Macedonia: Reform of Compulsory Motor Vehicle Insurance System

Macedonia: Reform of Compulsory Motor Vehicle Insurance System

This project was introduced by the World Bank together with the Ministry of Finance of the Republic of Macedonia in September 2003. The consultants were drawn from a team employed by Trowbridge Deloitte (Australia). The project arose from problems connected with the operation of the motor third-party liability (MTPL) system in Macedonia:

  • Low compliance with the law- about 50%
  • Very slow claims processing that were expensive, clogging the courts with claims disputes, delaying compensation to victims of motor accidents and damaging the entire credibility of the MTPL
  • Unprofitable, regulated, premiums

The project therefore needed to focus on changes to the laws, changes to the claims processing, changes to the system for vehicle registration and enforcement for non-compliance, consideration of a claims tariff, working with the judiciary to facilitate claims processing through the courts, establishment of a Motor Commission to implement and monitor measure introduced.

Lessons learned:

  • Development of an effective MTPL system is a long and complex process because it involves many parties and steps, and mere drafting of a Compulsory Insurance TPL Law is only the beginning. Main requirements are that: a system of vehicle registration is needed to ensure that insurance is in fact taken out; the police needs to be involved; the judiciary needs to be involved; claims processing needs to be expedited; and, ideally a claims tariff needs to be established to assess quantum of claims and to assist courts (where necessary) in awarding compensation. An appropriate methodology for setting premiums and reserving for claims is essential. The regulator needs to ensure that premiums are not too low to penalise insurers and discourage them from providing adequate cover and yet not too high to penalise the insured. As a result, the development of an effective system may take many years with considerable technical assistance cost.
  • Compulsory Motor TPL is one of the largest classes of non-life insurance and an effective system for compliance may have a significant impact on the growth of the insurance sector which in turn enables insurance companies to become more competitive and generate funds for investment back into the economy.


Every country will have its own circumstances. Nonetheless the attachments should provide insights of value for most emerging markets considering the introduction of compulsory MTPL or facing problems with the system they have in force.

  • The Consultants Reports for Phase 1 and Phase 3. These contain useful summaries of the issues to be addressed and plans for implementation
  • The Terms of Reference for the project