Insurance (law) in Europe

Common basic principles of insurance contract law and the conflict of insurance cultures

Prof. em. Herman Cousy

COMMON BASIC PRINCIPLES

1. Insurable interest

2. Principle of indemnity

3. Utmost good faith

4. Contract of adhesion

FIN DE SIÈCLE: TWO VIEWS

• Frances Fukuyama, The End of History (1992)

• Michel Albert, Capitalisme contre capitalisme (Seuil, 1991)

TWO “INSURANCE CULTURES”

Michel Albert, “L’avenir de l’assurance”, Risques. Les Cahiers de l’Assurance, 1991, 181.

ALPINE versus MARITIMEWhere?

ALPINE

• Switzerland• Germany

(Bayern)• Northern Italy

MARITIME

• British Isles• The Netherlands

ALPINE INSURANCE CULTURE

(1)Basic idea: security through mutual help(2)Easy access(3)Limited differentiation(4)Ex ante control of conditions and tariffs(5)Few bankruptcies (6)Stable clientèle (long-term contracts)(7)Stable shareholdership

ALPINE/MARITIME CULTURE

ALPINE MARITIME(1) Basic idea: security through mutual

help(1) Basic idea: speculative and efficient

handling of risks

(2) Easy access (2) Selectivity in underwriting

(3) Limited differentiation (3) Segmentation of tariffs

(4) Ex ante control of conditions and tariffs

(4) Control of the solvency of the company

(5) Few bankruptcies (5) Bankruptcies – Guarantee Funds

(6) Stable clientèle (long-term contracts)

(6) Short-term contracts: “zapping”

(7) Stable shareholdership (7) Shareholder’s value and profitability

TWO (OR MORE) CULTURES OF INSURANCE INTERMEDIATION

ALPINE MARITIME

• Supply: insurance is sold • Demand: insurance is bought

• Agent • Broker

• Commission fee/inducements, etc. • Independent

• Good advice • Best advice

• Regulation of products • Regulation of service providers

• In-house concentration of services • Outsourcing

TWO LEGAL CULTURES (?)ALPINE MARITIME

(1) Civil law (1) Common law

(2) Cartesian approach (2) Pragmatism (Prof. Clarke’s elephant)

(3) Detailed legislation (cfr. Colbert) (3) General rules (e.g. article 17 Marine Insurance Act)

(4) Disclosure rules• Causality requirement• Proportional sanction (reduction)

(4) “Warranties”• No causality requirement• Loss of right (all or nothing

(5) Legal interpretation rules• General rules• Contra proferentem rule• Pro insured

(5) Taking business reality into consideration

THE MAKING OF THE INTERNAL MARKETA “CLASH” OF … CULTURES

• Alpine majority versus maritime minority

• EU “free market” preference

• The “detour” of the second generation of directives (1988-1990): “large risks” and “mass risks”

• The prevalence of the Maritime insurance traditiono “Internal Market” White Paper (1985)o Single European Act (1988)o Third generation (life and non-life) insurace directives

(1992)

“GENERAL GOOD” (Allgemein Interesse)

ECJ decided on “direct effect” of treaty provisions on free establishment and freedom services.

Nevertheless, in the absence of community legislation, Member States can still impose restrictive national measures if they are protecting the general good, and are necessary, proportional and not discriminatory.

DID THE EU INTERNAL MARKET REACH ITS GOALS?

1. An integrated market with “cross border provision of services?

Not for “mass risks”!Reason: non-harmonization of contract

law

2. (More) competitive markets?Yes! EU: “In competition we trust”!