THE’direct compensation of damages was introduced by the legislator in 2007 to significantly simplify the management of road accidents, with the hope that it would cause car insurance prices to collapse. But it was a flop, as also emerged during a recent meeting at the Ministry of Enterprise. In the future it could be eliminated. Let’s see in detail how direct compensation works, what its advantages and limitations are, and what the future prospects are. Although it has simplified some procedures, the system has been the subject of several criticisms and could undergo changes in the future.
How does direct compensation work?
In practice, with thedirect compensation, if you are involved in an accident and you are not responsible (or only partially responsible)you can request the compensation for damages directly to your insurance companywithout having to wait the longer times of the traditional procedure which required contacting the other party’s insurance.
It is a special procedure that is activated under certain conditions in the event of an accident: the victim (or whoever is partially not responsible) obtains reimbursement for damages directly from his or her own company.
- Your company advances the refund: Instead of having to wait for the other driver’s insurance to acknowledge liability and pay compensation, your insurance company pays you directly for the damages, advancing the amount due.
- Compensable damages: Direct compensation generally covers:
- Damage to your vehicle: scratches, dents, broken glass, etc.
- Damage to transported items: items present in your vehicle at the time of the accident.
- Minor driver injuries: injuries with permanent disability not exceeding 9%
Direct Compensation: 5 Things to Know
1) It applies if the two companies (of the guilty party and the victim) are part of the Card, Convention between insurers for direct compensation, as happens in 90% of cases.
2) It does not require the joint signature of the friendly accident report on the so-called Blue module. It occurs if the accident is between two motor vehicles, registered in Italy (or in the Republic of San Marino or in the State of Vatican City), identified (neither driver fled after the impact) and insured.
3) Includes damage to transported property belonging to the owner or driver. Includes minor injuries to the driver: i.e. up to 9% permanent disability.
4) In the clearinghouse, the company that compensated its customer receives a fixed lump sum from the company responsible for the accident.
5) With direct compensation, companies tend to push the damaged customer towards the approved body shops, to the detriment of independent body shops: this is forced channeling.
Why Direct Compensation Doesn’t Work, 6 Reasons
At the time, the legislator’s first objective was to bring down RCA prices. After more than 17 years, the result is a flop. Due to theever-increasing increase in tariffsas has been the case since 2022 (average premium of 400 euros in May 2024, even +6.8% in a year), in July 2024 the Ministry of Enterprise brought together the main players in the sector: during the meeting, the need to eliminate direct compensation emerged.
With the rejection sentence 180 of 2009 (filed in the registry on 19 June), the Constitutional Court established that the direct compensation is optionalThe injured party is free: he can ask for reimbursement either from the responsible party’s company or from his own.
In 2011, the Antitrust Authority stated that direct compensation does not work: Rca prices are too high. The hope of the Guarantor was a system reform that would relaunch competition between companies.
In 2013, the Antitrust Authority confirmed that direct compensation is a waste of time: companies pass on the increased costs of inefficiency to their insured, without investing in their own settlement structures.
We arrive at the meeting at the Ministry of Enterprise July 2024in which the need to scrap direct compensation emerges.
1) Direct compensation goes against logic: the damaged party’s debtor decides how much reimbursement to give him.
2) The companies try to control the repair market as much as possible, pushing the customer into the arms of the contracted body shops. An anti-competitive mechanism. With potential negative consequences also on the quality of the repair, as the contracted ones work at labor rates imposed by the insurance companies. Vice versa, the independent body shops work at free rates.
3) Many insurance companies tend to forget what the 2017 Competition Law requires: the damaged customer is free to choose whether to turn to his trusted independent body shop or to the approved repairer. Article 148, paragraph 11-bis of the Insurance Code is clear: the insured has the right to obtain full compensation for the professional repair of the damaged vehicle by using his own trusted car repair companies.
4) Many companies impose special conditions on insured persons such as deductibles and penalties for those who turn to an independent body shop. Clauses defined as unfair for their content and anti-competitive for their effect by a group of associations: Assoutenti (consumers), Movimento consumatori, Aiped (insurance experts), Unarca (lawyers), Cupsit (extrajudicial advocates), some insurance agents, road victims, Federcarrozzieri (independent body shops).
5) In the clearing house, things work poorly and poorly: if the lump sum is lower than the reimbursement (as often happens), the company raises the RCA prices.
6) According to the companies, RCA fraud (invented or inflated claims) was and remains a serious problem: direct compensation has failed here too. The claims subject to detection (at risk of fraud) reported to insurance companies during 2023 are 2,490,816, an increase of 1% compared to 2022.
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