarks, the technological operations comprised in the estimates of repairs)  or to impose certain solutions in the damage records.  

In order to support the insurers/ prejudiced persons has been set-up the entity SAL-Fin, which holds analysis leverages of these aspects as well, being able to propose/impose, according to the chosen procedure, a certain solution.

ASF settles petitions according to the legal framework and investigates damage records, as this activity is wrongly perceived by many claimants.

In most of cases, the divergence elements do not reside in the exclusive application of the insurance legislation, but are being determined by the non-acceptance, by the insurers, of the amounts requested by way of compensation by the service units, due to elements of commercial nature practiced. 

Or, from this perspective, ASF, as per its competences conferred by the law, cannot establish which of the two parties facing dispute, the insurer or the repairing unit, has determined the correct extent of the prejudice suffered by the prejudiced person, namely the correct quantum of the compensation due thereto, in order to express an opinion.

For the situations where the compensation cannot be established amicably, the legislator himself has established the settlement manner in the contents of Art.23 – the Payment of compensations – of Law no.132/2017 on compulsory motor third party liability insurance for prejudices produced to third parties by motor vehicle accidents and trams, which at Para (5) stipulated the followings: „If the parties do not agree on the quantum of the compensation, the amount not subject to litigation is being paid by the MTPL insurer, prior to its settlement by negotiations or by the court of justice”.  

The digitalization of the manner of submitting the complaints, to the consumers’ disadvantage – In a period when the online communication has become a habit, even a necessity, ASF has implemented an electronic system in order to create a unique channel of submission of the petitions, which includes all mandatory fields that need to be filled in by the claimant, in order to formulate a petition in compliance with the legal provisions. This decision has been made following the ascertainment of the fact a series of petitions have been submitted with incomplete documentation or have not contained all identification elements, in order to be considered.   

Therefore, the process of application of lodging a complaint, by way of the application/portal exclusively dedicated to petitions, is a modern one and comes as a support for the claimants, and by no means limits the right thereof to submit complaints. 

By way of the portal dedicated to petitions, it is ensured the possibility to track the status of investigation of the petition, thus being provided a very modern and transparent means offered by the Authority for the support of the consumer. In case the consumer wishes to visualize the petition also after a long period of time, the latter has access to the document by simply accessing the account. 

Given that, in 2019 approximately 86% of the petitions have been submitted electronically, the ASF decision to create the special application fort the process of lodging the petitions is fully reasoned.

This fact does not mean that the submission of the petitions in paper format has been adjourned. The consumers can still submit the claims in writing, by post or courier.

ASF has only limited the activity of customers relations, in what concerns the access to the counter of the general registry and direct meetings with the consumers.

This decision has been made only for the period related to the current situation, as measure required by the competent authorities in the field, of social distancing, for limitation of COVID – 19 spread and for the protection of the health of the personnel involved in such activities.

COTAR proposal that ASF also receive petitions by phone is in total disagreement with the legal provisions, particularly with GO no.27/2002 on the regulation of the activity related to the settlement of petitions, which requires the written form of the claims and cannot be taken into consideration.  

In conclusion, ASF has done nothing but replace the submission of the petitions by e-mail with the submission thereof by way of an application especially designed on the institution website. It is presumed the fact that any person who can create an e-mail account and send a petition in this manner may access without problems also the portal dedicated to the petitions.

ASF consigns Ponzi insurance scheme – COTAR states that the insurance firms in Romania are not grounded on the insurance principles but on Caritas functioning principle or based on Ponzi scheme.    

Such an interpretation shows unequivocally the fact that COTAR representatives do not have full knowledge of the insurance market functioning mechanisms.

A Ponzi scheme is a fraudulent investment operation implying the payment of various extremely high profits to some investors based on some funds invested by other persons and not based on the revenues that the business has actually generated.  The insurance activity does not imply “payment of some profits” to the damaged persons and the payment of the insurance premiums, in case of goods and liabilities insurances, as are the MTPL insurances, do not represent an investment activity. 

For the insurance companies, the damages registered represent expenses that, along with the other general procurement and administration expenses must be covered out of the insurance premiums subscribed and collected. The insurance premiums represent the major component of the revenues of an insurance company. 

The failure to collect these premiums implicitly presumes the failure to achieve the revenues and a potential loss record, namely the impossibility to cover the expenses out of the economic activity performed by the company. Consequently, it is obvious that we cannot talk about any Ponzi scheme, but about a dynamic that is to be found in any type of business.

The payment of the damage records, delayed - COTAR questions why the insurers need 6 months (October 2019 – March 2019) to pay just half of the number of damage files? Why has not been paid the other half related to the damage files up to the date of the reports?  

The figures communicated by ASF, as per the report invoked by COTAR, are being calculated based on a certain report by which is being required to the insurers to communicate the payments performed up to February, 14 (45 days) for the files endorsed in Quarter IV.  The extrapolation of the percentage obtained of payments of 49% and the conclusion that the insurers have paid only a half of the damage files in 6 months are not reasoned, for various reasons. 

Not all the files are being endorsed at October 1, namely the payments for these files are not considered up to March 31, as the contents of the document submitted by COTAR wrongly suggests.

Moreover, in the analysis presented are counted the number of days from the date of endorsement of the damage file and up to the payment date, without being presented details referring to the duration between the date of endorsement and the submission of the documents necessary for the completion of the damage files (repair documents etc.). 

As per the data submitted by the insurance companies that perform the MTPL insurance activity, the number of the damage files (uncompleted), in reserve by the end of the year 2019 for material damages for accidents produced on the Romanian territory, is significantly under the percentage of 50% of the total of the files endorsed during 2019 and in reserve up to the end of the year 2018. 

As per the last report Consumer Trends, published by EIOPA in 2019, at European level, the rate of the uncompleted files (open) at the end of the year 2018 and 2017 was of 40-41% and the rate of the files closed without payment was of approximately 22%.

The Adjournment of the Exercise Balance Sheet Review (BSR) related to the audit of the insurance companies – ASF informs COTAR that the financial audit of the insurance companies has not been adjourned.  As per the legal regulations in force, the insurance companies are bound to submit, along with the annual financial statements, the audit report drafted by the external financial auditor of the company.

Apart from auditing the mentioned financial statements, ASF has decided the initiation of a new independent assessment program of the insurance sector in Romania, by the exercise of evaluation of the assets and liabilities, similar to the one preformed during 2014-2015 - Balance Sheet Review (BSR). This exercise is being performed in collaboration with EIOPA and not under the coordination or the initiative thereof. Currently the performance of the exercise is being adjourned and not annulled, following the crisis situation generated by COVID-19.

To whom ASF grants loans – The Financial Supervisory Authority does not grant loans, not holding this prerogative established by the legal acts of establishment. In the account emphasized in the heading „Short term loans awarded” are to be found the placements made by ASF, out of cumulated surpluses annually achieved, in treasury certificates and government bonds form credit institutions. The maturity of these placements is, regularly, of maximum 12 months.

What for has ASF purchased software programs – In the open letter sent by COTAR it is shown that: in 2018, ASF purchased licenses for IT programs in amount of approximately 1 million Euro (3,863,343 RON); the legitimate question arising is with what It program (software) has ASF functioned until then and what recitals stood proof for replacing it with other program, in amount of 1,000,000 Euro that, as it may be found, has led to worse results of the authority.  

At the level of ASF we cannot talk about a single IT program to cover all the necessities of a complex system made up of a number of 14 IT platforms used for various activities, embodying over 500 working stations.  

The needs and exigencies in the IT domain are continuously evolving and the necessary licenses have, regularly, a limited period of use.

For these reasons, at the level of the year 2018 have been purchased intangible assets in total amount of 1,500,355 RON and not of almost a million Euro (3,863,343 RON). They are being used in current activities and represent using licenses for operation systems and various IT programs at the level of individual working stations, licenses of use and support services for the operation systems related to servers, licenses of use  and support services for the operation systems related to servers, licenses to use and support services for databases, licenses of use for the analysis programs and data visualization, as well as the national contribution to the development and maintenance of IT components within the ESMA delegated projects. 

To conclude, following the analysis of the main themes brought to the attention of the public opinion by COTAR, the Financial Supervisory Authority reiterates that they are not correctly substantiated and present reality in an obvious distorted manner.

 

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About ASF

ASF is the national authority set up in 2013 through OUG 93/2012 approved by Law 113/2013, for the regulation and supervision of insurance markets, private pensions and the capital market. ASF contributes to strengthening the integrated operating framework of the three sectors, which amounts over 10 million participants. More information can be found at www.asfromania.ro.