European Commission: Insurance Contract Law - Expert report pinpoints obstacles to cross-border trade

27 February 2014

The report finds that differences in contract laws impede the cross-border supply of insurance products by increasing costs, creating legal uncertainty and making it hard for consumers and businesses to take out insurance in other EU Member States.

At present, a citizen moving to work in another EU country may have to take out a new car insurance policy, or face problems having their rights under a private pension plan recognised if taken out in his country of origin. Similarly, companies with branches in several EU countries may have to get separate policies under different conditions in each country instead of a single policy for their entire EU business. The European Commission will now follow up on the report consulting consumers, businesses and the insurance sector on possible solutions.

“More than 20 years after the completion of our Single Market, cross-border trade in the insurance sector is far from being smooth", said Vice-President Viviane Reding, the EU’s Justice Commissioner. “The reality is: only a few customers can buy insurance products in other countries, with just 0.6 per cent of all motor insurance premiums and 2.8 per cent of property insurance premiums offered across EU borders. The expert group report published today shows that some of these problems stem from differences in contract law. There is a large potential for the provision of cross-border insurance products. Let's make sure we do our best to exploit it. This is crucial for maintaining the competitive position of the EU's top insurers in the global market."

The Expert Group on European Insurance Contract Law was tasked with identifying if and to what extent contract law differences hinder cross-border provision and use of insurance products. Composed of 20 members from 12 Member States and with different occupational experiences, the Expert Group held ten meetings in 2013 and 2014. The report issued today comes just one day after the European Parliament gave its strong backing to an optional European Sales Law to remove contract law related barriers to the marketing of digital products and related services across the EU (MEMO/14/137).

The main findings of the report on European Insurance Contract Law are:

• For many life, motor or liability insurance products sold to consumers, insurance companies have to adapt their contracts to the national rules where the policyholder is based. This means they have to develop new contracts to comply, for instance, with rules on pre-contractual information.

• Contract law differences impede the supply of insurance products across borders. They increase costs for the cross-border provision of insurance, create legal uncertainty and make it very difficult for consumers and businesses to take out insurance in other Member States.

• Contract law obstacles are found primarily in the sector of life insurance, as well as areas such as liability and motor insurance. The report finds that problems are less likely to occur in insurance for large risks markets if linked to a trade or certain insurances for bigger companies – such as in the area of transport insurance.

Full press release

Report

© European Commission