Italy: direct compensation rules for motor third party liability insurance extended to EU insurance companies | Hogan Lovells

On August 12, 2022, Law No. 118 of August 5, 2022 (annual law on the market and competition – the “Right“) was published in the Italian Official Gazette.

Article 31 of the law introduces changes to the direct compensation rules for motor third party liability insurance (the so-called CARD system) under article 150 of Legislative Decree no. 209/2005 (the Italian insurance code) .

In particular, the law replaces paragraph 2 of article 150 of the Italian Insurance Code providing that the provisions governing the direct compensation procedure provided for in article 149 of the same code also apply to insurance companies of the EU operating in Italy by virtue of the right of establishment or the freedom of establishment. provide services.

In its previous wording, Article 150(2) of the Italian Insurance Code generally excluded the application of the direct compensation procedure to EU insurance companies operating in Italy, unless they have voluntarily joined the direct compensation system.

The direct compensation procedure implies that in the event of an accident between two identified motor vehicles insured under compulsory motor third-party liability, where damage is caused to the vehicles involved or to their drivers, the injured parties address the claim to their insurance company. respective insurance (i.e. the one that issued the contract for the vehicle used). Thus, following the filing of the claim for direct compensation, the insurance company is required to settle the damage on behalf of the insurance company of the vehicle responsible for the accident, without prejudice to the subsequent adjustment of relations between the companies themselves.

Based on the explanatory report of the law, the aforementioned modification aims to eliminate the potentially discriminatory treatment to the detriment of Italian companies compared to companies having their registered office in other Member States. In fact, EU companies were considered to have an unfair advantage in that, since they were not obliged to provide direct compensation, they had more opportunities to charge lower prices.

As part of the review of the law by the Italian Parliament, several subjects, including the Italian Association of Insurance Companies (ANIA), were heard in order to give their opinion on the provisions of the law. With regard to the provision in question, ANIA clarified that, while understanding the rationale for the rule, it should nevertheless be taken into consideration that an appropriate period of time be provided for the implementation of the obligation which had to be introduced, since a number of actions must be carried out by foreign insurance undertakings.

As a result, a transitional provision has been introduced into the law as part of the review of the law by the Italian Parliament, which now provides that the new regime will enter into force on January 1, 2023 and will ask claims occurring from this date.

Therefore, by the end of the year, EU insurance companies operating in Italy on the basis of the right of establishment or the freedom to provide services that have not yet voluntarily joined the system CARD will:

  • adapt the clauses of automobile civil liability insurance contracts and the corresponding set of pre-contractual and contractual information documents to the insured and inform the insured of any modification of the information contained in the general conditions of the policies and in the Information Package in general following the new provision introduced by the law;

  • modify business processes for risk assessment, pricing and distribution of insurance products;

  • modify the commercial claims settlement processes, in accordance with the accomplishments provided for by the direct compensation application regulations (i.e. Presidential Decree No. 254 of July 18, 2006 and the inter-insurer agreement for direct compensation stipulated under the said presidential decree);

  • update the respective computer procedures for the management of communication flows with CONSAP-Management of the clearing house and ANIA for the management of CARD claims, whose system operates under the supervision of IVASS.