Business insurance market in for shake-up

The competitiveness of the business insurance market across the European Union is severely restricted by a number of unacceptable practices, according to European Commissioner for Competition Policy, Neelie Kroes.

Speaking today at an EC public hearing, Kroes highlighted five major areas negatively affecting the business insurance sector across Europe which had come to light following the the recent inquiry into operating practices in this market.

“We have found sustained differences in insurers' underwriting profitability in the various Member States,” said Kroes, differences which she believes suggest that the business insurance market has yet to become fully integrated.

This concern was further supported by evidence revealing that insurers in some Member States achieve consistently higher profitability levels from their SME clients compared to their larger corporate clients, suggesting that an unfavourable environment exists for SMEs.

Other areas of concern raised by Kroes included the use of “best terms and conditions” clauses by reinsurers, which could be used to ensure that such conditions were set at levels biased in favour of the reinsurer.

Attention was also drawn to the on-going argument about the potential for conflicts of interest and the lack of transparency in relation to intermediary remuneration. “We are concerned that some of the practices identified in the interim report could severely impede competition in both the insurance and the insurance mediation markets,” said Kroes.

A public consultation period is now underway into the findings of the preliminary report, which runs until 10 April. A final report is due to be published in September.

“On the basis of the conclusions reached in the final report,” concluded Kroes, “we will then decided how to best move forward in order to overcome the competition constraints that have been identified, and to contribute to a more competitive, dynamic and integrated business insurance market.”