INSTITUTE OF INSURANCE OMBUDSMAN Experience REPUBLIC OF KAZAKHSTAN
CONTENT History of establishment: - The law on “Mandatory insurance of vehicle owners’ responsibility” ; - Memorandum about “Extrajudicial dispute resolution” ; - Law amendment in “Mandatory insurance of vehicle owners’ responsibility” ; Insurance Mediator today: - History of case handling 2008-2009. Case review: - Typical problems; - Solutions of typical problems. What next? - Memorandum on “Extrajudicial dispute resolution” ; - More automatization.
History of establishment: The law on “Mandatory insurance of vehicle owners’ responsibility”. The law of the Republic of Kazakhstan on “Amendments and Additions to certain insurance legislative acts” came into force in May 27, 2007 ; The mentioned legislative act envisaged the prosecution of direct regulation of insured accidents. The procedure of the direct regulation generates many disputes, which entails additional costs concerning money payback.
History of establishment: The law on “Mandatory insurance of vehicle owners’ responsibility”. Insurance mediator is an independent natural person, who regulates relationships between insurers about mandatory insurance of vehicle owners’ responsibility. The insurer has a right to appeal this decision to the court in case of disagreement with the decision of the Insurance ombudsman. The Office launched professional activities on October 24, 2007.
• Election of insurance ombudsman is realized by the council of representatives. The council of representatives is formed by one representative from: 1) each insurer; 2) authorized body. • Authorized body recommends the candidacy for the election of insurance ombudsman. Insurance ombudsman is elected by the majority votes of the council of representatives. Each member of the council has a right for one vote in the election. In case of tie vote the vote of the authorized body is decisive • Insurance mediator is elected for a term of two years.
Person, who cannot be recommended for the selection as an insurance ombudsman: • Without higher education; • With work experience in the sphere of insurance less than three years; • With prior conviction, which is not cancelled or not expunged by the established order;
• Previously was an executive employee of an insurance organization or other legal entity for a period of maximum a year before decision making by the authorized body about conservation of insurance organization, mandatory redemption of its stock, license deprivation from the insurance organization, and also mandatory liquidation of insurance organization or other legal entity or adjudication about bankruptcy according to the established legislation of the Republic of Kazakhstan. • Insurance ombudsman does not have a right to hold any position in insurance organization and/or be an affiliated person of insurance organization. • The board of representatives has a right to reelect the insurance ombudsman in case if the insurance ombudsman does not meet the requirements.
Financial activities of the insurance ombudsman is realized at the expense of mandatory payments of the insurance organizations. Each year insurance ombudsman plans annual budget and submits it for the approval of the Board of Representatives. Annual budget is equally allocated among all the insurance organizations, who realize mandatory insurance of vehicle owners’ civil responsibility.
History of establishment: - Memorandum on « Extrajudicial dispute settlement »; The Memorandum on market development cooperation of mandatory insurance of vehicle owners’ responsibility was signed among Financier Association of Kazakhstan, Insurance ombudsman and 14 insurance organizations in June 25, 2008. According to the memorandum, insurance organizations grant a charter to the insurance ombudsman to settle the disputes rising between insurance organizations and clients. The participants of the memorandum are 22 insurance organizations from 27 as of February 1, 2010.
History of establishment: - Memorandum on « Extrajudicial dispute settlement »; The cause: As a result of rather low confidence of clients towards insurance organizations: - Absence of united and understandable standards for the client for the regulation of insurance climes; - Absence of access of the consumer of insurance services to the qualitative legal assistance - Not client oriented payment politics of particular players of insurance market.
History of establishment: The law amendment on “Mandatory insurance of vehicle owners’ responsibility” . The law on “Amendments and augmentation in several legislative acts concerning mandatory and mutual insurance, taxation” of the Republic of Kazakhstan came into force in February 20, 2010. According to the amendments, the Insurance ombudsman – an independent natural person implementing regulation of relationships among - insurers over mandatory insurance vehicle owners’ responsibility; - insured person, insurance beneficiaries and insurers over mandatory insurance of vehicle owners’ responsibility.
History of estanlishment: The law amendment on “Mandatory insurance of vehicle owners’ responsibility”. ― decision of the insurance mediator for СК ― decision of the insurance ombudsman over relationship between the insured (insurance beneficiary) and the insurer is compulsory for the insurer in case of its admission by the insured. In case of disagreement with the decision of the insurance ombudsman the insured (insurance beneficiaries) has a right to apply to the court for the protection of his/her right in accordance with the legislation of Republic of Kazakhstan. At the same time, the decision of the insurance ombudsman is not compulsory for the insured (insurance beneficiary).
Insurance Mediator today: case investigation history In the year of 2008: 27 applications from insurance organizations about regulation of relationship. 9 cases were investigated, 4 claims from which were satisfied, 5 cases were closed through reconciliation of the parties, 3 cases were refused to be admitted because of the lack of authority. A decision was made for 44,5% of cases; A reconciliation agreement was reached for 55,5 % of cases. 16 cases are under the investigation process. Low level of application of the insurance organizations we connect to the very low level of awareness of insured about the existence of direct regulation mechanism and as a result low level of application of direct regulation mechanism of insurance payouts by insurance organizations.
Insurance Mediator today: case investigation history In the year of 2009: Overall 270 applications were submitted: • 247 applications about disputes between insurance organizations; • 23 applications about disputes between insured and insurance organization • Overall 241 cases were reviewed, from which: • 120 – claims of insurance company were satisfied; • 8 - claims were satisfied partially; • 12 – recommendations were given; • 2 – rejected;
Insurance Mediator today: case investigation history 64 – stopped because of dispute settlement; 28 – stopped, not liable to be reviewed; 1 – stopped without review; 8 – refused to be submitted. The rest of not reviewed cases: 27 /December 15, 2009./ 37 % of cases were regulated without the decision making of the insurance ombudsman.
Case review – Typical problems - damage assessment: - absence of a single method to assess the damage of vehicles after the traffic accident; - absence of state regulation services of vehicles’ restoration; - absence of certification of spare parts for the restoration of the vehicles; - absence of price monitoring of maintenance station service. As a result, nobody can tell how much the restoration costs actually.
Case review – Typical problems - damage regulation: Typical refusals of insurance payouts: - related to the lack of knowledge of the clients of insurance organizations about their rights and obligations (which are not brought to client’s notice intentionally or unintentionally); - related to the politics of insurance organizations. Situations related to the problems in the legislation: - multiple ambiguous interpretation of the rule of law - insufficient knowledge of theory and related sectors of law.
Case review – Solution of typical problems: - Development, agreement and adoption of a united method to assess transportation facilities; - Formation of a standardized enforcement practice.
What next? – Memorandum on “Extrajudicial dispute settlement” : Accretion of power of insurance ombudsman by giving the right to regulate the disputable relationships regarding to the voluntary classes and forms of insurances. - KASKO + voluntary insurance of responsibility; - voluntary insurance of moveable and immovable property insurance of natural people and legal entities. - voluntary insurance for the people going abroad.
What next? – more automatization. Development of electronic system of dispute settlement. - direct development of the system as IT solutions; - development of the system with the insurance organizations; - system development – as realization that the system is a necessary instrument for the dispute settlement.
Thank You for attention
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