Prices, Distribution Channels and Regulatory Intervention in European Insurance Markets

Abstract

The 'Cost of Non-Europe' reports suggest that the opening of European national financial services markets will benefit consumers by increasing competition. But these gains are only some of the potential consumer benefits that may result from European market integration. The EC-member countries have developed quite different schemes of insurance market regulations. Except for an agreement on some basic aspects such as solvency regulations. a harmonisation of the national rules of insurance market regulations was not achieved. For the time being, some markets continue to be highly regulated while others remain relatively unregulated. When freedom of service will finally be realised in Europe, insurance contracts written under different regulatory rules will compete with each other. Ultimately, as the volume of exports grows, the national regulatory rules will be put to the market test. This paper will provide an empirical analysis of how regulatory schemes affect key market characteristics and thus contribute to an understanding of the forces unleashed by the freedom of service program.