ISTANBULMARCH 2013

C O N T E N T

I. ASSOCIATION OF SERBIAN INSURERS..................................................................................................................................3A. About us...................................................................................... ......................................................................................4-5B. Members.................................................................................... ..........................................................................................6II. SERBIAN INSURANCE MARKET....................................................................................... .....................................................7A. Number of insurance companies in the Serbian insurance market....................................................................................8B. Gross insurance premium....................................................................................................................................................9C. Insurance premiums of the most frequent types of insurance.........................................................................................10D. Share in total insurance premium of the most frequent types of insurance....................................................................11E. Concentration of insurance premiums in the market........................................................................................................12F. Insurance premiums by types of insurance in 2011...........................................................................................................13G. Premium share of the top five insurance companies........................................................................................................14III. MOTOR THIRD PARTY LIABILITY.......................................................................................................................................15A. Number of MTPL policies and total premium by companies in 2012...............................................................................16B. Share of MTPL premium by companies in 2012................................................................................................................17IV. INSURANCE FRAUDS – MAJOR INSURANCE PROBLEM...................................................................................................18A. Overall............................................................................. ...................................................................................................19B. Serbian market..................................................................... ..............................................................................................20C. Where is the „arable land“ for frauds in Serbia.................................................................................................................21D. Some typical problems.......................................................................................................................................................22E. Combating frauds.............................................................................................................................................................. .23V. INFORMATION CENTRE OF THE ASSOCIATION OF SERBIAN INSURERS............................................................................24A. General facts................................................................... ...................................................................................................25B. Protocol with Ministry of the Interior................................................................................................................................26C. Information centre and anti-fraud system.........................................................................................................................27D. Key word – Cooperation.....................................................................................................................................................28VI. BODILY INJURIES...................................................................................... .........................................................................29A. Key aspects/problems in the Serbian market....................................................................................................................30

I. ASSOCIATION OF SERBIAN INSURERS (ASI)

A. ABOUT US

The Association of Serbian Insurers is the legal successor of the Association of Insurance Companies of Yugoslavia, founded in 1968.

The Association of Serbian Insurers is a non-profit organization which performs duties of common interest of the members of the Association, public functions granted by law, work for the improvement and development of insurance, activities in the field of professional training of personnel, initiates passing and amending laws and other regulations in the field of insurance and discusses and resolves other issues of common interest, which are entrusted to the Association by its founders and members.

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MEMBERS (24) - 21 INSURERS (6 COMPOSITE + 9 NON-LIFE + 6 LIFE) + 3 REINSURERS

ASSOCIATION OF SERBIAN INSURERS

PUBLIC FUNCTIONS GRANTED BY LAW

GREEN CARD

BUREAU

GUARANTEE FUND

INFORMATION

CENTER

CODE OF CONDUCT

Representing insurance

companies (country and

abroad)

DUTIES OF COMMON INTEREST

EDUCATION – TRAINING

OF PERSONNEL

REGULATORY WORK – INITATE

PASSING AND AMMENDING

LAWS

EXPERT COMMISSIONS

(13):Motor vehicles,

Property insurance, Green Card,Information

center,Legal affairs,

Financial issues,Actuaries,

Health insurance,Life insurance,

MTPL insurance claims,

Prevention of frauds,

Development of HR,

Bonus/malus.

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* On December 31, 2012 there were total of 28 insurance and reinsurance companies operating in Serbia, 24 of them are members of the Association of Serbian Insurers.

B. MEMBERS

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II. SERBIANINSURANCE MARKET

Number of insurance companies in the Serbian insurance market

Year Composite Non-life Life Total

2005 8 8 1 172006 7 6 1 142007 6 8 4 182008 6 9 6 212009 6 9 7 222010 6 9 7 222011 6 10 7 232012 6 11 7 24

* Apart from insurance companies, on December 31, 2012 there were also 4 companies in Serbia engaged in reinsurance business. 8

2005 2006 2007 2008 2009 2010 20110

100,000

200,000

300,000

400,000

500,000

600,000

700,000 Gross insurance premium (in 000 €)

Total Non-life Life

( u 000 € )

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2005 2006 2007 2008 2009 2010 2011Year

0

50,000

100,000

150,000

200,000

250,000

Insurance premiums of the most frequent types of insurance (in 000 € )

MTPLOther property insuranceMotor casco vehicle in-suranceProperty insurance against fire&other perilsAccident insurance

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Share in total insurance premium of the most frequent insurance types

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Concentration of insurance premiums in the market

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Code Type of insurance Total premium (000 €) Share in total premium

01 Accident insurance 37.024 6,76%02 Voluntary health insurance 9.287 1,70%03 Motor insurance 68.590 12,52%04 Rail vehicle insurance 1.565 0,29%05 Aircraft insurance 1.186 0,22%06 Ship (vessel) insurance 981 0,18%07 Goods in transit insurance 7.477 1,37%08 Property insurance against fire and other perils 42.084 7,68%09 Other property insurance 78.660 14,36%10 MTPL 178.802 32,64%11 Aircraft Liability Insurance 2.477 0,45%12 Vessels Liability Insurance 128 0,02%13 General liability insurance 10.066 1,84%14 Credit insurance 931 0,17%15 Warranty insurance 738 0,13%16 Financial loss insurance 1.363 0,25%17 Legal expenses insurance 89 0,02%18 Travel assistance insurance 10.763 1,97%19 Other non-life insurance 15 0,00%20 Life insurance 83.105 15,17%21 Annuity insurance 4.739 0,87%22 Supplementary insurance along with life insurance 7.286 1,33%23 Voluntary pension insurance 0 0,00%24 Other types of life insurance 364 0,07%

Total non-life insurance (from 1 to 19 ) 452.226 82.56%

Total life insurance ( 20 to24 ) 95.495 17.44% TOTAL 547.721

Insurance premiums by types of insurance in 2011

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Premium share of the top five insurance companies

TOTAL

DDOR NS

1. DELTA GEN. 25,55 25,24

2. WIENER ST. 24,20 25,20

3. GRAWE 19,34 21,28

4. DUNAV 8,20 7,47

5. UNIQA life 7,64 7,50

2011 2010

84,92 86,69

1. DUNAV 32,00 29,59

2. DDOR NS 20,15 21,08

3. DELTA GEN. 17,45 17,18

4. UNIQA non-life 6,19 5,87

5. WIENER ST. 5,31 5,39

2011 2010

81,11 79,11

1. DUNAV 28,2425,93

2. DELTA GEN. 18,73 18,51

3. 17,88 18,50

4. WIENER ST. 8,30 8,67

5. UNIQA non-life 5,21 4,90

2011 2010

78,36 76,51

NON-LIFE LIFE

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III. MOTOR THIRD PARTY LIABILITY

Number of MTPL policies and total premium by companies in 2012

No. Company Number of MTPL policies

Total premium

(000 €)

1 AMS 141.581 10.1402 AS 10.814 9073 Basler 12.504 9904 DDOR Novi Sad 173.314 13.6805 Delta Generali 470.678 36.6306 Dunav 637.470 51.0207 Milenijum 124.354 10.0758 Sava 95.215 7.5619 Takovo 224.085 17.223

10 Triglav 114.008 8.99811 Uniqa non-life 104.903 8.01012 Wiener Städtische 32.261 2.836 TOTAL 2.141.187 168.071

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Share of MTPL premium by companies in 2012

AMS6%

AS1%

Basler1% DDOR NS

8%

Delta Generali22%

Dunav30%

Milenijum6%

Sava4%

Takovo10%

Triglav5%

Uniqa 5%

Wiener 2%

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IV. INSURANCE FRAUDS -MAJOR INSURANCE PROBLEM

A. OVERALL

Frauds dating back since the first insurance company was established (Friendly Society, South Caroline, USA, 1732).

The more insurance develops anti-frauds mechanisms, the more frauds get sophisticated – everlasting game.

Serious impacts/losses (annually): Great Britain estimated to cca. 2 billion £ Germany estimated to 4 billion € USA > $ 30 billion

Insurance Europe estimates total loss 2% of premium, insurers say even more.

INSURANCE FRAUDS ARE NOT ONLY THE INSURERS’ PROBLEM, BUT THE EVER INCREASING CRIMINAL AT THE

EXPENSE OF ENTIRE SOCIETY!HONEST CONSUMERS ARE PAYING THE PRICE THROUGH

HIGHER TARIFFS 19

B. SERBIAN MARKET

Frauds taking place predominantly with: Casco insurance (hull insurance, motor vehicle insurance) MTPL compulsory insurance Property insurance

Frauds appearing both as: Domestic Cross-border

(Usually organized groups: 8 suspects currently under proceedings before the Court in Subotica, Serbia, estimated more than €250 thousand worth of claims against eight Serbian insurers arising from the fraudulent accidents on the territory of Hungary where said Serbian citizens appear as offenders – party causing damage)

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Estimated loss of 2-4 milion € annually, quite significant for market that size!

C. WHERE IS THE “ARABLE LAND” FOR FRAUDS IN SERBIA?

When issuing an insurance policyGranting bonus whereas it should not be, double/false policies and different tariffs, backdating/forging of validity, etc. - involving employees and/or agents. False or fraudulent accidentsNon-existing or deliberately caused accidents, inflated material damage, false bodily injuries, posting claims for non-existing vehicles, reporting false thefts. Mostly on the ground of European Accident Report (Constat Amiable), occasionally involving police, insurer’s employees and various experts, lawyers. Claim settlementInvolving insurer’s employees, often in collaboration with repair services, relating mostly to material damage.By claimants by way of: enlarging of invoices, spare parts frauds, submitting expert’s estimation on vehicle much higher than the market one, double

indemnification, non-existing or falsely enlarged bodily injuries, etc. - involving various experts

and surveyors, lawyers, medical staff, etc.21

D. SOME TYPICAL PROBLEMS

Frauds are often very difficult to prove Involvement of experts and even civil servants Judicial practice approach – „off the peg“ and uniform Lack of adequate or updated regulatory framework Absence of cooperation with state institutions, poor

coordination (insurers – police – courts). Insufficient cooperation (exchange of info) between the very

insures Data protection restrictions Lack or adequate tools (softwares), etc.

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E. COMBATING FRAUDS

On the individual level, most of the Serbian insurers have developed anti-fraud departments.

Commission for prevention of frauds in insurance has been established within the Association of Serbian Insurers, which deals with this matter on a high expertise level, consisting of top insurance experts in anti-fraud field, also exchanging and analysing data on particular cases.

Both the Association and the insurers are cooperating closely with Ministry of the Interior and Courts, providing data and expertise, initiating investigations.

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V. INFORMATION CENTRE OF THE ASSOCIATION OF

SERBIAN INSURERS(IC ASI)

KEY TO ESTABLISHING OF ANTI-FRAUD MECHANISM

A. GENERAL FACTS

Information centre of the Association of Serbian Insurers (IC ASI) is established in conformity with the Law on Compulsory Traffic Insurance, with following key features:

Unification of all MTPL insurance data, for all licensed vehicles in Serbia; It is a unique data base containing full set of information on issued insurance

policies and registered claims with full control of the issued insurance policies; Car accidents data base; Facilitation of implementation of Bonus/Malus system; Web portal – customer service with an objective to offer prompter insight into the

accident’s details for easier settling of the claim, as it offers information about vehicles registered in Serbia which were involved in car accidents on the territory of RS, as well as information relating to claimant and guilty party;

It is planned to carry on with constant development of the IC ASI e.g. developing of the module for fraud revealing in MTPL insurance and to integrate it into the similar EU systems.

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B. PROTOCOL WITH MINISTRY OF THE INTERIOR

In accordance with the Law provisions, Ministry of the Interior of Republic of Serbia (MUP RS), keeps track in its electronic database of all registered vehicles in the Republic of Serbia and the data from the Police records from the scenes of accidents.

In order to improve the service functions of IC ASI, the Project of integration with Information system of the Republic of Serbia, Ministry of the Interior, has been launched, starting with signing of a Protocol on data exchange.

As part of the exchange, Republic of Serbia, Ministry of the Interior, granted access to IC ASI to data from (national) vehicle register (e.g. registration and chassis numbers, categories and types of vehicles, engine number, paint, etc.), allowing at the same time also the download of data from Police records from car accidents.

These data will be used for statistical purposes and in order to develop a System (software) against fraud.

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C. INFORMATION CENTRE AND ANTI-FRAUD SYSTEM The system is to analyze pre-defined key fraud indicators, such as: accidents that involve

people that are already recorded in some previous accident in the roles of „offender“, „victim“, „witness“ etc., cases of drastic difference in value of the vehicles involved, frequent appearance of one and same scene of accident, one and same police officers, and many more.

It shall be set as to conduct web research of the social networks and to analize data collected so to recover information on the connection between persons involved in traffic accidents, hence provide insight to possible fraudulent activities of the organized groups.

Additional benefits:

The development of this project with Republic of Serbia, Ministry of the Interior, also provides technical conditions to start with the sale of the car insurance policies via Internet, which will allow customers to choose their own insurance company from which they want to buy insurance policies. That will result in restrictions on the PMVI commission, which is one of the burning issues in the Serbian MTPL market.

Reduce the impact of PMVI, since for the vehicles up to 3 years of age it would be possible to complete the process of renewal of insurance and registration within the insurance companies.

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D. KEY WORD - COOPERATION Between insurers at the level of local markets Between insurers and state institutions at local markets Between insurers at the international level, both individually or through

pre-established communication chanels/formal arrangements Between insurers or groups of insurers with international institutions and

organizations (Interpol, national police of various states, Insurance Europe, CoB etc.)

PROTOCOL ON COOPERATION TO COMBAT INSURANCE FRAUDApril 2011

Slovenia, Croatia, Bosnia and Hercegovina (Federation and Republic of Srpska), Montengro, Serbia and Hungary

Possible model of regional data exchange network/data base, „embryo“ of future regional anti-fraud software

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VI. BODILY INJURIES

A. KEY ASPECTS/PROBLEMSIN THE SERBIAN MARKET

Rather uneven judicial practice (differing to up to 300% depending on region)

The „Act on compensation of damage to persons“ of the Government of Serbia has been proclaimed void by the Constitutional Court, leaving some sort of „legal vacuum“

Attempts of the insurance companies to reach some consensus failed due to the significant difference in living standards and earnings in various regions of Serbia hence no interest to make compensations uniform

* Burning issue - WHIPLASH Major problem in non-material damage settlement up to 2009, both

medical and judicial practice recognized subjective over objective criteria Since 2009. significant change in judicial practice, no more diminished life

ability on the ground of whiplash, less compensation (pain and fear in minimum amounts)

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Thank you for your

attention!