Marcin Wojtkowiak Summary Insurance coverage of municipality in Poland. Determinants and scope With the reactivation of local government in Poland in

Transcription

1 Marcin Wojtkowiak Summary Insurance coverage of municipality in Poland. Determinants and scope With the reactivation of local government in Poland in 1990, many of the existing tasks assigned to state have been transferred to the implementation to the local communities. Municipality meets the needs of the local community. This objective concerns the operation under conditions of risk. Local and regional government in Poland has three levels but the most important tasks are performed by municipalities. The key role of the municipality decides article 164 of the Constitution. Structure and tasks of the municipalities are specifically defined in acts. Production of public and social services requires possession and use of property. At the same time it exists financial risks (e.g. the risk of third-party liability). Needs of the local community are endless but assets are limited. Through the cooperation with insurance companies level of the property may be stable. Properly designed insurance is an effective method of protection against perils. Dissertation provides answer to the research problem formulated in the form of question: what are the determinants, scope and possibilities of the use of insurance by the municipalities in Poland? In order to resolve the main research problem author attempts to resolve the following partial research problems: 1) in what organizational and legal context do the municipalities acquire insurance coverage? 2) what are the sources of the property interests of municipalities? 3) what extent do municipalities use the insurance coverage? 4) what is the degree of implementation of the principles of universality and completeness of insurance coverage? 5) do municipalities fulfill the compulsion of concluding of insurance on someone s else? 6) could the quality of municipalities insurance be higher? Dissertation presents the results of a study in 45 municipalities that meet the following criteria: territorial affiliation to the voivodship Wielkopolska, insurance has been purchased in the public procurement procedure and was active on 30 November 2013, insurance covers at least the municipal office,

2 municipality doesn t have the special status (connected functions of municipality and county). Source of information is the insurance documentation of examined units. The study concerns the insurance coverage provided under section II of annex to the act of insurance activity (year of publication 2003) i.e. non-life insurance. The analysis does not include CAR/EAR insurance, insurance guarantee contracts and group accident insurance for children and students in educational institutions. The author reviews considerations regarding the scope and possibilities of the use of insurance cover by municipalities compared to the general conditions of insurance of 4 companies: Concordia Polska TUW, Uniqa TU S.A., Towarzystwo Ubezpieczeń Wzajemnych TUW and InterRisk TU S.A. The layout and content of the dissertation are subordinated to realization of the main and partial research problems. The dissertation is composed of four chapters, preceded by the introduction and topped by the ending. The first chapter discusses the importance of municipality in the structure of public administration in Poland. Description of the structure of municipality is the basis for the detailed identification of the property interests. The municipality is perceived as an entity of risk and insurance as method of handling risk. The author describes the determinants and methods of the acquisition of insurance coverage by municipalities. The second chapter provides a detailed identification of the sources of the property interests of the municipalities which the author divides into 3 groups: communal property, third-party liability insurance and other sources. The identification of property interests in the field of communal property requires the knowledge of its structure, values and threatening perils. Registries of communal property are the tools for assisting in determination of the subject scope of insurance. On the other hand the risk of general third-party liability is generated by areas of activity of the municipality which are within the dominium sphere (public administration as a provider of services) and the imperium sphere (public authority). Detailed identification of the property interests contributes to the optimal design of the insurance cover. The third chapter presents the results of a study conducted among 45 municipalities. The subject of the study were the scope and conditions of insurance contracts. The author presents research results and interprets them. The author compares the research results to the standard provisions of the general conditions of insurance. The fourth chapter presents the conclusions and recommendations relating to the insurance coverage of municipalities. Remarks made in the chapter are universal although based on the

3 results of the study. Suggestions included in the chapter should contribute to improving the quality of insurance purchased by municipalities. On the basis of discussion it can be concluded that: 1) The degree of use of insurance depends on the objective and subjective factors. These factors can interact with different strength in each municipality. From group of objective determinants should be highlighted aspects specific for the municipality as a public sector entity, i.e. the scope of activity of municipalities in the performance of public tasks, the nature of communal property, the degree of government intervention in restitution of catastrophic losses, organizational-legal form of activity and social priority of providing public services. On the other hand, the concept of individualization in the construction of risk and the problem of attitudes to risk are fundamental subjective determinants which can weaken the impact of objective determinants. 2) Liability for damages in the dominium sphere results from activity of the municipality in the specific for public entities areas (e.g. road maintenance, public order, water supply, protection against homeless animals) as well as common situations and conditions (relationship with employees, possession of third party property). On the other hand, activity in imperium sphere creates a specific area of possible claims for pure financial losses. Not all of the claims from the imperium sphere can be clearly classified into the civil liability (e.g. shaping of spatial order and the expropriation). 3) The most important other sources of property interests are claims of voluntary firemen and administrative liability for environmental damage. 4) All the analyzed procedures include coverage for main property insurance products (fire and other perils, theft, burglary and robbery, electronic equipment all risks insurance). 5) Motor vehicle insurance, compulsory motor third party liability and general third party liability insurance are concluded by all audited municipalities. 6) Municipalities demonstrate low activity in the field of other financial risks insurance with the exception of insurance of voluntary firemen claims. 7) Insurance of the analyzed municipalities includes all the basic categories of communal property in general. Insurance coverage sometimes doesn t include public infrastructure and low-value assets. 8) Insurance contracts against fire and other perils in the examined municipalities properly fulfill postulate of the universality of the insurance cover in the aspect of risks because they include four major perils that threaten communal property: fire (100%), flood (98%), hurricane (100%) and landslides (100%). However, it postulates more frequent use of the

4 formula against all risks in property insurance (including motor vehicles) in place of the classical named perils insurance formula. On the other hand, when deciding on flood insurance, flood risk assessment documents should be used. 9) General third party liability insurance in examined municipalities includes damages arising from public authority activities and pure financial losses in general. 10) The activity of the municipalities in the field of voluntary insurance on someone else's account is a manifestation of incorrect management of public funds. 11) The use of public procurement procedure causes that the insurance contract loses adhesive character. In addition, comprehensiveness of the insurance program allows to enter the rare clauses and provisions into the contract. 12) In the majority of municipalities, buildings and third party property are insured at the first risk system meanwhile in general terms of insurance dominates the proportional liability system. 13) The common abolition of proportion clause causes equalization of the proportional liability system with the first risk system. 14) The introduction of anti-theft and anti-fire clauses in 91% of the examined municipalities and frequent cover against difficult risks (water damage by a leaky roof, audacious theft) causes the marginalization of the preventive function of insurance. 15) Method of determining of the sum insured and loss adjustment process don t depend on the degree of technical wear or redemption. 16) Insurance against burglary and robbery commonly (89% of the examined municipalities) is extended for audacious theft. The author specifies the following general technical-insurance postulates: connection of the categories of insured property with the Classification of Fixed Assets, defining custom events included in the insurance (e.g. water damage by a leaky roof, melting of snow), the use of appropriate location clauses due to the dispersion of municipal property throughout the community area. prudent use of gross book value in the buildings and constructions insurance due to the volatility of prices of materials and construction works, take into account the age, method of use and the degree of technical wear when the decision about choosing between the replacement (new) value and actual value in insurance,

5 abandonment of the principle of absolute completeness of insurance coverage in a favor of reasonable deductibles. The author concludes that the quality of insurance cover in polish municipalities is at a satisfactory level. However, the analysis of indicated conclusions and implementation of the listed demands will contribute to even better implementation of the principles of universality and completeness of insurance cover.