Brussels, 25/01/2007 (Agence Europe) - On Wednesday 24 January, the European Commission published its interim report on competition in the business insurance sector. This document illustrates factors that are likely to have a negative impact on competition. If Commission doubts are confirmed in the consultation and in September's final report, it may launch proceedings as laid down in the relevant articles of the EC Treaty (80, 81 and 82). In connection with the irregularities already identified, Competition Commissioner Neelie Kroes declared in a press release that her services intended “to look at these issues in more detail before finalising the sector inquiry report."
The sectoral enquiry was launched in June 2005 and aims to detect distortions to competition in the business insurance sector. After processing a raft of information and carrying out many different analyses, including consultations with other stakeholders, the DG Competition inquiry revealed a number of current practices that could initially suggest an anti-competitive character categorising the industry. The results in the preliminary findings led the Commission to draw the following conclusions:
Insurers' underwriting profitability varied sharply from one member state to another, which was also the case in sectors serving both SMEs and large companies (where the SME market shows a level of profitability that is much higher). This would suggest an artificially high level of profitability in some sectors.
Sustained differences in long-term insurance contracts, as well as their exclusive character may reduce the scope for competition. This could be the case notably in Austria, Italy, the Netherlands and Slovenia, as regards long term contracts, and in particular in Italy, as far as the distribution structure is concerned.
Some re-insurance companies active in the EU have so-called "best terms and conditions" clauses in their contracts with their clients, the direct insurers. These clauses are at the most favourable level for the re-insurers concerned, to the detriment of the direct insurer and, ultimately, of the final business insurance customer.
Some insurance intermediaries can be exposed to conflicts of interest and demonstrate a lack of transparency.
Differences in the degree of cooperation among insurers observed in different member states raise doubts about the justifications of such cooperation, and about the scope of the exemption per category in the insurance sector (Commission Regulation EC 358/2003) being applied.
The next steps in the process will involve the Commission's presentation of the initial conclusions of the sectoral inquiry in a public hearing in Brussels on 9 February. All stakeholders have been invited to submit written observations before 10 April. Given the stakes at play, it is likely that the industry will express some reservations about the conclusions. An official from DG Competition involved in data analysis, explained to EUROPE that Commission services trust their own procedures but expect to take some flak from the big insurers whose profits are under threat, particularly on the “methodology used for calculating profitability and the samples we took”. After the consultation period, the Commission will continue to examine certain elements, such as distribution infrastructure and market fragmentation, as well as aspects raised by the consultation, before publishing its final report in September 2007. If this is based on the same lines as the interim report, the Commission will then seek to apply anti-trust rules itself or via the competition authorities of member states.
For further information:
http: //ec.europa.eu/comm/competition/antitrust/others/sector_inquiries/financial_services/interim_report
_24012007.pdf. (cd)