Overhaul of insurance competition rules

The current sector-specific block exemption which applies to the insurance sector is up for revision. As part of the ongoing consultation process with operators in this sector, the European Commission has now launched a public consultation on a proposed law which will eventually replace the current rules.

There is no doubt that anti-competitive conduct engaged in by operators in the insurance sector falls foul of EU competition rules. However, this industry has, since 1992, been comforted by a sector-specific block exemption which exempts from the application of the competition rules certain types of agreements concluded between insurers.

Such exemptions relate to agreements on joint calculations, tables and studies, standard policy conditions and models on profits, common coverage of certain types of risks (pools) as well as those on security devices or safety equipment. The current block exemption is now bound to expire in 2010.

The European Commission began a review process of the current law in November 2007. After a lengthy consultative process with stakeholders, public authorities and consumer organisations, a new proposed law is now in place.

Throughout its review process, the Commission has sought a reply to three fundamental questions, namely, whether the insurance sector is so special as to give rise to an enhanced need for cooperation in comparison with other sectors, whether this enhanced need for cooperation requires a block exemption to protect or facilitate it and if so, whether the current block exemption addresses any concerns that industry might have.

On the basis of the evidence that it gathered, the Commission has now drafted a law which does away with two of the four exemptions found in the current block exemption. These refer to exemptions for agreements on standard policy conditions and agreements on security devices. The reason given by the Commission for such a decision is that neither agreement is specific to the insurance sector, and therefore as such does not require a sector-specific exemption.

In conclusion, this means that only agreements on joint compilations, tables and studies and agreements on pools are exempted in terms of the draft proposed law. Furthermore, a number of conditions have been introduced insofar as the two exemptions are concerned.

Insofar as the exemption relating to information exchange is concerned, the Commission is in particular insisting that only the exchange of necessary information is exempted. Furthermore, except in cases where a public security exception can be invoked, interested third parties such as consumer organisations ought to be able to access shared data.

Other key changes which are being proposed insofar as the exemption for pools is concerned relate to a change in the approach to market share calculation in order to bring it into line with other general and sector-specific competition rules, as well as a rise in the flexibility percentage for market share thresholds by three per cent.

Interested parties now have until November 30 to submit their comments on this proposed law which is available via the following link:

http://ec.europa.eu/competition/sectors/financial_services/insurance.html

Dr Vella Cardona is a practising lawyer and a freelance consultant in EU, intellectual property, consumer protection and competition law. She is also a visiting lecturer at the University of Malta.

mariosa@vellacardona.com