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Ljubljana, 6.11.2014. Aleksandra Miletić, National bank of Serbia Regulation and Supervision of Intermediaries in Serbia

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  • Ljubljana, 6.11.2014. Aleksandra Miletić,

    National bank of Serbia

    Regulation and Supervision

    of Intermediaries in Serbia

  • OUTLINE

    Legal Framework,

    Professional requirements,

    Information presented by the

    intermediaries,

    Registration,

    Supervisory challenges,

    The new Insurance Law.

  • 1. LEGAL FRAMEWORK

    The Insurance Law was adopted in 2004.

    Licensed Insurance Agents and Brokers

    (companies and natural persons), are

    subjects of supervision by the National

    bank of Serbia,

    The Law is partially harmonized with

    IMD1.

  • Bylaws relating to insurance intermediaries

    Decision on the content and manner of taking the

    professional exam for insurance brokerage

    and/or agency services and manner of proving

    eligibility for obtaining the relevant certificates,

    from 2006,

    Decision on terms of granting approval to banks

    to act as insurance agents, from 2006,

    Decision оn the contents and manner of keeping

    of a register of data on insurance companies and

    other registers, from 2006.

  • Brokerage and Agency activities

    Brokerage activities include activities related to

    connecting the insured and/or policyholder with

    an insurance company, in order to negotiate the

    conclusion of an insurance contract,

    Agency activities are performed in accordance

    with an agent contract on representation on

    behalf and for an insurance company .

  • Types of Insurance Intermediaries

    Insurance brokers: Licensed Insurance Brokerage Companies by the NBS, incorporated

    as a joint stock company or a limited liability company,

    Brokerage Companies cannot provide insurance agency services.

    Exceptionally, the brokerage company can engage in insurance

    agency activities for a certain types of risk,

    Certified brokers authorized by the NBS (brokers natural persons

    working in a Insurance Brokerage Company).

    Insurance agents: Licensed Insurance Agencies, incorporated as a joint stock company

    or a limited liability company or Licensed Contractors (insurance

    agents/entrepreneurs) by the NBS,

    Banks or tourist agencies may provide insurance agency services,

    as additional activities to their principal professional activity, with an

    NBS prior approval,

    Certified agents authorized by the NBS (agents natural persons

    engaged in insurance agency activities).

  • 2. PROFESSIONAL REQUIREMENTS -

    BROKERAGE COMPANIES

    The application for a NBS license to conduct insurance brokerage

    activities includes, amongst others:

    list of shareholders and business plan;

    initial capital (financial capacity);

    evidence that persons proposed for members of the management

    and supervisory board meet the conditions prescribed;

    evidence of adequate personnel and technical equipment capacity of

    the company;

    insurance against liability for damages arising from activities or

    unconditional financial bank guarantee accepted by the National Bank

    of Serbia for the insured sum and/or the sum not less than the RSD

    equivalent of EUR 100,000;

    evidence of relatedness based on capital or in another way with

    insurance companies, insurance agency companies or insurance

    brokerage companies.

  • PROFESSIONAL REQUIREMENTS - AGENCY

    COMPANIES/ INSURANCE AGENTS

    The conditions for incorporation and performance of insurance

    agency activities in an insurance agency company equal the

    mentioned conditions for incorporation of an insurance brokerage

    company.

    The only difference is the non-submission of evidence of

    insurance against liability along with the application for a license

    to conduct insurance agency activities.

    However, a preliminary agency contract or the agency contract

    with the insurance company, with the provision of the insurance

    company’s right to consistent monitoring of the execution of the

    contract must be submitted instead.

    The conditions for incorporation of an insurance

    agents/entrepreneurs are less demanding (initial capital,

    fit&proper requirements, preliminary agency contact and other

    conditions)

  • Responsibility for the activities of an Insurance

    Agency/Insurance Agent

    The insurance company shall be liable for the actions

    performed within the insurance agency activities,

    The insurance agency or agent is liable to the insured for

    any damage caused by false representation or negligence

    of the insurance agency or agent or for the damage caused

    due to the fact that the insurance agency or agent did not

    disclose their acting as an agency or agent,

    The general manager of the insurance company and/or the

    individual endowed with special authorizations who signed

    the contract on agency is liable to the insurance company

    for the damage to the company arising from such contract.

  • Other Insurance Intermediaries

    Insurance brokerage and agency activities may

    also be performed by other legal entities based

    on a special law and the approval of the National

    Bank of Serbia (in terms of the fulfillment of

    conditions on human resource and technical

    capacity) (e.g. travel agencies, commercial banks

    – bancassurance, etc).

    Pursuant to Article 44 of the Law on Compulsory

    Traffic Insurance, motor third party liability

    insurance policies may also be sold by legal

    entities authorised for motor vehicle inspection.

  • Professional examination for the performance of

    brokerage/agency activities

    Insurance brokerage/agency activities in an insurance

    brokerage/agency company or an insurance agent may be

    performed only by employees of this company, who are

    authorised by the National Bank of Serbia.

    The National Bank of Serbia gives authorisation for the

    performance of insurance brokerage/agency activities to a person

    who has passed the professional examination for the performance

    of brokerage/agency activities (ogranised by the NBS) and who

    complies with other prescribed conditions by the Insurance law.

    The Decision on the Content and Manner of Taking the

    Professional Exam for Insurance Brokerage and/or Agency

    Services and Manner of Proving Eligibility for Obtaining the

    Relevant Certificates, prescribes the content and method of taking

    the professional exam for insurance brokerage and/or agency

    services.

  • 3. INFORMATION PRESENTED BY THE BROKERAGE

    COMPANIES

    Insurance brokerage company must explain to and advise the insured of the

    circumstances relevant to the conclusion of the insurance contract and is

    specially obliged to:

    Draft an appropriate risks analysis;

    Draft a solvency analysis of the insurance company;

    Mediate in the execution of insurance contracts with the insurance company;

    Inform the insurance company that the insured wants to conclude the insurance

    contract, offer to the insured the insurance conditions and provide them with

    information on the method for calculating the premium;

    Check the wording of the insurance policy;

    Offer assistance to the insured during the validity term of the insurance contract;

    Monitor the execution of the insurance contract by the insured,

    Draft proposal to amend the closed insurance contract for the purpose of ensuring a

    higher level of safety to the insured.

    The insurance brokerage company is obliged to inform the insured of all legal

    and economic relationships with the insurance company affecting the

    impartiality of the insurance brokerage company while fulfilling its obligations

    to the insured.

  • 4. REGISTRATION OF INTERMEDIARIES

    The National Bank of Serbia keeps registries of

    licensed insurance brokerage and agency

    companies and agents, records of licenses

    granted to certified brokers and certified agents,

    records of legal entities which perform the

    activities of brokerage and agency according to a

    separate law (banks),

    Records are continuously updated to reflect all

    changes in information.

  • The insurance intermediaries market in Serbia is

    comprised of:

    -61 insurance brokerage companies,

    -22 insurance agency companies,

    -110 insurance/agents entrepreneurs,

    -19 banks performing insurance agency,

    -15,170 natural persons licensed to engage in

    insurance agency/brokerage activities:

    -166 certifies brokers,

    -11,413 certified agents,

    -3,591 certified brokers and agents.

    Number of insurance intermediaries

  • 5. SUPERVISORY CHALLENGES

    Provisions of the Insurance Law relating to the issuance of

    licenses and to supervision of insurance companies apply

    accordingly to insurance brokers and agents (licenses,

    approvals, registration and off-site and on-site

    supervision and supervisory measures),

    According to the NBS By–Law, the NBS Council adopts the

    Plan for on-site controls, on the proposal of the

    Administration for supervision of financial institutions within

    the NBS,

  • SUPERVISION PROCESS - OFF-SITE

    Analyses of annual financial statements and

    other regular reports,

    Identifying problems and determining potential

    cause of problems,

    Sending intermediary written notes about

    observed problems, with a deadline to make

    necessary corrections,

    NBS undertakes specific action regarding every

    intermediary, if the proposed requirements are

    not fulfilled.

  • SUPERVISION PROCESS - ON-SITE

    Focused on compliance with law and by-laws,

    Major fields: relationship with an insurance

    company, records of policies and internal rules,

    Performed as well through supervision of an

    insurance company – distribution channels and

    costs,

    In specific situations extends to market conduct

    and relationship with clients, especialy

    information requirements.

  • Supervisory challenges II

    Due to the underdevelopment of the insurance market,

    most licensed brokers and agents often do not possess

    adequate knowledge,

    Due to these reasons, the main focus of intermediaries is

    singing of insurance contracts and gaining new clients, and

    less attention is focused on the rights and obligations that

    result from the conclusion of an insurance contract,

    However significant progress has been achieved in

    insurance intermediation from 2004: regulated sales

    network has been adopted, only licensed agents and

    brokers can operate in the market and better protection of

    policyholders has been achieved.

  • 6. The new Insurance Law

    The new Insurance Law, prepared by the NBS,

    envisages further harmonisation with IMD1, as

    intermediaries have a central role in the distribution of

    insurance products, in order to enhance consumer

    protection,

    The main novelties are:

    - reinsurance mediation has been introduced,

    - the ability of intermediaries to conduct business activities directly

    or indirectly related to insurance,

    - exclusion of the possibility that the insurance broker may

    perform insurance agency activities,

    -

  • The new Insurance Law (II)

    - a bank, public post operator and a financial leasing company

    may engage in insurance agency activities, as supplementary

    activities, with prior approval of the National Bank of Serbia,

    - the director of the insurance broker or insurance agency

    company must be employed and have residence in the Republic

    of Serbia,

    - certified brokers/agents can be hired on the basis of

    employment or other legal basis in accordance with the Labour

    Law,

    - introduction of the obligations of education and training of these

    certified brokers/agents, in order to maintain better protection of

    insurance clients,

  • The new Insurance Law (III)

    - the obligations of insurance intermediates on providing

    information to clients is enhanced and detailed information

    conditions have been prescribed,

    - the right to register complaints about intermediaries is

    regulated,

    - exceptions for intermediaries has been introduced in

    accordance with IMD1,

    - freedom to provide (re)insurance mediation services and the

    freedom of establishment has been introduced, that will apply

    from the day of accession of RS to the EU.