European Commissioner for Competition
Review of Insurance Block Exemption Regulation
Keynote speech at the Insurance Block Exemption Regulation Conference in Brussels
Brussels, 2nd June 2009
Ladies and gentlemen,
It's a great pleasure for me to welcome all of you today.
As you know the Commission is reviewing the functioning of the Insurance Block Exemption Regulation. This event is one of the final stages of our consultations – and a very important one given the expertise in the room today.
Each of you has your own points of view, and your own interests to defend. It will not surprise me that you may have different ideas of what needs to be done. The important thing is that you make your views clear so we can take account of them.
As you know we take a long-term view, and will be weighing your views and evidence in light of the best interests of consumers and the competition process.
We are not afraid to go back to 'first principles' and ask hard questions:
Are exemptions necessary in the first place, and if so – are they causing market problems?
What is the best way to ensure that insurance is efficient and effective?
Will consumers be better off if the current exemptions are maintained?
Would tighter restrictions on co-operation between insurers be more beneficial in the long run?
Maybe we won't find all the answers today - but I hope today’s discussions will shed more light.
Insurance is an important part of the European economy. European insurers employ over one million people and invest more than €7 trillion in the economy.
But this perhaps doesn't fully capture the importance of insurance – which is that it enables every individual and company in Europe to protect themselves financially against risks. It gives many people peace of mind, and allows them to move forward with confidence in their lives.
Let me tell you – my life this year would be much easier if more banks had taken insurance! Having said that, I think you may be counting your blessings that you missed out on their business!
But being serious again, a competitive environment in the insurance industry is crucial to European economic growth. If more people can get the types of insurance they need at fair prices, which is what competition helps to deliver – then we are all better off.
That's why we are keen to ensure ways to make the market work better.
In our work so far, the Commission has called on the expertise of market players and stakeholders both in direct consultations and follow-up questionnaires. We want to know more about all stakeholders' experience of the market.
Whether you are an insurer, re-insurer, broker, agent or association, or indeed you are representing consumers or risk managers, I am paying close attention to your input. And I want to thank you for your role in the development of the Report and Working Document. You have made an essential contribution.
I would also like to acknowledge the input received from our colleagues in National Competition Authorities and Supervisory Authorities from across the 27 Member States.
The consultation and review process would have been impossible without the assistance of national experts. So we are once again extremely grateful for the high level of cooperation achieved between individual institutions as well as through the European Competition Network.
Now let me turn to the substance of our findings. Block Exemption Regulations are exceptional legal instruments and must be justified in terms of real benefits to competition and consumers .
This is even more the case since the notification system was brought to an end with our modernisation several years ago.
In other words – the competition landscape has changed since the BER was last renewed in 2003. That's why we need to go back to first principles and check closely what role the BER should play in the new landscape.
The Report and Working Document present individual analyses of each of the four categories of agreement exempted by the BER, but all four Chapters address the same key questions. These questions are:
Is the insurance sector somehow "special" (or different to other sectors) so as to lead to an enhanced need for cooperation between insurers?
If so, does it require a legal instrument to protect or facilitate such cooperation?
And, if the answers to these questions are positive, what is the most appropriate legal instrument for the job?
In analysing the impact of the BER, the Commission has focussed on:
Evaluating whether it gives rise to any restrictions of competition;
How much use is actually made of it;
Whether or not cooperation between insurers would cease in its absence;
Whether practical alternative arrangements could be developed; and finally
Are consumers receiving a fair share of the efficiencies generated by cooperation?
More than any other single element, increasing consumer welfare is the goal of the Commission. That is, by the way, the attitude we take with all industries.
The first exemption we are exploring concerns agreements relating to Joint Calculations, Tables and Studies. We found that cooperation in this area is specific to the insurance industry. Furthermore, it appears that the competitiveness of small insurers may suffer in the absence of this exemption because their size restricts their ability to compile relevant data. Our preliminary proposal is therefore to renew it.
Exemption for pools
The insurance industry appears to have certain specificities which trigger the need for enhanced cooperation for pools.
But let me say that we think there are some alarming practices concerning pools. In particular: the way many insurers are neglecting to carry out the careful legal assessments of their activities required by the Regulation.
So, if we do renew this exemption, substantial changes are needed. And we will be keeping a close eye on the industry, using strong enforcement where needed.
Standard policy conditions
In relation to the current exemption for standard policy conditions; we are not convinced that this type of agreement is specific to the insurance industry. In the event of non-renewal we think cooperation would still take place. We do not therefore propose to renew this exemption.
Standards for security devices
Finally, the provisions of the BER allowing cooperation in the setting of standards for security devices allow for insurers to better evaluate the risks they cover.
However, such agreements on technical specifications appear to fall into the general domain of standard-setting; they are not unique to the insurance industry. Furthermore the scope of application of the BER is constantly decreasing as a result of increasing EU harmonisation and competition problems on downstream markets for security devices appear to be arising. Thus, our initial proposal is also not to renew this exemption.
This speech is just a "snap-shot" of our views - I hope that you will take the time to read the Report and Working Document carefully.
While we began this Review process more than 18 months ago - you still have time to offer feedback on these first proposals.
Please also bear in mind that the insurance industry is not in a vacuum. It operates alongside many other industries, and most of them do not benefit from a block exemption. We do not renew such exemptions lightly.
Having said that, whether you agree or disagree with us, your views matter to me equally.
The Commission does not pretend to have a monopoly on expertise in this area. The next steps are quite important – in the coming weeks, having consulted the Parliament and Council, we will decide the future of the exemption.
So please continue to make your contributions – and I look forward to sharing with you our final conclusions.