The European Commission has today released its interim report on the competition inquiry into the business insurance sector, revealing evidence of fragmented markets and highlighting factors that may adversely affect competition.
The inquiry, launched in June 2005, is aimed at rooting out what the EC describes as “distortions of competition” by ensuring a better understanding of the functioning of the sector.
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."
The inquiry has revealed sustained differences of insurers' underwriting profitability in different EU member states which suggests 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.
The inquiry also found that In some member states, long-term insurance contracts as well as certain distribution structures may reduce the scope for competition.
Reinsurers' use of so-called "best terms and conditions" clauses were also highlighted, with the report stating that such clauses lead to a harmonisation of terms and conditions at the most favourable level for the reinsurers concerned, to the detriment of the direct insurer and, ultimately, of the final business insurance customer.
In terms of intermediaries, the inquiry report stated that they 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.
Before reaching final conclusions due to be published in September 2007, the Commission has invites all stakeholders to submit their views and observations on the preliminary findings.
