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Question

In the Czech Republic insurance companies offer allongside the main policy also additional cover called PERMANENT CONSEQUENCES OF ACCIDENT. Unlike in case of disability, for this type of cover policyholder does not need any approaval from state to obtain the payment from insurance. Insurance compny simply determines the extent of injury (damage) and provides payment to policyholder accordingly.
One of the event in mass risk calculation is permanent disability. Should the cover called PERMANENT CONSEQUENCES OF ACCIDENT be taken into account in the calculation of total benefits? We expect that once person becomes permamently disabled he/she also suffers from some permament consequences (e.g. missing hand/leg,...).
And therefore this cover seems relevant for the permanent disability event.Additionaly, how to calculate proper value of benefits payable (sum insured) if it depends on the nature and extent of the injury.

European Insurance and Occupational Pensions Authority · Accepted Answer

Based on the explanation indicated in the question, it appears that “Permanent consequence of accident” contracts in Czech Republic cover permanent disability events. Nevertheless, the coverage scope is broader than just disability and, in particular, no prior administrative approval is required to proceed to payment to the policyholder.
Article 161(3) of the Commission Delegated Regulation (EU) 2015/35  indicates that” For all event types set out in Annex XVI […], the sum insured of an […] undertaking for a particular event type […] shall be equal to the [sum of the value of the benefits payable by the insurance or reinsurance undertaking in case of this event type]”.
Annex XVI of the Commission Delegated Regulation (EU) 2015/35 provides a “complete definition of events and risk factors for the mass accident risk sub-module and accident concentration risk sub-module”. Among the different event types listed, the” permanent disability” caused by an accident is mentioned.
Therefore, it appears that “Permanent consequences of accident” contracts need to be taken into account in the calculation of the Health catastrophe risk sub-module.
Please note that EIOPA’s Guidelines on health catastrophe risk sub-module describe the calculation method to use for this component of the SCR. In particular, its Guideline 3 describes the calculation of the sum insured for permanent disability benefits.

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