Effect of Liberalization in Insurance Industry

What is liberalization?

The beginnings of liberalization in the economic context consisted in the fact that the quantitative reduction of trade restrictions had first been pushed forward. Today, liberalization in the economic sector is defined by deregulation and privatization.

The Impact of Liberalization

A noticeable change in insurance contract law results from the abolition of the preventive condition and tariff control. This applies to any type of insurance. With the entry into force of the new directives, the examination of the general insurance conditions by a supervisory authority is no longer part of the approval procedure. A subsequent amendment to the terms also no longer requires the approval of the Supervisory Board.

Instead of preventive conditions and tariff control, the consequences of civil law are becoming more and more important. Prior to the entry into force of the regulations, there were previously conditions which were standardized. By eliminating the standardized conditions, a greater variety of products prevails. This in turn leads to greater competition among the insurance companies. The aim of product diversity and competition is to enable customers to benefit from the lower insurance premiums and the more individual insurance protection.

However, the liberalization of the insurance industry also has effects that are associated with risks. For the consumer, the resulting variety of insurance products has become even more confusing. This makes it more difficult to find individual insurance. In addition, there is the danger of getting a mogul pack through the different combinations.

If the idea of ​​the EC is pursued further, it is recognized that its specifications are based on an idea of ​​an ideal type. The EC presupposes that the insurance company is in a position to use the steadily growing range of insurance products. Even the most experienced insurance employees have difficulties in surveying the amount of new insurance policies on the new market, and the quality of the product.

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