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Brussels, 24th January 2007

Competition: Commission publishes interim report on business insurance inquiry; public hearing in February

The European Commission has published its interim report on the competition inquiry into the business insurance sector, which shows evidence of fragmented markets and highlights factors that may adversely affect competition. The sector inquiry, launched in June 2005 (see IP/05/719), aims at ensuring a better understanding of the functioning of the sector. This would ultimately allow the Commission to detect distortions of competition that, where appropriate, could then be tackled through antitrust enforcement, either by the Commission or by the Member States' competition authorities. Before reaching final conclusions due to be published in September 2007, the Commission invites all stakeholders to submit their views and observations on the preliminary findings. The consultation period lasts until 10 April. The Commission is also organising a public hearing in Brussels on 9 February to discuss this interim report.

Competition Commissioner Neelie Kroes said: “The preliminary findings of the Commission's inquiry into the business insurance sector have identified factors on all levels of the supply chain that may prevent the markets from working as well as they should. With the help of the comments received during the consultation, we intend to look at these issues in more detail before finalising the sector inquiry report."

Main findings

The main findings of the Commission's interim report on competition in the business insurance sector are that:

  • Sustained differences of insurers' underwriting profitability in different Member States suggest a significant degree of market fragmentation along national lines and the potential for price reductions. In some Member States, there is consistently higher profitability as regards insurance contracts for SMEs, suggesting that there may be less competition than in the large companies' market.
  • In some Member States, long-term insurance contracts as well as certain distribution structures may reduce the scope for competition. This could be the case notably in Austria, Italy, the Netherlands and Slovenia, as regards long term contracts, and in particular in Italy, as far as the distribution structure is concerned. These issues are particularly important as insurers consider access to clients and to distribution infrastructures as one of the most important factors influencing their decision to enter a new market.
  • Some re-insurance companies active in the EU have so-called "best terms and conditions" clauses in their contracts with their clients, the direct insurers. These clauses lead to a harmonisation of terms and conditions at the most favourable level for the re-insurers concerned, to the detriment of the direct insurer and, ultimately, of the final business insurance customer. The same practice also appears to exist in co-insurance.
  • Some insurance intermediaries can be exposed to conflicts of interest, in particular when they provide not only advice and services to their clients, but also to insurers and/or receive remuneration from the insurers. This "double relationship" can compromise the objectivity of their advice to clients and has a potential negative impact on competition.
  • The lack of transparency of intermediaries' remuneration also reduces the potential for price competition in relation to insurance mediation services.
  • Notable differences in the degree of cooperation among insurers observed in different Member States raise doubts about the justifications of such cooperation and about the scope of the exemption granted by the present Insurance Block Exemption Regulation (Commission Regulation (EC) 358/2003 of 27 February 2003, OJ L53/03 – see IP/03/291).

Next steps

The Commission will present the preliminary findings of the sector inquiry to stakeholders at the public hearing on 9 February 2007. Representatives from both the industry and the business insurance customers will have the opportunity to discuss the findings in two panel sessions dealing with horizontal cooperation among insurers and distribution aspects. The period for public consultation on the preliminary findings will end on 10th April; interested parties are invited to submit written observations during this period.

The Commission is further examining some of the issues highlighted in this report with the aim of identifying issues that could be closely followed by the Commission. The final report, which will take into account additional findings and the observations received during the public consultation, is due to be published in September 2007. The Commission will then decide, on the basis of the fact finding and of the input received, on whether specific measures are necessary.

For further information, see also MEMO/07/26.
More information, including the preliminary report on the business insurance sector inquiry, is available at:

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