Post Europe: View from the Top – What price pan-European regulation?

The fallout from the global financial crisis has been much greater fiscal and regulatory scrutiny across Europe. The pressure on insurers, brokers and clients - particularly those involved in multinational business - could see changes in the way these kinds of insurance contracts are transacted and managed.

The psychosis of regulators throughout continental Europe on the way the insurance industry operates across borders means they are looking closer than ever at all levels; from the financial flows within businesses, to reinsurance arrangements and the management of multinational programmes.

Two directions
The raft of regulation and legislation could be seen as creating an environment at odds with the industry's drive to simplify the insurance process. As insurers focus on innovation and embrace technology to improve the customer experience, legislators and regulators appear to be pushing in the other direction.

For example, the European Commission's move to eliminate block exemptions; or the scrutiny of distance selling practices; or a change in the tax treatment of areas such as life insurance which are now being seen as complex financial products. All could make innovation increasingly difficult and slow.

"Legislators and regulators appear to be pushing in the other direction."

Account management
The management of multinational accounts is another area under the regulatory microscope. This includes a focus on coverage and taxation issues; the movement of monies between company operations and, for the first time, the potential for application of sales taxes such as VAT, on service aspects of the insurance contracts.

There is no doubt European authorities are on a steep learning curve when it comes to the structure and operation of insurance operations; there is evidence of cross-border information sharing - not least to achieve a degree of regulatory harmonisation avoiding the creation of fiscal disparity that might be exploited.

Knee-jerk reactions
The insurance industry or customers would certainly not benefit from knee-jerk reactions from the regulatory authorities with policy that effectively moves toward ‘de-globalisation' and protectionism. Insurance operations play an important role in the economic growth of many European countries in terms of investment in national economies and providing valuable protection to national businesses.

"Insurance operations play an important role in the economic growth of many European countries."

Grudge match
If the regulators are looking at a grudge-match with financial services, they should remember that the industry is fundamentally different from the financial sector and was not a significant actor in the last financial crisis.

Of course, we should take a pragmatic view of the implications of this increased scrutiny, it is unlikely to fundamentally change the way insurers operate. And we are seeing some political pressure being brought to bear to reduce the regulatory pressure - for example, in France.

Stifling innovation
A recent audit looking at increases in homeowners' market rates acknowledged that losses were being made by the sector while calling for increased transparency in customer communication around the renewal process. However, anything that stifles the industry's attempts to innovate and make customer service easy and simple for the user cannot be overlooked as mere inconvenience.

Jeff Moghrabi is country manager in for Ace Europe France