The European Commission has adopted the final report of the competition inquiry into the business insurance sector. The findings of the inquiry, after a wide public-consultation, have identified three key issues which the Commission or national authorities should follow up.

The Commission has found that widespread harmonisation of certain market practices in both the reinsurance and coinsurance markets almost always results in the de facto alignment of premiums and conditions of cover. In its interim report the Commission identified problems with “best terms and conditions” clauses but as a result of its investigations found that the problems with the alignment of premiums and conditions of coverage occurred regardless of the use of best terms and conditions clauses.

The Commission has identified a number of issues relating to the distribution of insurance. The report confirms the concerns raised in the interim report (published in January), that transparency of remuneration and conflicts of interest in the insurance broking sector may inflate prices and restrict choice - especially for SMEs. The Commission believes that these issues require further careful consideration and that it intends to examine these in the planned review of the Insurance Mediation Directive.

During the inquiry the Commission looked at the excessive duration of some contracts and at clauses concerning their renewal and extension. The Commission were concerned that excessively long contracts might restrict the market to new entrants. In the final report it has been decided that the situation with long term contracts in Austria warrants further consideration.

The interim report raised the Commission’s concerns over whether there is justification in continuing to allow insurers various forms of cooperation under the Block Exemption Regulation (BER). In the final report the Commission states that it still needs to be persuaded by the insurance industry that the exemption is still necessary for insurers. It will consider the matter in a later report in 2009 prior to the due expiry of the Block Exemption Regulation in March 2010.

In June 2005 the European Commission decided to initiate a sector inquiry into the provision of insurance products and services to businesses. The inquiry was based upon article 17 of Council Regulation (EC) No 1/2003. The final report is accompanied by a working document which sets out the detailed findings of the inquiry.

For further information:

Please see the details of the Commission's inquiry in the current edition of Insurance Focus

Final Report of the European Commission on the Business Insurance Sector Inquiry (58.33KB PDF)

Working document on the inquiry (498.25KB PDF)