Plan de negocios

4.27 However, the extent to which policyholders are compensated in such circumstances depends on a number of factors. One factor is the extent of assets available for distribution to creditors. A second is the degree of priority the law of the home state assigns to policyholders as creditors. A third is the existence of permanent or ad hoc policyholder protection fund arrangements for compensation of policyholders and the extent to which these arrangements are available to all EEA policyholders.

Policyholder Protection Fund

4.28 The failure of an insurer in the EU with significant cross- border business has highlighted the difficulties that can arise in relation to policyholders outside the home state. In the UK, a policyholder protection fund was invoked after the collapse of Independent Insurance Company. Independent Insurance Company had customers in both the UK and Ireland. Private Irish policyholders were protected by the fund. However commercial Irish policyholders were not protected by the UK fund. This fund is collected via a levy on insurance premiums. It covers 100% of the claim for the first £2000 and 90% of the remainder of the claim. There is no ceiling on the value of claims. Both outstanding claims and unearned premiums are covered.14

4.29 Member States of the EU and EEA are currently considering the possibility of introducing some minimum harmonisation of guarantee schemes at EU/EEA level in order to ensure protection to buyers of insurance (and third party claimants) in the event of the collapse of an insurer. One objective of a

guarantee scheme would be to ensure that there would be at least a minimum level of prompt compensation in cases where not enough assets are left to pay outstanding claims within the winding-up proceedings. The issue is being discussed in a working group within the European Commission’s (the “Commission”) “Insurance Committee”, which includes representatives of all member states, with Ireland being represented by IFSRA and the Department of Finance.

The “General Good” in the Insurance Sector

4.30 A Member State may have recourse to the concept of the general good in order to enforce compliance with its own laws by an insurer wishing to carry on business within its territory under the right of freedom of establishment or freedom of services.

4.31 An insurer must comply with the rules of the host country, even if they entail a restriction. For such a measure to be justified as being in the general good, it must not have been harmonised at EU level and must not duplicate rules of the country of origin. It must be: (a) non-discriminatory;

(b) justified by imperative requirements in the general interest;

(c) objectively necessary; and

(d) proportionate to the objective pursued.

4.32 If an insurer is faced with a national rule that constitutes an unjustified restriction of the freedom of establishment or the freedom to provide services, it may resort to the courts or lodge a complaint with the Commission.15

Motor Insurance

4.33 Liberalisation of international road travel in the EU/ EEA has been a major factor in efforts to harmonise the widely varying motor insurance regimes of Member States. This process is by no means complete, but there have been four Council Directives on motor insurance.16

4.34 The First Council Directive on Motor Insurance (1972) stipulated that motor insurance policies in a Member State had to provide the minimum cover for each of the other Member States. This allowed any vehicle in the EU to travel legally to other Member States on the basis of its own insurance policy. This did not address the disparity in the minimum indemnity requirements prescribed by the laws of the various Member States. 4.35 The Second Directive (1984) introduced minimum

indemnity. In addition, it required an insurance policy covering any motor vehicle to accept liability for all drivers whether or not they were named on the policy. It also required a compensation fund to be set up to compensate victims of road accidents where there was no insurance, defective insurance or where the culpable vehicle was untraced - although motor insurance bureaux were already providing that service in practice.

4.36 The Third Directive (1992) required that, in the case of vehicles insured in one Member State but visiting another, the minimum legal cover would be the higher of the two Member States. In addition, a single

14 Commission (2003), Insurance guarantee schemes discussion paper for the III meeting of the Working Group, Commission, January. 15 Chapters 7 and 8 contain analyses of a number of "national rules" which may constitute unjustified restrictions of competition.

16 Directive 72/166/EEC, OJ [1972] L 103, 2.5.1972, p. 1 (First Motor Directive); Directive 84/5/EEC, OJ [1984] L 8, 11.1.1984, p. 17 (Second Motor Directive); Directive 90/232/EEC, OJ [1990] L 129, 19.5.1990, p. 33 (Third Motor Directive); Directive 2000/26/EC, OJ [2000] L 181, 20.7.2000, p. 65 (Fourth Motor Directive).

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premium would have to cover use of the vehicle throughout the EU. Passenger liability would have to be included in the policy. Compensation would have to be paid as soon as liability was established. Where there was a dispute, the insurer, or motor insurance bureau if applicable, would have to pay compensation as soon as liability was established and then sort details between themselves afterwards.

4.37 The Fourth Directive (2000) established a mechanism for quick settlement of claims where the accident takes place outside the victim’s Member State of residence. It required insurers to have claims representatives in all Member States. It also established an information and assistance service for claimants in respect of accidents that took place outside their own Member State. Towards this end, it required each Member State to set up a register of insured vehicles.

4.38 There is now a proposal from the Commission for a Fifth Directive on motor insurance. The main objectives in this regard are to (1) update and improve the protection of victims of motor vehicle accidents through compulsory insurance; (2) fill gaps and clarify certain provisions of the earlier Directives, thereby ensuring increased convergence as regards their interpretation and application by the Member States; and (3) provide solutions to problems that arise frequently in order to create a more efficient single market in motor insurance. 4.39 In some Member States, including Ireland, liability for

personal injuries in motor insurance contracts is unlimited. Insurers have the option of drawing upon reinsurance in the event of very high-cost settlements. There is a debate as to whether liability should continue to be unlimited, but there is no consensus at this stage on whether changes to the existing system would be appropriate.

Block Exemption Regulation

4.40 The Insurance Block Exemption Regulation17 conditionally authorises certain types of co-operation agreements between insurance companies which would otherwise be illegal and void under EU competition law. Agreements covered include joint calculations of risks and joint studies on future risks; the establishment of non-binding standard policy conditions; the establishment and management of insurance pools; and the testing and acceptance of security equipment.

Insurance Mediation

4.41 With the objective of achieving an internal market for insurance intermediaries, the Insurance Mediation Directive (“IMD”)18_{was adopted in 2002 and came} into effect on the 14th January 2005.19_{It will provide} for a European passport for insurance intermediaries, based on registration in their home state on the basis of professionalism and competence (as determined by the regulations applicable in that Member State). This will require individuals engaged in the sale of insurance products to possess appropriate knowledge and ability20_{on an ongoing basis. It will also require} professional indemnity insurance.

4.42 The IMD will require an intermediary to inform a client, before the conclusion of an insurance contract, whether “broad based advice”21_{is being offered, or} whether the service is limited to placing business with one or more insurers. The reasons why particular products are considered suited to a buyer’s

requirements must be provided to the buyer in writing. The IMD information requirements are applicable to mass risks but not to “large” risks.

4.43 Under the IMD, Member States will be committed to providing easy public access, through a single information point, to details of registered insurance and reinsurance intermediaries, the competent authorities with which they are registered and regulated and the Member States in which they conduct business. The IMD also encourages Member States to set up appropriate and effective Alternative Dispute Resolution procedures for out-of-court redress for dissatisfied customers.

Proposed Directive on Equal Treatment between Men and Women

4.44 The Commission has proposed a Directive on equal treatment of men and women outside the workplace. This is still under negotiation. A concern with disallowing any differentiation between men and women in relation to motor insurance would be the impact on risk-related calculation of premiums. For example, in the case of motor insurance, there is evidence that, as a group, young male drivers are a higher risk than their female counterparts.22_{It follows} that gender may be relevant in the setting of risk- related premiums. Against the background of a general requirement to treat men and women equally,

17 Commission Regulation 358/2003.

18 Directive 2002/92/EC of the European Parliament and of the Council of 9 December 2002 on insurance mediation. 19 S.I. 13 of 2005 brought the IMD into effect in Ireland.

20 In the case of corporate intermediaries, the requirement will be applied to a "reasonable proportion" of the persons within the management structure of such entities who are responsible for insurance mediation activities, and all others directly involved in insurance mediation.

21 This requires "… analysis of a sufficiently large number of insurance contracts available on the market, to enable … a recommendation in accordance with professional criteria, regarding which insurance contract would be adequate to meet the customer’s needs". The phrase "adequate to meet" includes the extent of coverage as well as best price. The specific requirements are laid out in the IFSRA Handbooks for Authorised Advisors and Multi Agency Intermediaries.

22 Accident data from the National Roads Authority show that 15-24 year old males represent 8% of the population but account for 16% of drivers involved in fatal and injury accidents.

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