Borislav Bogoev, Deputy Chairman of the Financial Supervision Commission: The unified information system will eliminate the errors in policies issued from receipt-books

Mr Bogoev, what are the advantages of the electronic policy and what shortcomings in the system will be overcome by its introduction?
- The so-called by the media “electronic policy "is not the most accurate term as it comes down to the introduction of a unified information system for risk assessment, management and control, which, besides the issuing of policies directly from the insurers’ information systems, will allow for the setting up of the "bonus-malus” system via a centralised information system and database. It will be based on criteria which will affect the price of the premium depending on the drivers’ behaviour on the road and the damages already caused. This is an outstanding success because a measure which we have debated for years and which will substantially benefit consumers will become efficient. After entering the data needed for the issuing of the policy, the electronic system will generate a code (individual number of the policy) in real time. Policy accounting will no longer be needed and the bad practice of report issuing with major delays will be overcome.

How far will the introduction of the e-policy affect the coverage of the Civil Liability (CL) policy? Do you expect that it will be reduced as a result of the implementation of the compulsory payment in one instalment instead via many remittances as was the case so far?
- These are two completely separate issues. First, the e-policy will have a positive effect on the coverage of the compulsory CL policy. Why? All insurance companies will have access to the platform through which a uniform numbering of the policies is being introduced. The system will allow for the Guarantee Fund to receive accurate information in real time on what policies have been issued, which companies have issued them and who are the persons insured. Thus, businesses and the Government will have accurate information about the actual coverage of the CL policies at any time. And the most important issue is that the system will help for a number of errors, which now occur in the policies from the receipt-books, to be eliminated. The data shows that there are errors in more than 25% of the insurance policies, a fact that partly influences the coverage. The coverage is expected to increase by several percent due to the elimination of the mistakes alone. Regarding the proposal for the suspension of the deferred payments under the CL policy, it was made with the amendments to the Insurance Code which were discussed at the Council of Ministers meeting and have to be submitted to the National Assembly. That is, the e-policy is already a fact, and as of July 18, 2011, all the companies issuing policies under CL will have to do it via the electronic system, while the payment in one instalment is a matter of further discussion and decision.

Is there a risk that drivers, in case of an accident, will be able to issue an e-policy by themselves instantly without being submitted to any sanctions?
- No. We can look at the following case – the police officer stops a driver who claims to have a CL policy but has forgotten it at home. Each insurer, broker or agent, will provide you with an insurance policy that must be kept together with the other documents for the car. However, the new information system allows the traffic police officer to check directly, in real time, the database of the Guarantee Fund, via SMS or other special technical means, as to whether the driver has a policy. The driver practically will not be able to beat the police officer to it and sign the policy in front of him.

The suspension of the deferred payment is another broadly debated issue. According to the companies in the industry, this will develop a secondary credit market, which will bear the risk and defer the amounts. What is your comment on this issue?
- The proposal for the suspension of the deferred payments was made because it is exactly the deferred payment option that has led to bad practices: payment of the first instalment alone, providing an insurance policy, which is presented to the Traffic Police authorities as a full-year policy. This practice impedes effective control and creates conditions for avoiding the imposition of sanctions. Attempts are being made for such a setting of the deferred contributions that, even at the conclusion of the insurance, it is foreseen that the last instalment will not be paid and dumping prices are being set which threaten the financial stability of the sector. Also, the deferred payment option was distorted by mass non-payment and early termination of insurances, which further reduced the coverage to 75% at the end of May 2011.

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