Risk classification efficiency and the insurance market regulation

Po ini, Dona ella A icle Risk classi ica ion e iciency and he insu ance ma ke egula ion Risks P o ided in Coope a ion wi h: MDPI – Mul idisciplina y Digi al Publishing Ins i u e, Basel Sugges ed Ci a ion: Po ini, Dona ella (2015) : Risk classi ica ion e iciency and he insu ance ma ke egula ion, Risks, ISSN 2227-9091, MDPI, Basel, Vol. 3, Iss. 4, pp. 445-454, h ps://doi.o g/10.3390/ isks3040445 This Ve sion is a ailable a : h ps://hdl.handle.ne /10419/167863 S anda d-Nu zungsbedingungen: Die Dokumen e au EconS o dü en zu eigenen wissenscha lichen Zwecken und zum P i a geb auch gespeiche und kopie we den. Sie dü en die Dokumen e nich ü ö en liche ode komme zielle Zwecke e iel äl igen, ö en lich auss ellen, ö en lich zugänglich machen, e eiben ode ande wei ig nu zen. So e n die Ve asse die Dokumen e un e Open-Con en -Lizenzen (insbesonde e CC-Lizenzen) zu Ve ügung ges ell haben soll en, gel en abweichend on diesen Nu zungsbedingungen die in de do genann en Lizenz gewäh en Nu zungs ech e. 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I he documen s ha e been made a ailable unde an Open Con en Licence (especially C ea i e Commons Licences), you may exe cise u he usage igh s as speci ied in he indica ed licence. h p://c ea i ecommons.o g/licenses/by/4.0/ Risks 2015, 3, 445-454; doi:10.3390/ isks3040445 isks ISSN 2227-9091 www.mdpi.com/jou nal/ isks A icle Risk Classi ica ion E iciency and he Insu ance Ma ke Regula ion Dona ella Po ini Dipa imen o di Scienze dell’Economia, Uni e si à del Salen o, Eco ekne, Via pe Mon e oni, Lecce 73100, I aly; E-Mail: [email p o ec ed]; Tel.: +39-083-2298776; Fax: +39-083-229873 Academic Edi o : Mogens S e ensen and Geo ges Dionne Recei ed: 29 June 2015 / Accep ed: 21 Sep embe 2015 / Published: 25 Sep embe 2015 Abs ac : Gi en ha he insu ance ma ke is cha ac e ized by asymme ic in o ma ion, i s e iciency has adi ionally been based o a la ge ex en on isk classi ica ion. In ce ain egula ions, howe e , we can ind es ic ions on hese di e en ia ions, p ima ily he ban on hose conside ed o be “disc imina o y”. In 2011, ollowing he Eu opean Union Di ec i e 2004/113/EC, he Eu opean Cou o Jus ice concluded ha any gende -based disc imina ion was p ohibi ed, meaning ha gende equali y in he Eu opean Union had o be ensu ed om 21 Decembe 2012. Ano he es ic ion was imposed by EU and na ional compe i ion egula ion on he exchange o in o ma ion conside ed as an i-compe i i e beha io . This pape aims o con ibu e o he ecen policy deba e in he EU, e alua ing he nega i e economic consequences o hese egula o y es ic ions in e ms o ma ke e iciency. Keywo ds: isk classi ica ion; asymme ic in o ma ion; disc imina ion; ad e se selec ion 1. In oduc ion Gi en ha he insu ance ma ke is cha ac e ized by asymme ic in o ma ion, i s e iciency has adi ionally been based on isk classi ica ion, which can be seen as a i uous p ocess designed o achie e he na owes possible de ini ion o a isk pool. Howe e , in eali y, insu ance ma ke egula ions o en impose es ic ions, and in his pape we analyze wo o hem. Fi s o all, in some cases, he use o classi ica ion a iables, and gende is a ecen example, has been conside ed “disc imina o y” and has he eby been banned. OPEN ACCESS Risks 2015, 3 446 Second, he exchange o in o ma ion be ween insu ance companies, use ul o ob aining da a abou he isk cha ac e is ics o he insu ed, has been ecognized o be an icompe i i e beha io . This kind o egula o y es ic ion has gi en ise o a deba e abou how he ad an ages de i ed om isk classi ica ion e iciency jus i y special ea men o he insu ance ma ke . Wi h espec o he con ibu ion o Dionne and Ro hschild [1], who p esen a canonical insu ance ma ke sc eening model p o iding a igo ous analysis o he economic consequences o isk classi ica ion bans, he p esen pape con ibu es o his deba e by ying o link he esul s o he o mal economic li e a u e wi h ecen de elopmen s in egula o y policies. 2. T adi ional Theo y on Risk Classi ica ion T adi ional economic heo y jus i ies isk classi ica ion on he basis o he ma ke ailu e o in o ma ional aspec s. In his sense, isk classi ica ion can be seen as a “ emedy” o asymme ic in o ma ion. The heo y dis inguishes be ween wo kinds o asymme ic in o ma ion p oblems. Fi s , ad e se selec ion, ha is, he “lemon ma ke phenomenon” by Ake lo [2], poses a e y di icul d awback in insu ance ma ke s because he pa ies wan ing o buy insu ance usually know much mo e abou hei isk cha ac e is ics han i is possible o he insu e s o unde s and. The asymme ic in o ma ion causes ad e se selec ion wi hin he insu ance pool, as high- isk indi iduals ealize ha insu ance is a good deal o hem, con a y o low- isk indi iduals, who decide no o buy he co e age. As many high- isk people pu chase insu ance, highe payou s by insu ance i ms can o ce hem o boos a es and ha , in u n, makes he insu ance less a ac i e o low- isk people. As ega ds ma ke unc ioning, ad e se selec ion aises he cos o insu ance, o cing low- isk cus ome s o subsidize high- isk ones up o he poin whe e he o me a e induced o d op ou o insu ance. This, in u n, aises again he cos o insu ance and induces mo e and mo e cus ome s o d op ou o he ma ke [3]. Mo al haza d, on he o he hand, depends on he insu ance companies’ lack o in o ma ion wi h espec o hei cus ome s’ beha io , a ec ing he occu ence and/o dimension o he loss. P o ided ha such beha io canno be moni o ed by he insu ance company a a easonable cos , he insu ed has no incen i e o ake he op imal amoun o ca e in o de o a oid he loss o o educe i s magni ude. To be p ecise, he e m mo al haza d includes wo di e en issues. F om an ex an e poin o iew, he insu ed may be able o in luence he likelihood o loss and/o he se e i y o loss h ough sel -p o ec ion and sel -insu ance ac i i ies, and i hese a e hidden ac ions, hen expec ed losses could be ine icien ly high. F om an ex pos poin o iew, he magni ude o he loss bo ne by he insu e payou can be ad e sely a ec ed by claim build-up and/o aud on he pa o he claiman , o by “o e consump ion” o co e ed se ices o epai o damages when co-insu ance pa ially educes he ma ginal cos o hese se ices o con ol ex an e mo al haza d. In his case, a emedy could be o moni o he insu ed’s beha io in wo ways: on he one hand, moni o ing he le el o ca e in p e en ing he loss (p o ided ha he insu ed’s beha io has any in luence o e he isk); and, on he o he hand, moni o ing he amoun o he claim in he case o loss occu ence, assuming he insu ed can in luence he magni ude o he claim. Howe e , conside ing he in o ma ion asymme y, p ecau iona y beha io canno be di ec ly moni o ed by he insu ance company and indi ec indica o s o he insu ed’s beha io may p o ide inaccu a e in o ma ion. Risks 2015, 3 447 As a esul , cus ome s ha e no incen i e o adop e icien isk- educing beha io , since such beha io is no iden i iable by he insu e and hus will ne e be e lec ed in lowe p emiums. F om his pe spec i e, mo al haza d exace ba es ad e se selec ion: mo al haza d inc eases he isk wi hin he pool (by inc easing he expec ed loss and i s a iance), aises he cos o insu ance and gi es he low- isk insu ed he incen i e o d op ou o he ma ke [4]. In heo y, he cen al ole o he ad e se selec ion p oblem in he insu ance ma ke is e iden , as is he necessi y o co ec a se e e ma ke ailu e de i ing om incomple e in o ma ion by he isk classi ica ion me hod. F om an empi ical poin o iew, wi h ega d o he ole o classi ica ion as a emedy o asymme ic in o ma ion consequences, Dahlby [5] ound e idence ha he p ohibi ion o isk classi ica ion in au o insu ance ma ke s o ces sa e d i e s, i.e., emale d i e s, ou o he ma ke . Dionne, Gou ie oux and Vanasse [6] examined au o insu ance ma ke s and concluded ha isk classi ica ion elimina es esidual ad e se selec ion. Fu he mo e, ew yea s la e , he same Au ho s [7] showed ha , by an app op ia e isk classi ica ion p ocedu e, he insu e s we e able signi ican ly o con ol o ad e se selec ion in he au omobile insu ance ma ke and did no need any addi ional sel -selec ion mechanism in e ms o unde w i ing. In con as o he con ibu ions jus men ioned, Buchmuelle and Di Na do [8] ound ha communi y a ing did no induce ad e se selec ion by compa ing he heal h insu ance ma ke s o h ee US s a es. Simila ly, Schwa ze and Wein [9] demons a ed ha isk classi ica ion in he Ge man au omobile insu ance ma ke du ing he 1990s did no imp o e he e iciency o con ac ing and, he e o e, isk classi ica ion was ine icien in his ma ke . 3. Risk Classi ica ion in P ac ice In de e mining he p emium o be cha ged o insu ance co e age, insu ance companies mus es ima e he expec ed losses o he indi idual being insu ed. Acco dingly, he a ge o a isk classi ica ion sys em is o ensu e ha indi iduals a e g ouped in such a way ha hose wi h a simila possibili y o loss a e cha ged he same a e. Fo e icien isk classi ica ion, i is c ucial o seg ega e unco ela ed isks as much as possible in o sepa a e, na owly-de ined isk pools in o de o con ol ad e se selec ion [10]. In ac , ad e se selec ion, desc ibed abo e as he endency o hose wi h ela i ely g ea e isk exposu e o seek insu ance p o ec ion, can be e icien ly con olled i an insu e e icien ly collec s in a isk pool indi iduals wi h a na ow ange o isk exposu e so he insu ance emains inancially a ac i e o each membe o he pool. O he wise, i he dispa i y be ween he p emium and he isks added by low- isk membe s becomes oo subs an ial, low- isk membe s may d op ou o he pool. Accu a e di e en ia ion basically aims a educing he a e age isk aced by he insu ance company h ough educing he ange o isk wi hin he pool. Finding e icien isk pools is he e o e essen ial. In de ining whe he a isk classi ica ion is e icien , we ake in o accoun a iable cha ac e is ics like homogenei y, sepa a ion, eliabili y, causali y and incen i e wo h [11]. Homogenei y means ha since all membe s o a ca ego y pay cons an a es, hei isk o loss should be e y simila . The sepa a ion measu es he ca ego ies’ mean expec ed losses, which ough o be su icien ly di e en in e ms o loss expec a ion o wa an hei iden i ica ion as a sepa a e class. Reliabili y measu es how much simple and Risks 2015, 3 448 e iden di e ences a e u ilized o classi y he insu ed in an accu a e way. Causali y measu es whe he ca ego y dis inc ions a e suppo ed by cha ac e is ics associa ed wi h loss. Incen i e wo h means ha a good ca ego y sys em ough o classi y he cha ac e is ics inside he insu ed’s con ol so as o p oduce he inducemen o adop low- isk cha ac e is ics. F om a ma ke pe spec i e, he di ision o he insu ed in o sepa a e isk pools acco ding o he speci ic exposu e o isk allows insu e s o cha ge p emiums as close as possible o he insu ed’s expec ed loss. As a esul , his also a ac s he ela i ely low- isk cus ome s who o he wise would no buy insu ance which hey ind oo expensi e. Ul ima ely, his i uous p ocess inc eases he a ailabili y o insu ance o he whole o socie y. A he insu ance ma ke le el, he e a e di e en p emiums o iden ical co e age. This is a ibu able o he insu ance indus y p ac ice o placing policyholde s in o g oups which supposedly ha e a simila p obabili y o loss: indi iduals in each g oup a e hen cha ged a simila p emium. The dis inc ions o he isk classi ica ion sys em a e clea ly suppo ed by s a is ical da a showing di e ences in he a e o acciden o he di e en g oups [12]. Risk di e si ica ion, howe e , is cos ly o he company: on he one hand, he g ea e he isk ha mus be di e si ied, he mo e cos ly he di e si ica ion o in es men s becomes; on he o he hand, he highe he a e age isk wi hin a isk pool, he highe he cos o he insu ance o such isks, and hus he highe he p emiums ha membe s o he pool ha e o pay. The inclusion o ce ain a iables may be cos ly o each company ha decides o use a ce ain kind o isk classi ica ion on he basis o he o ce o ma ke compe i ion. Howe e , compe i ion be ween insu e s induces a endency o mo e isk classi ica ion wi h he e ec ha some cus ome s pay less o insu ance, bu some pay mo e, and some may be excluded om insu ance al oge he . F om a public policy pe spec i e, he educed cos o insu ance o some cus ome s is o se by he inc eased cos o o he s; he classi ica ion p ocess i sel has cos s, and he exclusion o some cus ome s could gi e ise o p oblems om a wel a e pe spec i e [13]. F om he poin o iew o he insu ance company, a a e o dis inc ion is no un ai i i is ac ua ially accu a e and economically con enien . Howe e , di e ences in p emiums paid by indi iduals o iden ical co e age a e based on classi ica ions and any isk classi ica ion scheme disc imina es; he issue u ns on he “social accep abili y” o he disc imina ion. The c i ical poin o disc imina ion based on gende is analyzed in he ollowing pa ag aph in he ligh o a Eu opean Union egula ion. 4. Risk Classi ica ion and Disc imina ion In 2004, he Council o he Eu opean Union adop ed a Di ec i e implemen ing he p inciple o equal ea men o men and women in e ms o access o and supply o goods and se ices, including insu ance, he so-called “Gende Di ec i e”. This Di ec i e is one o he i s ac s ha e lec he gene al endency o impose legal es ic ions on insu ance di e en ia ion by banning me hods conside ed o be “disc imina o y”. Pu ing in o e ec he p inciple o equal ea men o indi iduals is a esponse o he obse a ion ha insu ance consume s canno ha e di e en policies on he basis o ac o s such as gende o age. Howe e , his clea ly a ec s he con ac ual eedom o en e p ise, as ou lined by Thie y and Van Schoub oeck [14]. Risks 2015, 3 449 The con en o he Di ec i e has been widely deba ed in he EU Membe S a es, pa icula ly in ela ion o he impac on he insu ance ma ke because o he p ohibi ion on using gende as a isk classi ica ion a iable. In ac , a e he i m esis ance o he insu ance indus y o he EU Commission’s ea lie p oposal, he Eu opean Council allowed insu e s o di e ge om he p inciple o equal ea men o men and women as long as hey could p o e ha gende was a decisi e ac o in assessing isk. The EU Commission was o de ed o moni o he implemen a ion o his exemp ion and o e iew he si ua ion a e a i e-yea pe iod (in 2008). F om his poin on, insu e s would ha e o keep on p o ing s a is ically ha hey we e no disc imina ing on g ounds o gende . In i s las e sion, Di ec i e 2004/113/EC, imposed, in heo y, “unisex” p emiums, bu an excep ion is included in A icle 5(2), allowing Membe S a es, e en a e 2008, o a y ea men o women and men, based on ac ua ial da a and eliable s a is ics which a e upda ed egula ly and a ailable o he public. Howe e , in 2011, he Cou o Jus ice uled ha a limi less de oga ion om he p inciple o equal ea men o men and women wi hin he ield o insu ance, con ained in Di ec i e 2004/113/EC, was unlaw ul. The occasion was a decision 1 in which he Associa ion Belge des Consomma eu s (Tes -Acha s) M an Vug and M Basselie conside ed ha he Belgian Law o 21 Decembe 2007, implemen ing he de oga ion o e ed by A icle 5(2) o Di ec i e 2004/113/EC, o be con a y o he p inciple o equali y o indi iduals. In his judgmen , he Cou o Jus ice ini ially poin ed ou ha he alidi y o A icle 5(2) o ha Di ec i e should be assessed wi hin A icles 21 and 23 o he Cha e o Fundamen al Righ s o he EU, o which Di ec i e 2004/113/EC exp essly e e s. These A icles p ohibi any disc imina ion on g ounds o sex and expec gene al assu ance o equali y o men and women. The Cou dismissed he a gumen ha he de oga ion in oduced by A icle 5(2) does no con lic wi h he p inciple o equali y be ween men and women as hey a e in objec i ely di e en si ua ions wi h espec o p emiums and bene i s in iew o he insu ed isk. In ac , acco ding o he Cou , Di ec i e 2004/113/EC is based on si ua ions whe e he wo sexes a e compa able in his espec . The EC Cou o Jus ice uled ha he use o gende as a isk ac o by insu e s should no esul in indi idual di e ences in p emiums and bene i s based on gende , and ha he de oga ion con ained in A icle 5(2) o he “Gende Di ec i e”, which pe mi ed his p ac ice, should cease o ha e e ec om 21 Decembe 2012. Many c i ics we e disappoin ed wi h he judgmen , because hey expec ed i o ha e a la gely nega i e impac on consume s. Pa icula ly, in he insu ance sec o , as indi iduals should no be ea ed un ai ly because o hei gende , he inancial se ices p o ide s should be allowed o make sensible decisions based on sound analysis o ele an isk ac o s. 5. Risk Classi ica ion and Compe i ion Risk classi ica ion is also connec ed wi h he compe i i e s uc u e o he ma ke . On he one hand, compe i ion can be seen as a i uous p ocess o achie ing he na owes possible de ini ion o a isk pool. On he o he hand, speci ic cus ome classi ica ion is u ilized as a me hodology o segmen a ion o 1 C-236/09 Tes -Acha s—1 Ma ch 2011. Risks 2015, 3 450 he ma ke based on he indi idualiza ion o new isks. In his sense, insu ance isk segmen a ion is a compe i i e ool wi h ega d o o he insu ance companies. In p ac ice, insu ance companies y o lu e cus ome s om compe i o s by o e ing membe ship o a pool whose p emium is close o he insu ed’s expec ed loss because o he mo e disc e e de ini ion o he pool. In essence, he insu e s a e compe ing o e he ela i ely low- isk insu ed o any isk pool, who a e likely o selec hose insu e s mos able o p ice he isk he insu ed b ings o he pool. Compe i ion he e o e gi es insu e s he incen i e o commi esou ces o he acquisi ion o cos ly in o ma ion necessa y o he cons an imp o emen o isk classi ica ion, in o de o be able o de ine na owe isk pools. 2 In eali y, gi en he di icul ies o insu ance companies in ob aining da a on he insu ed’s cha ac e is ics and beha io , in o ma ion exchange can be seen as a use ul ins umen ha allows insu ance companies o imp o e hei own in o ma ion abou hei con ac ual coun e pa s. As explained abo e, in ela ion o he applica ion o emedies o asymme ic in o ma ion p oblems, a he sc eening s age insu ance companies need in o ma ion abou insu ed indi iduals’ isk p o iles. A e he policy is signed, insu e s need in o ma ion abou cus ome s’ beha io o moni o he ac ions aken by he insu ed indi iduals. Consequen ly, he exchange o da a abou cus ome s’ isk cha ac e is ics can imp o e he quali y o he con ac s supplied. As no ed by Padilla and Pagano [15], he exchange o in o ma ion in he banking ma ke , hough he same can be said o he insu ance ma ke , educes he lock-in e ec s when cus ome s deal wi h banks o insu ance companies ha hey ha e used be o e. Al hough his is a disad an age o he i m ex pos , i cons i u es an ad an age ex an e in ini ial con ac ing, a oiding he p oblem associa ed wi h educed ma ke pene a ion owed o asymme ic in o ma ion. In his con ex , mo e in o ma ion can induce g ea e compe i ion. This sugges s ha possible bene i s can be de i ed om in o ma ion exchange in he insu ance ma ke . Howe e , exchange o in o ma ion beha io can be conside ed an an i-compe i i e p ac ice because o i s me e po en iali y o gi ing ise o collusion. 3 In o he wo ds, in o ma ion exchange beha io can be included in he acili a ing p ac ices, de ined as p ac ices which y o limi he in luence o ac o s ha des abilize coope a i e ou comes and o enhance he suppo o coope a i e ou comes. The e o e, e en i in o ma ion-sha ing in i sel is no de imen al o wel a e o a es ic ion on compe i ion, he an i us au ho i ies may concen a e on de ec ing speci ic in o ma ion exchanges ha se e o sus ain explici and aci collusion [16]. The e o e, exchange o in o ma ion beha io is ega ded as a acili a ing p ac ice in cases whe e he compe i ion au ho i y canno di ec ly comba collusion on p ice. This si ua ion is qui e common o wo easons. Fi s , collusion is no o iously di icul o p o e in cou because o he sca ci y o lack o s a is ical e idence ha goes wi h collusi e ag eemen s. Second, in many cases, he e a e no explici collusi e ag eemen s in a legal sense, bu only o ms o aci collusion. In e ms o ma ke unc ioning, in o ma ion exchange beha io , because o he e ec i has by dis o ing compe i ion, would no mally be egula ed [19]. 2 We conside he case in which he e is no indi iduals’ p i acy cos o be moni o ed as ega ds gende , simila ly o he case o age o au omobile insu ance analysed by Kelly and Nielson [17]. 3 Fo a de ailed analysis o he ade-o be ween g ea e compe i ion and inc eased po en ial o collusion, see [18]. Risks 2015, 3 451 In 1968, he Commission s a ed ha , as a as in o ma ion exchange beha io is conce ned, i is di icul o dis inguish be ween in o ma ion ha has no e ec on compe i ion and in o ma ion ha has an an i-compe i i e e ec . Howe e , his does no mean ha A icle 101 T ea y on he Func ioning o he Eu opean Union (TFEU) is no applicable. In ac , in o ma ion exchange, especially in an oligopolis ic ma ke , is a way o disclosing o compe i o s he conduc ha he i ms hemsel es ha e decided o adop in he ma ke , and his mo i a ion was conside ed in he many decisions o na ional an i us au ho i ies agains his p ac ice by insu ance companies. 4 Ten yea s la e , in 1978, he Commission cla i ied i s app oach owa ds in o ma ion exchange. 5 Fi s , he de ini ion o an i-compe i i e beha io has o be made on a case-by-case basis by examining he ea u es o each ag eemen . Second, he con igu a ion o he ma ke as an oligopoly plays a c ucial ole because, in his kind o ma ke , in o ma ion exchange inc eases anspa ency and educes compe i ion. Thi d, he na u e o he da a is impo an . In o ma ion exchange o s a is ical da a, such as in o ma ion on he p oduc ion and demand in an indus y, is no ele an . The exchange has o conce n he indi idual company’s da a, such as in o ma ion on p ices, sales condi ions, sales and ou pu . Applica ion o EU compe i ion policy o he insu ance sec o s a ed a he end o he 1980s, when he Eu opean Commission began se iously con on ing an i-compe i i e a angemen s be ween insu ance unde akings. So a , he Commission has mainly had o deal wi h ag eemen s be ween insu e s. I has, he e o e, mainly been equi ed o apply A icle 101(1) TFEU, which p ohibi s ag eemen s be ween unde akings es ic ing compe i ion in a subs an ial pa o he Common Ma ke . Any ag eemen s be ween insu e s on comme cial p emiums belong o he ca ego y o p ice- ixing ag eemen s, which a e always con a y o A icle 101(1) TFEU and canno be exemp ed. 6 The Commission has also ecognized ha ce ain cha ac e is ics o he insu ance sec o equi e a deg ee o coope a ion be ween insu e s. A icle 101(3) TFEU g an s exemp ions o ag eemen s ha would o he wise be p ohibi ed when hey imp o e he economic condi ions o a pa icula sec o and p o ide bene i s o consume s. Mos o he Commission’s wo k in ela ion o he applica ion o compe i ion ules o he insu ance sec o has been de o ed o he de ini ion o he ypes o ag eemen s ha could bene i om his exemp ion. In 1992, he Commission adop ed a block exemp ion egula ion in he insu ance ield o ce ain ca ego ies o ag eemen s, decisions and conce ed p ac ices in he insu ance sec o . This Commission Regula ion exemp s ce ain ag eemen s wi hin he insu ance indus y om ca el p ohibi ion on he basis o some peculia i ies o he insu ance indus y. In any e en , he exchange o da a in o de o elabo a e common s a is ics will only be exemp ed i one addi ional condi ion is ul illed: insu e s exchanging da a should no be obliged o use he s a is ics ob ained o he calcula ion o hei p emiums. In ela ion o his condi ion, common s a is ics should always indica e ha hey a e pu ely illus a i e. 4 No ice on co-ope a ion be ween en e p ises conce ning ag eemen s, decisions and conce ed p ac ices in he ield o coope a ion be ween en e p ises, OJ C75 o 2 July 1968. 5 Se en h Repo on Compe i ion Policy, B ussels-Luxembou g, Ap il, 1978. 6 In 1984, he Commission condemned a ecommenda ion om he Ge man Associa ion o P ope y Insu e s o i s membe s o inc ease hei comme cial p emiums by a ixed pe cen age (Decision o 5 Decembe , 1984, Ve band de Sach e siche e , OJ L35/21). The Cou o Jus ice upheld he Commission’s decision (Judgemen o 27 Janua y 987, 45/85). Risks 2015, 3 452 In conclusion, he Commission Regula ion made i clea ha an exchange o da a ha is mo e de ailed han necessa y o he calcula ion o ne p emiums would no be allowed. In addi ion, any exchange o in o ma ion agg ega ed in such a way ha i becomes meaningless om a s a is ical poin o iew and a emp s only o ha monize p ices be ween insu e s would also no be co e ed by he exemp ion p o ided by Regula ion 3932/92 [20]. The Eu opean Commission is in he p ocess o e iewing Commission Regula ion 358/2003 on he applica ion o A icle 81(3) o he T ea y o ce ain ca ego ies o ag eemen s, decisions and conce ed p ac ices in he insu ance sec o . The p elimina y assessmen o he Commission is ha he block should be ex ended in ela ion o some o he p ac ices cu en ly co e ed and e mina ed in ela ion o o he s. The Commission will also ake in o accoun he need o insu ance companies o in o ma ion o build an e icien isk classi ica ion sys em. Howe e , we do no know how much his will a ec he inal decision in e ms o exemp ion o he insu ance ma ke . 6. Which Is he Bes Regula ion? Gi en he asymme ic in o ma ion issue, insu ance ma ke e iciency depends subs an ially on in o ma ion ha insu e s can ga he on he isk ha hey a e co e ing. These ac o s help o de e mine he p emium ha mus be se o di e en isk ca ego ies, in o de o allow ully o he likelihood o a claim and he cos o ha claim. The mo e in o ma ion ha an insu e can ga he , he mo e accu a ely a policy can be p iced. The e a e many good economic easons o classi ying insu ance isks acco ding o hei ype and he mos ele an one is ha i inc eases he e iciency o con ac ing in e ms o ad e se selec ion and mo al haza d. Consequen ly, he bene i s o socie y a e less o al damage and a lowe a e age p ice o policies. The mul iple bene i s o isk classi ica ion a e, howe e , condi ional on gene al p inciples, such as he non-disc imina ion p inciple, and he ma ke s uc u e. Mo eo e , egula ions canno p o ide exemp ions ha de e mine special ea men o he insu ance ma ke , which e y equen ly akes he shape o an oligopoly, and whe e in many coun ies he an i us au ho i ies ha e al eady de ec ed collusi e beha io s. Ou inal conce n is ha insu ance ma ke egula ion needs o be add essed o s imula e compe i ion be ween insu ance companies, because his will de e mine he sea ch, in business e ms, o di e en a iables o classi ica ion, such as expe ience-based ones, which will be e y use ul o an e icien ma ke , wi hou implying any disc imina ion o he need o sha e in o ma ion among compe i o s. Acknowledgemen s I am g a e ul o he use ul commen s o hose who pa icipa ed in he VI Wo kshop on Ins i u ions, Indi idual Beha iou and Economic Ou comes, Alghe o, Sa dinia, 20–29 June 2015. Con lic s o In e es The au ho s decla e no con lic o in e es .