PARLIAMENT MEMBER DEPUTY ADRIAN GURZĂU: "There is a veritable mafia on the insurance market"

Reporter: In autumn 2012, the Commission Against Abuse of the Chamber of Deputies presented several irregularities in the activity of the former Insurance Oversight Commission (CSA). The deputies of the Budget and Finance Commission have even asked for a detailed activity report from the CSA. The CSA was subsequently integrated in the Financial Supervision Authority (ASF). What happened to this report and how would you describe the activity of the ASF in the insurance sector?

Adrian Gurzău: The creation of the ASF was a circus. The parliamentarians of the governing parties thought they would be able to save money with the budget of the ASF and they decided to remove the representatives of the political opposition from the ASF. In doing so, all they did was to encourage the lack of transparency at the ASF.

The ASF doesn't play with all the cards on the table. You may perhaps get information from their employees, through "sources", but not the way you should be able to get it from a European institution of the scale and importance of the ASF.

The USL has the absolute majority in the Parliament and in the ASF, an institution which does nothing else but distort the market and create a parallel economy.

I've been carefully studying the insurance market for years and I've faced many cases of fraud. The creation of the ASF hasn't led to anything new on the insurance market. I have been led to believe that the ASF has decided to eliminate the requirement to set up a reserve for paying the damages. Every insurance company was required to have this reserve for the payment of damages, depending on market share. Most of the companies with a large market share were in trouble, because their reserves weren't big enough to cover their market share. It has now been decided that the reserve would no longer be mandatory and every company has complied with the law. As a result, we will see small insurers disappear, no one will be held liable, and we, the taxpayers, will be the only ones bearing a loss. Nowhere in the European Union does anything like this happen.

Reporter: And the European Union actually accepts this? How can this happen?

Adrian Gurzău: How would it find out about it? In the end it is a state of things that even the multinational insurers are complicit to. Don't forget that the manager of every insurance company needs to be licensed by the ASF. There have been cases, like in the past, when the CSA approved managers who didn't meet the requirements. For instance, there was one insurance company where a manager that didn't speak Romanian was licensed, even though the legislation in effect clearly stipulated that requirement.

Reporter: But the ASF is funded by the taxpayers' money.

Adrian Gurzău: The main role of the ASF is to regulate and to monitor the equity, insurance and pension markets. The ASF must protect citizens from abuse and oversee these markets. Or, the ASF did nothing more than deviate from the current functioning of the insurance market, in a typical Balkan style, twisting the market. The losers here are the citizens and the insurance companies which are looking to do business fairly and which do not have direct access to the party's crony system. Fair companies don't have equal chances when competing with the other companies.

The ASF makes the rules and the only body that audits it is the Parliament, but in the latter, the USL also holds the majority. The USL also controls the ASF. You can tell what kind of abuse can occur as a result. There is no one to oppose the bad decisions of the ASF.

We were supposed to receive a report from the CSA, after the layoff of its president of Constantin Buzoianu, and an increasing number of deputies have publicly said that the entire management of the CSA should have been let go for what was happening there. But no decision was made in that regard. By March 2013, the deputies were supposed to receive a detailed report on the activity of the CSA. This was postponed due to the creation of the ASF. I've waited to see what the Parliament and the ASF would decide. I can see that the lack of transparency has gotten worse, and the access to information is more difficult then it was before the creation of the ASF. The ASF has made things worse on the insurance market and the degree of unhappiness with its actions has increased.

For example, there is a veritable mafia on the market for vehicle: the amount of the compensations granted to the victims of accidents or to the deceased is far greater than that of damages caused to vehicles because the money doesn't get where it is supposed to, but to a few law firms only. These law firms represent in court virtually every victim of car accidents and they obtain large compensations from the insurance companies. I think that this is a distortion of the market and that the habilitated institutions must investigate this aspect. I see that the ASF isn't doing anything in that regard.

In the past years, I have notified the issues concerning the PAID, as well as those related to the merger between Omniasig and BCR Asigurări and the CSA did nothing. In the case of that merger, the state was going to lose tens of millions of lei. But the merger was approved in spite of all these problems.

Since the ASF isn't doing anything to fix the irregularities on the market, I think that I need to notify other institutions. I will notify the Competition Council about what is happening on the auto repair workshop market. I will notify the tax administration as well. There are many things that are left to chance by those who are supposed to regulate and oversee the insurance market.

Reporter: How would you comment on the case of the recent fraud which was uncovered at BCR Asigurări?

Adrian Gurzău: The people who oversee the insurance market have the insurance companies wrapped around their finger and they appoint their own people on the management structure of the insurers. The fines levied on companies over the last few years have been insignificant and they are intended to cover up far greater irregularities. Once the fine was levied for a specific offense, another, harsher penalty can't be applied for that irregularity anymore. As far as I know, BCR Asigurări isn't the only case of fraud on the market.

All of the orders given by the former CSA lack transparency and create monsters. I can honestly say that there are major insurers that should be shut down tomorrow or are in a situation which could lead to them being shut down soon. I could give names, but I have hoped that things will turn out OK. Things can only turn out OK if the desire for it exists. But it doesn't.

It is a well-known fact that there have been many cases where insurers refused to pay the RCA alleging fraud. This is an abuse, the number of complaints grows by the day, and the ASF does not take actions against the insurance companies. The ASF is just twiddling its thumbs and sends the citizens to seek their justice in court. Obviously, many people don't go to court and they pay out of their own pocket the repairs of their cars. What are you still called the regulator and the supervisor of the market if you're going to tell people to go to court instead of taking measures?

The ASF has orders, regulations and all kinds of dispositions that can bury you or get you off the hook, depending on your position on the authority. The managers of the insurance companies are at the mercy of the market overseer.

Reporter: But won't this situation eventually blow up?

Adrian Gurzău: It is about to. There is an extremely high level of unhappiness in the insurance market among the companies that do business correctly and among the citizens. Most likely the shareholders of the major, multinational companies present on our market, don't know what it is all about. Even managers of top companies accept this situation to avoid having problem themselves.

Companies are constantly trying to maximize their profits. But what is the regulator doing? Why are we paying the people at the ASF those fabulous salaries?

Reporter: The ASF has increased its number of employees.

Adrian Gurzău: I will never complain about the fact that the ASF has hired 100 or 200 more people. They can very well hire 500 people more, as long as they do a good job. The problem with the ASF is that it isn't doing its job.

Reporter: You have been watching the insurance market for a long time. What did Buzoianu do that caused him to lose his position?

Adrian Gurzău: It wasn't Buzoianu that was the mastermind. He was the president of the CSA and he was held liable precisely because of his position. He wouldn't have been able to reform the completely opaque, inefficient, camarilla-like system. In the Chamber of Deputies, we heard Buzoianu and other people leading the CSA about several irregularities which were announced to me from the market. We talked to people from the Abuse Commission and the case was further sent to the Budget and Finance Commission, which could not disregard the information in the investigation. A joint Senate-Chamber of Deputies Commission was created and it was decided that the president of the CSA would be laid off and an interim management team would be appointed to replace them until March, when a clear report was supposed to be done, with the review of the market and the audit of the insurers, a thing which I was anxiously waiting for, myself. At the time, the members of the Parliament said that it was the entire CSA that was supposed to be laid off, that it was the entire management team of the CSA that was supposed to let go, not just one person.

There is another fraud that needs to be mentioned. Last year, approximately 65% of the number of vehicles in Romania, had RCA insurance policies, and we had an infringement proceeding opened against us, because 95% of the car fleet was supposed to have a mandatory insurance policy. I doubt that there are many drivers driving without an RCA policy. That policy isn't that expensive to risk driving around without it. That's why I think that there are brokers and insurance companies that don't report all the policies they sign. I've found cases where the same policy had two different names. The clients are acting in good faith. They are actually buying a piece of paper. Situations like that are uncovered when the payment of the RCA policy is requested.

I have another outrageous example. The software of the CSA hasn't been audited by the tax administration. So then, what do you do about the insurance brokers or about insurance companies stealing money and how do you oversee the market? There are mechanisms by which the former CSA and the current ASF leave backdoors open for these companies to sneak through. Brokers don't pay the money for the insurance policies they sold, they file for insolvency or bankruptcy. People only find out that the policies they bought from these troubled companies can't be honored when they go to the insurer to get compensated.

Reporter: And what did you do with this shocking information?

Adrian Gurzău: I have revealed these aspects, but nothing happened. I have decided to communicate more and more with the unhappy parties - clients, employees, brokers, companies - and to inform other authorities because the ASF doesn't want any justice to be done in the market. Over the years, of corresponding with the CSA, I've found that the system is opaque and that the overseers of the insurance market think themselves above everyone. Right now, throughout the entire insurance market, there is a cancer where serious companies and the clients are finding it very hard to endure. It is a system which is unfair to those who pay insurance. The thing that bothers me is that those that pay are taken for fools.

I am hereby announcing officially that I will conduct my own investigations for each individual insurance company and I will send them to the press, the National Anti-Corruption Department (DNA), the Department for the Investigation of Organized Crime and Terrorism (DIICOT) and the European Commission.

Reporter: Thank you!