Compensation agencies criticize the propositions to regulate their business
Polish senators have prepared new legal regulations for compensation agencies. They include a maximum provision rate for these entities from their clients, duty to purchase professional indemnity insurance and direct payment of compensation to injured parties by insurers. Read more: Senators work on regulations concerning compensation agencies
The sector’s representatives criticize the proposition of the new regulations. According to them, implementation of these solutions may cause smaller entities to have problems with maintaining the profitability of their business. It may lead to growing consolidation on the market or bankruptcy of small agencies. This is very probably due to the tough business situation on the market. Entities have noted decreased profits and a lot of companies have looked for new niches to develop their business.
“The market of compensation agencies is in recession. Financial results of the companies after 2017 are lower by 50% than a year before. In 2017 all compensation advisers obtained PLN 500 mln from insurance companies. This amount decreases every year”, says Jolanta Zendran, a vicepresident of Europejskie Centrum Odszkodowań EuCO.
The agencies also criticize the rule of direct payment of compensation to injured parties by insurers. It envisages that the provision for compensation advisor will be paid by clients. Currently the obtained compensation is transferred to an agency which takes the honorarium and the rest of the amount is paid into a client account. Advisors are afraid of low rate of recovery. According to them, a better solution was proposed by the Financial Ombudsman. Compensation is divided by an insurance company as compensation for clients and fee for an adviser and next transferred directly into the account of the client and into the account of the compensation agency. Read more: Financial ombudsman wants to regulate a compensation advisor profession