AIRMIC responds to EU business insurance enquiry

AIRMIC said it strongly welcomes the EU Commission’s support for full transparency in the disclosure of broker remuneration.

In a release AIRMIC said: “The report rightly recognises that there are areas of the market, especially those serving the SME sector, that are poorly served in this respect. We hope the enquiry will lead to a situation where all buyers of commercial insurance routinely and automatically receive full disclosure as to how much of their premium the broker receives.”

Adding: “We welcome the fact that the Commission has responded to representations from ourselves and others to the effect that multi-year insurance agreements are a legitimate method of providing continuity and stability and are not inherently anti-competitive.”

“We will study the Commission’s comments on co-insurance and differential pricing within the subscription market. As a general comment, however, we regard the subscription market an efficient vehicle for spreading risk without reducing competition.”

The European Commission has adopted the final report of the competition inquiry on the business insurance sector.

“The report rightly recognises that there are areas of the market, especially those serving the SME sector, that are poorly served in this respect. We hope the enquiry will lead to a situation where all buyers of commercial insurance routinely and automatically receive full disclosure as to how much of their premium the broker receives.

AIRMIC

The final report raises concerns about the operation of two areas of business insurance.

First, long-standing and widespread industry practices in the reinsurance and coinsurance markets involving the alignment of premiums, which may lead to higher prices for large risk commercial insurance.

The report leaves open the question of whether these constitute infringements of the prohibition on restrictive business practices, but invites the industry either to justify the business practices concerned under the competition rules, or to reform them.

Second, the Commission also confirms its concerns as to transparency of remuneration and conflicts of interest in insurance brokerage. The report says this practices need to be better regulated.