Causes of creating the Insurance Ombudsman institution in Poland

The Insurance Ombudsman was created in 1995 as the effect of amendments to the Act of  June, 8 1995 ( Journal of Laws 1995 No. 96 item 478). The need of this specific amendment resulted from the necessity to adjust the insurance regulations to the new legal and economic conditions in Poland during the transformation of the political system (1989-1995). According to this conception, the Insurance Ombudsman institution was created to protect the consumers of insurance services who were much weaker than Insurance Companies as they have better resources and qualified lawyers on their disposal.
Former practice showed that the consumers’ interest was not always well protected. The weak and delayed control did not pick up the errors effectively enough. This failure had many negative results.
New conditions on the market induced the development of insurance service and creation of new insurance companies. However, poor knowledge about the market economy and using gaps in the law by some insurers created  unfavorable conditions for the consumers. Some big companies like “WESTA” became bankrupt as the effect of the poor economic conditions which also affected many other companies. These negative changes harmed not only policyholders but also insurance companies and government organs as they lost they credit among citizens. In such unfavorable situation  members of the Polish Parliament together with representatives of insurers and policyholders  decided to create an institution which main task would be to guard the interests of the policyholder: the weakest but the basic part of the insurance system. Two very prominent Polish experts in the insurance education: expert of the Committee professor  Jerzy Łańcucki and professor Eugeniusz Kowalewski had an enormous impact on creating the concept of the Insurance Ombudsman.

Experience of other countries

In creating the regulations concerning the Polish Insurance Ombudsman, the experience of  other countries in which similar institution functions was used. Even in countries with better developed market economy and stable law the legal and factual position of the consumers is not well balanced with the position of  the insurers. At this point the movement protecting the rights of consumers of the insurance services appeared. This movement is especially well-developed in the USA and Scandinavian countries. It was in the USA where the need to protect consumers’ rights was firstly formulated and labeled as a political problem. In this particular conception the consumers are perceived as some kind of minority which is distracted and deprived from the access to representative institutions. In other words, as consumers are recognized as the minority their rights should be protected. European institution which represents the consumers’ interest is the Insurance Ombudsman which is based on the Ombudsman institution. Such institution has been present in Switzerland for 24 years. Its main work is to give opinions, inform and educate. Among the basic tasks of the Insurance Ombudsman are investigation of proposals and complains as well as giving legal advice. Both policyholders and insurance companies can ask the Insurance Ombudsman for help.

Comparison between the position of the Polish Insurance Ombudsman according to the current law of insurance business and the  law of  insurance and pension supervision.

In June, 16 2003 the Polish president signed a packet of four insurance acts which came into force in January, 1 2004. This packet includes the Act concerning the insurance and pension supervision as well as the information specifying the position and role of the Polish Insurance Ombudsman. Second part of this Act introduces some new solutions concerning  functions and powers of the Insurance Ombudsman’s office. A piece of information published here is an attempt to give an overall look at former and new legal regulations specifying  the function of the Insurance Ombudsman institution.

Roots of  law

So far, according to the legal status, the basic provision which regulated the functioning of the Insurance Ombudsman was the Act of July, 28 1990 concerning the insurance business ( Journals of Law 1996 No. 11  item 62.). Chapter X of this Act ( item 90b-90d) contained regulations referring to the appointment of the Insurance Ombudsman, definition of his status and competence as well as the basis of  functioning of his institution.  Later competence of the Insurance Ombudsman was extended. Recently introduced  Article 60§2 of Polish Supreme Court( Journal of Law 2002  No. 240 item2052) gives the Insurance Ombudsman the power to turn to the Supreme Court if any discrepancies in the judgments are found. Worth mentioning is also the new regulation introduced by the amendment and concerning the protection of competition and consumers. This regulation gives the Insurance Ombudsman a possibility to ask the chairman of  The Office of Competition and Consumer Protection to open proceedings against the practice that violates collective interests of the consumers.
The chapters 19-30 of the new Act introduced a detailed regulation concerning the Polish Insurance Ombudsman institution. It specifies the bodies entitled to appoint the Insurance Ombudsman, required qualifications, term of office, the tasks of the institution, sphere and the cost of activity, prohibition to join offices and to own stocks of insurance companies as well as the competence and the membership of the Insurance Council. Moreover, foregoing regulation defines the duty of the insurance company to give the Insurance Ombudsman information about the problematic matter within a specific time. The same article describes also in details the reporting duties of the Insurance Ombudsman.
The Polish Insurance Ombudsman is financed by insurance companies and open pension funds.

Place of residence and  objectiveness of the Insurance Ombudsman

Both the former Act and new regulations give the Insurance Ombudsman the legal. The Polish Insurance Ombudsman is seated in Warsaw. According to both the old and the new Acts there is no place provided for branch offices of the Insurance Ombudsman institution. In practice it diminishes the chances to reach all of  the consumers of  insurance business and to provide the full inspection of insurance market. Instead the Insurance Ombudsman and the local and district spokesmen of the consumers  cooperate with each other when somebody needs their help.

Prohibition to join  offices and own stocks

In order to provide people represented by the Insurance Ombudsman with the right protection,  legal prohibition to employ the Insurance Ombudsman and his employees in insurance companies and Pension Funds was introduced. Additionally, they cannot take part in the insurance brokerage, own stocks of the insurance company and be members of the board of any of these companies. The regulation specifying this issue in Article 24 item 4 introduces also an additional rule announcing the total prohibition for the Insurance Ombudsman and its employees to act against their duties and raise any suspicion of the unfairness or self-interest.
Former Article concerning the insurance business as one of the legal duties of the Insurance Ombudsman introduced the duty to present to the Prime Minister an annual report from its activity. However, regulations of this article neither determined a deadline for  submitting this report nor the consequences of not fulfilling this duty. The new Act gives a precise deadline for submitting a report. According to this document the Insurance Ombudsman has 60 days starting from the end of the calendar year to present report enriched in some remarks concerning observance of the law and how the  interest of represented entities is protected. Although, publicity of the report has been already introduced, the new Act, as first, stated  the legal basis for it.
So far the two subjects entitled to appoint the Insurance Ombudsman were the Minister specializing in financial institutions and the Minister specializing in social security. The cadence of the Insurance Ombudsman lasted for 4 years. The new regulation indicates the Prime Minister of Poland as the subject entitled to appoint the Insurance Ombudsman. The time of the cadence has not changed but according to new regulations the same person cannot be the Insurance Ombudsman for longer than two cadences. Decision concerning a person competent to appoint the Insurance Ombudsman evokes a long discussion. Eventually, the Prime Minister was chosen  as an appropriate subject in this matter. Additionally, the new Act introduced some strict requirements towards a candidate for the Insurance Ombudsman office. It determines that person suitable to become the Insurance Ombudsman is required to have higher education, wide knowledge of the insurances as well as the organization and the  functioning of the Pension Funds. All of these requirements need to be fulfill simultaneously.     
So far candidates for the Insurance Ombudsman were presented by the chairman of the Office of Competition and Consumer Protection, the Ombudsman, statutory organs of governmental consumer institutions being a part of the Insurance Council, statutory organs of trade-unions being a part of the previously mentioned Insurance Council and the Insurance Council itself. Presentation of the candidates took place six months before the mandate of the former Insurance Ombudsman was over.
According to the new legal status the Insurance Ombudsman can be dismissed before the end of the cadence by the Prime Minister on  motion of the Minister of Finance and the minister of Social Security after the Insurance Council pronounces an opinion. The circumstances in which above situation has legal basis to happen is very strictly determined. Among the factors initiating the process of the Insurance Ombudsman’s dismissal are: gross violation of interests of the insurers, policyholders, members of the Pension Funds and other subjects entitled to the insurance service.
 
Aims of the Insurance Ombudsman

The most important and undoubtly leading duty of the Insurance Ombudsman is to represent the interest of policyholders , insurers, members of the Pension Funds and other entitled subjects, for example victims of road accidents entitled to compensation according to third party liability insurance.  Moreover, the new Act indicates entities with which the Insurance Ombudsman collaborates in order to fulfill his legislative duties. The most important of these subjects are: national and foreign consumer organizations and the Ombudsman.
The sphere of the Insurance Ombudsman activity may seem similar to the Polish Financial Supervision Authority as they both protect the interest of policyholders and the collective interest of consumers. However, taking into account the fact that the insurance market consists of three elemements: country, producers and consumers, the Insurance Ombudsman institution, despite all the similarities to other entities , should be placed in the segment of individuals. This is proved by the sentence formulated in the Act : ‘ representing the interest of policyholders, insured, etc.’ it is also worth mentioning that the Polish Insurance Ombudsman does not limit its activity to consumers only, even entrepreneurs can find help here if they are a party to the insurance contract. All of this makes the Insurance Ombudsman institution different in its character from the other subject. The Insurance Ombudsman does not supervise the country in a way that organs appointed to protect the market and public interests do it. It does not mean, of course, that these institutions do not meet while the realization of the same tasks leading to a common goal.

Tasks of the Insurance Ombudsman
 
According to the former legal status tasks of the Insurance Ombudsman were formulated in the Article 90c § 1  concerning the insurance business. Among these tasks are:
•    Representation and protection of interests of customers of the insurance market
•    Representation and protection of interests of  Open Pension Fund’s members
•    Evaluation of bill drafts concerning insurances, pension funds and pension plans
•    Informing supervisory bodies about all the errors in functioning of insurance companies and pension funds,
•    Initiation and organization of  educative and informative activity as far as insurances and pension funds are concerned,
•    In the new Act the tasks’ of the Insurance Ombudsman were extended and specified,
Moreover, the Insurance Ombudsman:
•    Initiates legislative actions with national bodies and regulators in cases concerning organization and functioning of the insurances and pension funds,
•    Creates a possibility of an amicable resolution of a dispute between insures and their clients,
•    Initiates and organizes educative and informative activity as far as the protection of insured  and policyholders is concerned,
•    Additionally, the Insurance Ombudsman can turn to insurance companies, pension funds, the Insurance Guarantee Fund or to the Polish Motor Insurers’ Bureau with a request to give information or essential explanation in following cases:
-individual cases (complaint  from client is needed),
-resolutions of general insurance terms which, in the Insurance Ombudsman’s opinion, are unfavorable for clients
-concerning inner regulations of these institutions which turn out to be unfavorable for represented subjects. 

Additionally, the Insurance Ombudsman can turn to the Minister of Finance with a postulate to introduce an amendment to propositions regulating the compulsory insurances. The Insurance Ombudsman acting according to appropriate proposition can also do a research about the situation on the insurance and pension market. Moreover, he can offer arguing sites to turn to the court of conciliation to settle a dispute. Both former and new regulations concerning the tasks of the Insurance Ombudsman are not strictly determined. The preposition provides the Insurance Ombudsman with freedom to take other actions if the intervention requires it. In addition, the Insurance Ombudsman can do the comparative analysis of general terms of insurance contract in a given group of insurances, contact with brokers and investigate the circumstances in which a contract was signed. What is more, the Insurance Ombudsman dealt  with the cases of  insurance fraud. This activity  was not mentioned by the old regulation.
Moreover, new regulation introduced the official possibility for the Insurance Ombudsman to turn to the arbitration court order to settle a dispute. In situation when the national courts are overwhelmed with enormous number of cases, the arbitration court presents a real help in the process concerning the insurance companies paying the damage and liquidation  proceeding.
The new regulation gives the Insurance Ombudsman the right to turn to the Polish Supreme Court to adopt a resolution clarifying doubts or divergences in jurisdiction. Resolution of the Polish Supreme Court gives clarity and order in applying the law which leads to the clear situation of the consumer.
What is more, the new regulation indicates also the way in which the informative and educative function of the Insurance Ombudsman is fulfilled. In this sphere of activity the Insurance Ombudsman gives a direct answers for the consumers’ questions and informs about the results of the interventions in public media. Educative activity  is organized, with a cooperation with the Foundation of Insurance Education, for the example through the insurance website www.rzu.gov.pl
Currently, to the Insurance Ombudsman receives complaints from both private consumers as well as bigger economic entities.
Former acts did not include the solutions assuring better effectiveness of the Insurance Ombudsman institution. There were no provisions in force making the Insurance Ombudsman able to enforce insurance companies to send answers on time. As the result, it took couple of months, despite reminders, till an insurance company presented its opinion in a given case. In order to solve this problem, legislator imposed on insurance companies, receiving a query from the Insurance Ombudsman, an obligation to give a respond in a time no longer than 30 days from receiving a letter from the Insurance Ombudsman. This regulation was needed to make the whole proceeding faster and more effective.

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