European Insurance Contract Law: Now it is up to the politicians!
Proposal for rules on European insurance contract law
One of the most important achievements of the European Union has been the creation of the Internal Market, thus allowing citizens to regularly and directly benefit from the removal of barriers between EU Member States. Cheaper flights, lower roaming charges, access to an ever wider range of products. All of these are cited as advances attributable to the European Internal Market. But has the insurance market witnessed similar improvements? Can, for example, EU citizens relocating within the EU simply take their car insurance with them, or do they need to take out new insurance coverage in each new location?
"More than twenty years after the completion of our Single Market, cross-border trade in the insurance sector is far from being smooth," observed former European Justice Commissioner and European Commission Vice-President Viviane Reding in 2014. "The reality is: only a few customers can buy insurance products in other countries, with only 0.6% of all motor insurance premiums and 2.8% of all property insurance premiums offered across EU borders,” she added. A functioning Internal Market looks different.
In support of her statements, Reding relied on the results of an Expert Group set up by the European Commission, a group featuring Jürgen Basedow, emeritus Director of the Max Planck Institute for Comparative and International Private Law. Professor Basedow has since 1998 been researching European insurance contract law under the auspices of various projects, working with domestic and international colleagues along the way. "The aim is to create the conditions for a functional single insurance market allowing for cross-border insurance contracts covering small and medium risks – such as motor insurance, liability insurance or life insurance," explains Jürgen Basedow.
The Expert Group established in 2013 was tasked with determining for the Commission whether and to what extent the national legal systems of EU Member States hinder the functionality of an EU-wide insurance market. The Group’s inquiry showed that especially the differing contract law rules of EU Member States impede a functioning internal market in the insurance sector. This conclusion corresponds to research findings made by Jürgen Basedow. In his assessment, a functioning internal insurance market is possible only on the basis of a common European insurance contract law. In fact, Jürgen Basedow took steps in that direction already in 2009: Together with twenty scholars from fifteen European countries he published the Principles of European Insurance Contract Law (PEICL). These Principles stand as a legal blueprint for a future pan-European insurance contract law, one that would allow a corresponding EU market and cross-border insurance contracts.
Whereas in the 2009 Principles the focus of the participating researchers was on general insurance law, the Expert Group went on to present a second, expanded edition at the end of 2015, one which, in addition to various updates, also contains specific proposals in the sectors of life insurance, liability insurance and group insurance. So as to benefit policyholders, the 2015 publication proposes mandatory rules. Resembling the rules proposed for general insurance contract law, the newly proposed rules offer a relatively high level of protection when considered comparatively. "With the publication of the second, expanded edition of the Principles of European Insurance Contract Law, there is now a reinforced comparative basis for a uniform European insurance contract law," comments Jürgen Basedow. "Our scholarly work on this topic is thereby complete. Now it falls on European and national lawmakers to reap the benefits of this academic groundwork."
Until that time, however, EU citizens will need to take out a new motor insurance policy each time they relocate from one EU country to the next.