PR(08)39: The EFTA Surveillance Authority publishes its concluding report on business insurance finding no strong indications of serious competition problems in Norway or Iceland


The EFTA Surveillance Authority has today published a concluding report on its sector inquiry into the competitiveness of the provision of business insurance in Norway and Iceland. The inquiry finds no strong indications of serious competition problems in this sector. The Authority’s inquiry investigated several aspects of the business insurance sector in particular, market structure and financial workings of the industry, use of standard policy conditions, other forms of horizontal cooperation, and distribution arrangements.

The Authority launched the sector inquiry into competition in the financial services markets of the EFTA States in June 2005 (see PR(05)20) and published an interim report on business insurance in July 2007 (see PR(07)32). The sector inquiry corresponds to a similar sector inquiry by the European Commission which published its concluding report on business insurance in September 2007. Together, the conclusions of the Authority and the Commission provide insights into the competitiveness of the business insurance sector across the whole of the EEA.

Overview of main findings in Norway and lceland

As regards the market structure and financial aspects of the industry, high concentration levels in most insurance lines were found. For brokers, the concentration level appears to be lower than for insurers. There appears to be considerable variation in profitability between insurance classes. However, the cyclical nature of the industry along with the time lag from premium payments to final settlement of claims makes it difficult to assess profitability based on the survey data available.

Regarding the joint use of standard policy conditions and other forms of horizontal cooperation, no significant issues of concern were identified. The provision for such cooperation under the Insurance Block Exemption Regulation does not seem to be relied upon to any great extent by insurers. Indeed, the Commission has questioned the scope of the Block Exemption Regulation after its expiry in 2010.

As far as distribution arrangements are concerned, the new code of conduct on remuneration of brokers introduced in Norway in September 2003 by the Norwegian Financial Services Association, (so-called "net quoting") may have uncertain consequences for the industry. Under the new code of conduct, insurance companies no longer pay commission to brokers for brokerage services but instead only provide net quotes. Brokers in turn charge purchasers of insurance directly for brokerage services.

The limited data avallable so far on the economic effects of the introduction of net quoting

in Norway indicate a shift in broker revenues from commissions from insurers to client fees. The practice of net quoting also seems to have caused a shift in the sources of revenues for brokers from Large Corporate Clients to SMEs. In December 2007, a proposal to enact a law on net quoting was introduced in Norway.

As regards the conduct of insurers, the Authority's interim report had suggested that there were indications of a collective refusal by insurance companies to supply liability insurance to brokers in lceland. However, further information obtained during the inquiry demonstrated that there are additional foreign insurers providing this coverage along with one domestic provider, so brokers have alternative sources of supply.

Of the EFTA States, only Iceland and Norway were included in the investigation. This is on the basis that there are no providers of business insurance in Liechtenstein. Customers of business insurance in Liechtenstein obtain insurance products from providers in other countries.

The report concludes the last of three sector reviews into the financial services markets of the EFTA States (Card Payments, Retail Banking and Business Insurance).


For further information, please contact:

Mr. Justin Menezes, tel. (+32)(0)2 286 18 84
Senior Officer, Competition & State Aid Directorate; or

Mr. Kjell-Arild Rein, tel. (+32)(0)2 286 18 86
Officer, Competition & State Aid Directorate


9 July 2008

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