Toespraak Neelie Kroes over bedrijfsverzekeringen (en)

SPEECH/07/71

Neelie Kroes

European Commissioner for Competition Policy

Preliminary Findings of the Business Insurance Sector Inquiry

European Commission Public Hear

Brussels, 9th February 2007

Ladies and gentlemen,

It's a great pleasure for me to welcome all of you to this public debate on the preliminary findings of the European Commission's Sector Inquiry into Business Insurance, which were published almost three weeks ago. Looking at the programme and the expertise of the people gathered here today - both here on the platform and in the audience - I am sure that today's hearing will be stimulating and instructive.

Business Insurance is an important part of the European economy. It is the most important sector of Non-Life Insurance, which generates gross premiums equivalent to around 3.3% of the EU's GDP. But this perhaps doesn't fully capture the importance of business insurance – which is that it enables every company in Europe to protect themselves financially against major risks, such as property damage and legal liability. A competitive environment in business insurance is therefore key to European economic growth: the whole economy will be strengthened if companies can buy better insurance services at a better price.

That's why it's important that the business insurance market functions properly. We launched the sector inquiry in 2005, because we knew that the cross border supply of business insurance services remained limited, despite the progress made by the Financial Services Action Plan to further integrate the EU financial services markets. We were also concerned that cooperation among the various actors in the market might not be in the interest of consumers, or the market as a whole. A proactive investigation of the market was called for.

Before I present the findings of the Sector Inquiry, I'd like to start by wholeheartedly thanking you for the role you have played in the inquiry: I'd like to thank the business insurance industry - insurers, re-insurers, brokers, agents and associations - for replying to our requests for information. We sent detailed and wide-ranging questionnaires to more than 400 different companies and associations, many of whom I'm delighted to see represented here today. Your feed-back, insights and data have given us a significant amount of information, on which the preliminary findings of the sector inquiry are based. I would also like to thank business insurance customers – in particular the associations of risk managers – for their contributions. Going forward, I hope we not only maintain, but also deepen this dialogue, especially with small and medium sized enterprises and large corporate clients. You need to tell us about the competition problems that really matter to you, so we can tackle them!

Let's now look at the substance of the preliminary findings of the inquiry, that are set out in the Interim Report. The inquiry has confirmed that there are indeed a number of practices at all levels of the supply chain that may prevent the markets from working as well as they should.

Broadly speaking, there are five key areas of concern.

First, the variations in underwriting profitability in different Member States and sub-sectors of business insurance. We have found sustained differences in insurers' underwriting profitability in the various Member States. This could indicate that the European Union does not yet benefit from a fully integrated market in business insurance- meaning that many companies in some Member States might be needlessly paying more for insurance than their competitors in other Member States.

Moreover, in some Member States, insurance companies tend to display consistently higher underwriting profitability in the services they offer to SMEs, compared to the services they offer to large corporate clients. This suggests that there may be a greater degree of competition and transparency in the insurance market for large corporate clients, making it easier for these better-informed larger companies to change insurance provider where this would save them money. We intend to further examine the reasons for these price differences which appear to be – to say the least – unfavourable to SMEs.

Second, we have identified potential risks of foreclosure, concentrated in two practices favoured by parts of the business insurance industry:

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  long-term insurance contracts, notably in Austria, Italy, the Netherlands and Slovenia; and
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  networks of exclusive agents that control the vast majority of insurance distribution in the market, such as, for example, appears to be the case in Italy.

By making it more difficult for an insurer to acquire new clients in these markets, these practices could be creating serious obstacles to the entry of new competitors, resulting in a worse deal for consumers.

Our third area of concern relates to the fields of reinsurance and co-insurance. The Sector Inquiry has found that some companies use what are known as "best terms and conditions" clauses in their contracts with their clients, the direct insurers. These clauses could lead to a de facto harmonisation of terms and conditions at the most favourable level for the reinsurers or co-insurers concerned. We intend to examine these clauses more closely to analyse their effects in the market, to verify whether these provisions have the effect of limiting competition, causing businesses to pay too much.

Fourthly, turning to independent insurance intermediaries, the interim report highlights the potential for conflicts of interest, and the lack of transparency of the intermediaries' 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. Given the great importance of intermediaries to the distribution of business insurance, and thus their potential capacity to stimulate competition in the market, I am very pleased to see that this afternoon's session is dedicated to these issues.

The fifth and final area of concern highlighted by the interim report is horizontal cooperation among insurers. Now, I know that this is normally considered to be an important practice within the insurance sector. However, the interim report has found that this type of cooperation does not appear to follow consistent and uniform patterns across Europe. Indeed, it varies significantly from one Member State to another! Our findings, therefore, legitimately raise doubts about the real need for certain forms of horizontal cooperation among insurers, and the scope of the present Insurance Block Exemption Regulation.

This finding is particularly timely, because a debate on the pertinence of the renewal of this Block Exemption Regulation is due to start by 2008. Exceptions to the normal application of European competition rules can only be accepted when very specific circumstances exist- and I have to say that I have doubts that this continues to be the case in this sector. To those who currently benefit from the Block Exemption, I have a clear message: show me the arguments and evidence that prove the contrary!

I've briefly summarised the highlights of the 164 pages of the interim report. I hope that you will take the time to read it carefully, if you haven’t already done so, and will send us your thoughts for the public consultation on the preliminary findings, which lasts until 10 April.

We will also conduct additional - more targeted - investigations, focusing on the issues that raise the competition concerns identified in the Interim Report. As you know, National Competition Authorities and the Commission work together in the European Competition Network to enforce competition law efficiently across the EU. So, for example, we will now assess whether there is indeed foreclosure by working together with the National Competition Authorities. Should this prove to be the case, any problems will be tackled through antitrust enforcement measures, either at national or Community level. And I can assure you that we will continue to ensure that stakeholders- both insurance companies and customers – are involved in this process.

Your views matter to me. I want your voices to be clearly heard in this wide and open consultation process. The results of today's debate, together with input from the additional investigations, will be reflected in our Final Report, which we intend to publish in September. On the basis of the conclusions reached in the Final Report, we will then decide 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.

I am convinced that this is the best way to serve the interest of European consumers and to enhance the contribution of the insurance industry to the EU economy as a whole, in line with the Growth and Jobs Strategy.

Ladies and gentlemen,

Thank you very much for your coming here today to make your contribution to the public hearing, and thereby the final report of the sector inquiry. Please do contribute actively to the debate. The Commission does not have a monopoly on expertise in this area. Our sector inquiry, and the value it adds, very much rely on the contributions we receive from stakeholders. Help us make it a success!

Thank you.