Major Changes in the New Law on Mandatory Auto Insurance, Possible Premium Increase

The Croatian Parliament confirmed in mid-December a decision that will enable the abolition of the monopoly of insurance companies. This means that the Parliament has sided with consumers and car service providers, and after 15 years, this Law has been aligned with the legal acquis of the EU.

What is changing?

Firstly, insurers will have fewer rights under the new law as insurers will no longer be able to assess and determine how much an hour of work will cost and dictate where cars will be repaired. From 2024, service rates will be recognized, rather than the imposed rates of only 13 euros that have not changed for decades, and policyholders will also be able to count on a replacement vehicle in the future.

This means that after a collision, one will no longer first go to the insurer, but to the service, as service providers will also be able to assess damages and do so at their own, rather than imposed prices. This means that there will no longer be a monopoly of insurance that allowed them to simultaneously assess and determine the amount of damages and to ‘force’ consumers into the services they designate.

– The Croatian Association of Auto Professionals has made a huge contribution to the creation of the new Law, which aims to bring order to this dark zone of business that generates a series of illegalities and irregularities and align it with European regulations. The previous law encouraged the gray zone and ‘shoddy work’. Due to the enormous number of settlements, more than 65 percent of the total number of damages, the safety of poorly repaired vehicles was also endangered, and the state was losing up to 50 million euros annually just in VAT – they say in a statement from HUAS.

Additionally, a new feature is that compensation for damages will be paid within 15 days of sending the reasoned offer from the insurer, or within a maximum of 60 days.

– In the Law, we managed to promote greater rights for consumers, but also to ensure that the auto service profession is finally valued. Three new items have been added, and HANFA, as the regulator of insurers, will have to adopt another regulation that will detail the procedures for processing claims.

The most important points in the new law:

– Mandatory payment of damages (undisputed part of the damage or invoice) within 15 days of sending the reasoned offer to the injured party. And that to the account of the service providers.

– The right of the injured party to an independent assessment and the right to submit an offer from the service workshop is introduced. Now it is a legal right.

– Greater rights and awareness for the injured party.

– HANFA as the regulator will adopt another regulation for the processing and payment of damages.

Increased Premium

On the other hand, a review of this topic on the Osiguranje.hr portal was written by leading insurance expert Marijan Ćurković.

As he states in that text, for Croatian insurers, the provisions of the Proposal for the Law on Amendments to the Law on Mandatory Traffic Insurance, which have been aligned with the provisions of Directive 2021/2118, are a necessity that will significantly expand the obligations of insurers.

– This particularly relates to the significance of the new concept of “use of motor vehicles” and its impact on the obligations of insurers regarding automobile liability. The expansion of the liability of insurers (and the expansion of protection for third parties) to areas where insurance coverage has not previously been provided (parking spaces, garages, etc.), and the establishment of liability (and insurance) for damages caused by a motor vehicle, regardless of whether its engine is running or not, means a new burden for insurers, and this certainly means a new, increased premium for mandatory automobile liability insurance that will be paid by motor vehicle owners. The benefit expected from the changes is also that if the Law is applied (and interpreted) in accordance with the goal to be achieved – absolute protection of the injured from damages caused by the use of motor vehicles, the source of constant disputes between the insurer and the injured party will disappear, and consequently unnecessary and costly court disputes – writes Ćurković.

– In addition to the provisions being adopted regarding the provisions of the mentioned EU Directive, the Proposal for the Law on Amendments to the Law on Mandatory Traffic Insurance brings some new provisions according to the domestic situation in the field of mandatory traffic insurance: a provision on a fixed time for the start of the deadline (15 days); a provision on the obligation to pay the undisputed part of the compensation as an advance payment of damages within seven days after the injured party has received a response (reasoned offer of compensation or a substantiated written response to their compensation request) in which the insurer states that the amount they offer as compensation is undisputed; a provision on the right of the injured party to submit the findings and opinions of an independent expert or, in the case of a traffic accident caused by the use of a vehicle, an offer from the service workshop for the repair of damages, which the injured party has personally chosen (it is a great shame that the Proposer – the Government of the Law on Amendments to the Law on Mandatory Traffic Insurance has not detailed this provision; what it means, what the significance of the findings and opinions of the authorized expert or the offer from the service workshop is, whether the insurer is obliged to accept such documents, etc.; the solution may be that HANFA, as the supervisory body, will be able to adopt a regulation that will “more specifically prescribe the manner of resolving compensation claims); a provision on the obligation of the insurer to inform the injured party about their rights and obligations related to the damage when receiving the compensation claim; etc. – states Ćurković.