Transparency the key for effective consumer protection

1
Transparency the key for effective consumer
protection
Mira Eric Jovic, Vicegovernor National Bank of
Serbia Sofia, June 7, 2007
2
The responsibilities of NBS

• According to the NBS Law, the main NBS goal is
• To achieve and maintain price stability
• To achieve and maintain financial sector safety
  and soundness, as a supervisor

3
Vision of National Bank of Serbia in Field of
Financial Supervision
STRATEGIC GOALS Ensure a safe and
sound financial system to protect the interests
of users of financial services, to strengthen the
public confidence in the financial sector, and to
ensure efficient servicing of needs of citizens
and the economy alike

VISION Build a modern, efficient and
safe financial system to ensure
high-quality financial services provided by
banks, as well as by insurance companies,
leasing companies and voluntary pension funds
4
Financial sector structure in Serbia
5
Insurance Law introduced consumer protection
first time in financial sector

• The Law passed on May 2004
• The Law based on the EU directives and the
  international standards
• National Bank of Serbia became Supervisory
  Authority
• Consumer Protection function
• is established with the aim of protecting
  insurance holders and other insurance
  beneficiaries
• reviews insurance holders complaints
• acts as a mediator in solving disputes arising on
  the grounds of insurance contracts (free of
  charge) with a view to preventing litigation

to minimize a huge number of long court
procedures rebuilt public confidence into
insurance sector
6
I step reliability objectivity of financial
statement

• Precondition for transparency
• IC are obliged to prepare financial statement
  (FS) in line with IFRS started with 2004
• NBS additional rules regarding assessment of
  balance sheet and of balance sheet positions
• Actuarial opinion it was a lack of proper
  actuarial practice
• Improvement of actuarial profession in Serbia
  education in line with international standards
  Bearing Point technical assistance

7
II step set of disclosure

• On mandatory basis IC published
• Audited annual reports
• Approval for publishing a number of data on NBS
  website such as
• Number and amount of claims by types of insurance
• Number of insurances, policyholders and premiums
  by types of insurance
• Number of settled claims by insurance companies
• FS should be audited on annually basis NBS has
  the authority to ask to submit FS from other
  auditor if it find out auditor opinion is not in
  accordance with ISA good practice
• NBS Guidelines
• Transparency
• ALM
• Corporate governance
• Market risk controls
• Prevention on AML CRTF
• Prevention on fraud

8
III step set of activities

• Transparency towards the consumers

Good practice of rules developments Customers
rights respect Clear definition of contracts of
IC - obligation to customers
Consumer Protection Unit established
Call center
Education
Complaints Mediation

• Fair treatment of customers
• Customers level of education increase
• Customers awareness of risk undertaking

9
First integrated Supervision Function - In
January, 2007 Center for Consumer Protection
became operate

• Cover all financial institutions supervised by
  NBS
• Two ways of acting
• - reactive considering consumers complaints
  and process of mediation
• - proactive consumers education through
  presentations, statements on web
  site, promotion, brochures, seminars, call center
  giving them adequate, prompt and
  full information (but not advices),
  recommendations

10
Increase of number and complexity of financial
products

• NBS started with campaign of various financial
  products in order to create a culture of saving
  and investing for retirement
• The aim of NBS is not promotions of financial
  institutions, but insurance products (different
  sorts of long term savings life insurance
  products)
• Providing financial education on a variety of
  topics through a variety of distributions
  channels (brochures and newspapers inserters,
  billboards)

11
Importance of consumers education

• Increasing awareness of the importance of
  personal financial education greater confidence
  in making financial decisions
• Financial educated consumers help financial
  market operate more smoothly
• Financial educated consumers can budget and
  manage their income, save and invest efficiently,
  and avoid becoming victims of fraud
• Financially educated consumers might facilitate
  supervisory activity and allow for lower levels
  or regulatory intervention improving of
  financial market

Well educated client contribute to development of
financial sector Precondition adequate
information Transparency reliable, full,
relevant timely information
12
Supervisory Authority Contribution to Public
Confidence and Financial Stability
S U P E R V I S I O N
Stability and soundness of financial system
CONFIDENCE

• Knowledge
• Qualified respond on daily risk exposed decisions
  in financial services
• awareness of risk
• way of risk management
• ability to find adequate financial service

• Education
• Improvement of understanding of financial
  services
• information gathering
• skill of risk recognition
• where and how find help
• activities

Complaints Mediation
13
Results

• Increase of
• S premium
• Life insurance premium
• Loss ratio
• Technical reserves
• Customers treatment
• Quality of information to customers
• Contracts definition
• Market Discipline

• First quarter of 2007
• S 273 complaints
• Number of complaints in insurance field 55
• 48 resolved in favor of clients
• No. of Mediation 3
• 1 resolved on pleasure of both parties, 2
  canceled

14
Further activities

• Further transparency improvement
• Improvement of methodology of customers
  education
• Increasing awareness of the importance of
  personal financial education
• Recommendations