WRITTEN QUESTION E-1025/01

by Neil MacCormick (Verts/ALE) to the Commission

(30 March 2001)

Subject: Insurance in the single market

Further to my Oral Question H-0053/01(1) and to the Commission's answer, would it consider developing class-specific directives so as to create a single market for simple

insurance products such as home contents insurance and term life assurance? Is it true that these insurance products are subject to no or to few tax barriers and are already subject to similar consumer protection requirements in most Member States?

(1) Written Answer dated 13 February 2001.

Answer given by Mr Bolkestein on behalf of the Commission

(30 May 2001)

The Commission would refer to its answer to the Honourable Member's Oral Question H-53/01 during question time in Parliament's February 2001 part-session(1). The directives adopted in the insurance sector have progressively created a single market in insurance. The new system has already intensified competition within the various national markets in terms of both price and new products available to customers and has contributed significantly to greater innovation in the insurance products available in both the life insurance and non-life insurance fields.

The Commission has no plans at the moment for any directives aimed at harmonising class-specific insurance products, such as multi-risk home insurance or term life insurance. Harmonising certain class-specific insurance products, for example in terms of cover and guarantees provided, could have the effect of hampering product innovation and restricting further competition, which could in time lead to a reduction in the supply of new insurance products and the presentation of insurance policies that are not necessarily suited to the different requirements of policyholders. Measures have been adopted in the area of insurance covering legal costs to ensure that this can be provided in the Community by non-specialist insurance companies and to avoid any conflict of interests between insurers and policyholders, and in the compulsory motor vehicle insurance sector to ensure protection of road accident victims and the free movement of persons within the Community.

In its Financial Services Action Plan(2), the Commission noted that national consumer protection law, while ensuring an adequate level of protection for policyholders in the Member States, must comply with Community law if it is to be legally justified, otherwise it could be deemed to constitute an obstacle to the smooth operation of the single market. This will be particularly relevant looking ahead to the development of e-commerce(3). In this context, the Commission has undertaken to review the national consumer protection rules that apply, with a view to determining equivalence and ensuring greater convergence between national regulations. On the basis of this work it will present a report to the Council and Parliament setting out guidelines for future policy in this field. Work is also under way in the area of harmonising the requirements for pre-contract information to be given to customers in connection with distance contracts in the financial sector.

As regards the tax treatment of insurance products, the sixth VAT Directive 77/388/EEC of 17 May 1977 provides an exemption from VAT for insurance and reinsurance operations, including services relating to these operations carried out by brokers and insurance intermediaries. However, the directives on insurance provide for insurance contracts to be subject to the indirect taxes on premiums that apply in the host Member State (usually the Member State in which the policyholder is resident). This rule establishes a clear criterion which facilitates the conclusion of insurance contracts under the system of freedom to provide services. However, it is quite possible that certain national regulations governing the tax treatment of insurance contracts concluded under the system of freedom to provide services, particularly in the area of life insurance (e.g. deductibility of insurance premiums, tax treatment of revenue and benefits from insurance contracts), contain obstacles to the smooth operation of the single market which are not always compatible with the rules of the single market. The Communication on the elimination of tax obstacles to the cross-border provision of occupational pensions, adopted by the Commission on 19 April 2001, contains a legal analysis of these obstacles in the pensions sector. Much of this analysis would also apply to life insurance.

In its role of guardian of the Treaties, the Commission reviews the compatibility of such national regulations with Community law and takes appropriate steps, where necessary initiating infringement proceedings.

(1) Written answer of 13.2.2001.

(2) COM(1999) 232 final.

(3) Communication from the Commission to the Council and the European Parliament on e-commerce and financial services (COM(2001) 66 final).