Financial services
Insurance
Overview
When private customers or companies buy insurance, they transfer risk that may arise from their personal or business activities to the insurance company. The insurance company is better able to manage and absorb the risk because it aggregates risks from a large number of customers. Moreover, the insurance company has better knowledge of the probability of a specific event occurring as well as the severity of the losses that might be incurred. Insurance companies also offer their clients additional services, such as loss prevention and safety advice, loss settlement advice and other legal services.
Private customers and businesses alike benefit greatly from the services offered by insurers. In particular, as far as business is concerned, the transfer of risks associated with commercial and investment activities allows the economy as a whole to function more effectively.
The service provided by insurance companies depends on an uncertain factor, i.e. the occurrence of the insured risk. Cooperation amongst insurers helps them to spread risks and acquire a better knowledge of the risks, and is a common feature of the industry.
As early as 1972, the Commission stated in its Second Report on Competition Policy that the EC Treaty competition rules applied to the insurance industry. The Court confirmed that the industry should be subject to these rules in the Verband der Sacheversicherer judgment. The Court also rejected the argument that unlimited competition would increase the risk of insolvency to the detriment of consumers and confirmed that special rules should be adopted under Article 83 EC, because cooperation among insurers was required to avoid such a risk.
European Competition Network (ECN) - Insurance
Insurance markets are still largely national, so often the national competition authorities are best placed to address possible competition issues. Information exchange is clearly necessary between the Commission and national competition authorities so that, where possible, coherent or even joint action can be taken.
The Commission set up the insurance network of the ECN, consisting of insurance experts from all 27 national competition authorities. The insurance network facilitates the exchange of information and best practice and serves as a forum for discussion amongst experts. It is designed to develop synergies and enhance the use of resources.
Insurance Block Exemption Regulation
The Commission conducted a lengthy review of Commission Regulation 358/2003, the previous Insurance Block Exemption Regulation (BER), involving two public consultations, several rounds of questionnaires and numerous meetings with stakeholders in advance of its expiry in March 2010. The outcome was a new Insurance BER, which will expire on 31 March 2017.
History: The Commission adopted a Block Exemption Regulation in 1992 (Regulation 3932/92) and, when this Regulation expired at the end of March 2003, the Commission replaced it with Regulation (EC) No 358/2003. When this second regulation expired on 31 March 2010, the Commission, after in-depth consultation with the insurance sector, consumer organisations and public sector bodies adopted a new insurance block exemption Regulation as well as an explanatory Communication. See press release IP/10/359.
The Regulation grants an exemption to the application of competition rules to certain types of agreements in the insurance sector, namely agreements on:
- Joint compilations, tables and studies
- Co-(re)insurance pools (common coverage of certain types of risks).
This Regulation is valid for seven years and will expire on 31 March 2017.
A detailed history of the BER is available here.
Sector Inquiry into Business Insurance
In recent years, the role of EU competition policy in the insurance sector has been changing. The Commission uses competition policy pro-actively to identify and help tackle barriers in the Single Market to deliver benefits for businesses and consumers. The Commission's sector inquiry into business insurance was a keystone of this approach.
The inquiry focused on the provision of insurance products and services to business and also covered reinsurance as well as insurance and reinsurance intermediation. The inquiry's results are helping the Commission to assess structural and behavioural aspects affecting competition in the market, including forms of existing cooperation, conditions of competition and market entry barriers
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