Serbia: Amendments to the Law postpone the increase in the minimum sum insured for two years
Serbian Parliament adopted the Law amending the Law on Compulsory Traffic Insurance stipulating that an increase in minimum sum insured, for which the compulsory automobile liability insurance for damage caused to third parties can be contracted, is to be postponed for two years: instead of coming into force starting October 2012, the new sums will be applied from October 2014.b Namely, the 2009 Law on Compulsory Traffic Insurance stipulates that, starting from October this year, the lowest sum insured is to be increased as follows: for damages to persons to EUR 1 million per one harmful event regardless of the number of injured persons, and for damages to property to EUR 200,000 per one harmful event.
This is an almost ten-fold increase given that the current valid sums amount to USD 200,000 for buses and trucks and to USD 100,000 for other motor vehicles. The argument for this increase at the time the Law was adopted was compliance with EU directives in order to adapt to European practice, as well as more equitable economic protection of claimants.
According to data presented by the Association of Serbian Insurers, these sums are much higher in neighboring countries than in Serbia: Bulgaria has a limit of EUR 2,545 million, Slovenia EUR 3,7 million, Hungary EUR 5,285 million. Croatia, which is preparing for EU membership, has a limit of EUR 481,000 for material damage, and Bosnia and Herzegovina, which is not a candidate yet – EUR 511,000. Representatives of the Association say that, through its directives the European Union requires its member states to raise their limits in accordance with the European regulations, adding that some member states have opted for gradual harmonization but also that there are no limits in EU lower than EUR 2,5 million.
Shortly after the establishment of the new Government, the Serbian Parliament adopted amendments to this Law, so the increase mentioned will be postponed for two years (for October 2014) because “the consequence could be a significant increase in the prices of automobile liability insurance policy, which would increase the total cost of motor vehicle registration.”
It was this increase precisely, adopted by the previous Law, that was one of the main arguments of the Serbian insurers to require the National Bank of Serbia to raise the minimum prices of automobile liability insurance. Before the Association of Insurers submitted the official request with a set of arguments, the state had sent a clear message that the price increase would not be allowed.
Governor of the National Bank of Serbia, Jorgovanka Tabakovi?, said there would be no increase in automobile liability insurance premium until further notice. The argument of the Ministry of Finance and Economy is that, along with the recent elimination of a number of taxes and levies, some regulations according to which the insurance companies can realize certain savings are also eliminated. For example, the obligation of insurance companies to allocate 5% of revenues generated from the transportation of hazardous materials by road, rail, river and air in the budget fund for emergencies, was also eliminated.
So far and only informally the insurers fear that the protection of citizens against the increase in prices of automobile liability insurance policy is not the only reason for the adoption of the Law amending the Law on Compulsory Traffic Insurance. Since the provision of the former Law, related to the increase in the minimum sum insured, is compliant with the EU directives, a waiver from the said could be interpreted as moving away from the standards that should be accepted by all countries aspiring to join the European Union.