State aid: Commission rules against the unequal treatment resulting from certain French insurance policies
27 January 2011
The Commission has reached the conclusion that a French plan to grant tax aid to insurers for managing certain supplementary sickness insurance policies ("contrats solidaires" and "contrats responsables") is not compatible with the rules on state aid in the EC Treaty.
Without calling into question the social objective of the proposed measures, the Commission’s investigation has shown that they were not of a kind to guarantee that benefits would actually be passed on to the final consumer. The measures also risked creating discrimination in favour of the incumbents. The Commission tried to persuade France to modify the two regimes so as to render them acceptable. In 2007 it approved a similar regime of supplementary health insurance for French civil servants. As the policies are still in draft form this decision does not give rise to aid recovery.
The Commission has concluded that two aid plans notified by France, into which it opened an investigation at the end of 2007 concerning two tax measures to encourage the development of certain supplementary sickness insurance policies, constitute state aid incompatible with the internal market.
The first measure is an exemption from corporation tax for the management of certain sickness insurance policies ("contrats solidaires" and "contrats responsables"). These policies are subject to a number of conditions, one of which is that the insurer is not allowed to take the insured person's state of health into account when setting the amount of the premium. The second measure grants tax relief, also to insurers, for certain collective supplementary insurance policies covering the risks of death, invalidity and incapacity.
The French authorities notified the aid under Article 107(2)(a) of the Treaty on the Functioning of the European Union, which permits aid having a social character that is granted to individual consumers without discrimination of any kind.
After an in-depth investigation during which interested third parties were given the opportunity to submit their comments, the Commission concluded that the measures fail to meet two of the three conditions laid down in the Treaty (whether the benefits are in fact passed on to individual consumers and whether the measures are non-discriminatory).
In both cases the individual consumer is merely the potential indirect beneficiary of the tax breaks directly granted to insurers offering “contrats solidaires”. The Commission considers that market forces alone will not be enough to guarantee these tax breaks are actually passed on to consumers, and that it is in fact the insurers that will be the main beneficiaries of these breaks.
Moreover, certain conditions that have to be met in order to benefit from the first measure, such as having a minimum number or proportion of "contrats solidaires" and "contrats responsables" in a portfolio, in fact risk introducing discrimination in favour of certain incumbents, such as mutual societies, which are legally required to offer only this type of policy. The same applies to the second measure, since the market for eligible collective policies is currently dominated by the provident societies.
The Commission proposed to the French authorities various options for making the measures compatible, but the authorities are not willing to modify them. Since the aid measures have not been implemented, recovery procedures are not applicable.
The options put forward by the Commission include a system of subsidies approved by the Commission in 2007 for supplementary sickness cover for French civil servants to ensure that the benefits of the aid are actually passed on to individual consumers.
© European Commission
