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'More competition' in SME insurance sector

Published On 25 January 2007 at 09:34:06

There may be more competition in the SME business insurance sector, the European Commission (EC) has reported.

An interim report from the EC's competition inquiry into the business insurance sector has found some evidence of "fragmented markets" across Europe.

It identifies the factors that could adversely affect competition, noting: "'Sustained differences' of insurers' underwriting profitability in different member states suggest a 'significant degree' of market fragmentation along national lines and the potential for price reductions."

However, some states see higher profitability for insurance contracts for SMEs, suggesting there is less competition in larger companies' markets, the report adds.

It also warns that the scope for competition can be reduced by long-term insurance contracts.

Additionally some re-insurance companies use "best terms and conditions" clauses, resulting in a harmonisation of terms and conditions.

This has an overall benefit to the re-insurers but may be detrimental to the direct insurer and business insurance customer.

The same practice was observed in co-insurance.

The report also found that intermediaries are vulnerable to conflicts of interest, especially if they provide advice and services to clients and insurers and/or receive remuneration from insurers.

A lack of transparency in remuneration threatens competition, it warns.

The inquiry was launched in June 2005 and this week's publication is an interim report.

 

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