The European Commission’s antitrust department, led by Neelie Kroes, is getting ‘serious’ about practices in the insurance sector, which it says may run counter to EU rules, especially regarding reinsurance, coinsurances and insurance brokerage by intermediaries.
Current business practices in the insurance sector may be anti-competitive and could trigger infringement proceedings, according to a report in the Sector Inquiry into Business Insurance, issued on 25 September.
“The Commission is serious about making markets work better, even where that means we need to question some established market practices when these may be harmful to consumers and competition,” Competition Commissioner Neelie Kroes said.
Practices under scrutiny include the alignment of premiums in the reinsurance and coinsurance markets, which the Commission argues lead to higher prices for large-risk commercial insurance. The Commission has called on the industry to justify or change these practices, or companies may face infringement procedures.
Another concern raised in the report is the lack of transparency in the way that insurance brokers are remunerated and possible conflicts of interest, leading to higher prices and reduced choice, especially for SMEs. The Commission said that it would take this into account when reviewing the insurance Mediation Directive, which is currently being looked into.
The Commission has also warned that it might drop the block exemption, which allows the insurance industry to be treated differently to other sectors. The exemption, which came into force in 2003, is about to expire in 2010 and the Commission said it had “yet to be persuaded” that special rules for the sector were “still necessary”.
The European Insurance and Reinsurance Federation (CEA) spoke out in favour of upholding the block exemption, arguing that it encouraged new entrants into the sector by providing market data, according to Reuters.