Community Directive 92/49/EC on direct insurance is designed to achieve the internal market in insurance on the basis of freedom of establishment and the freedom to provide services. The directive establishes the principle of the freedom to set premiums.

In 1995, by a law implementing the Community directive, premiums for compulsory motor insurance, which had hitherto been subject to a price control system in Italy as in most European countries, were liberalised. In Italy, liberalisation led to increases in compulsory motor insurance premiums of up to 400%. Italy thereupon passed a law in 2000 containing "emergency measures to limit inflation" in various sectors.

(a) Inflation was to be combated for an initial period of one year by the freezing of compulsory motor insurance premiums. The legislation applied without distinguishing between insurance companies having their head office in Italy and those conducting their business through branch offices or under the freedom to provide services.

(b) For the purpose of combating fraud, the Italian law also provided for the establishment of a data base. All insurance companies were required systematically to give notice of claims made against them, and to contribute to the financing of the data base.

The European Commission regards those measures as being in breach of the Community directive on direct insurance, and has brought an action against Italy before the Court of Justice. The freezing of premiums has in the meantime ceased, but the Commission expressly stands by its action in order to have a lever against similar legislation in Italy and other Member States.

Advocate General Siegbert Alber presents his Opinion today, and takes the view that the Commission's complaints against Italy are justified.

The Opinion of the Advocate General is not binding on the Court. It is the role of the Advocates General, acting with complete independence, to propose to the Court a legal solution to the cases assigned to them.

(1)    The complaint that the freezing of premiums infringes the freedom to set them

The Advocate General maintains that the Community directive prohibits the requirements of prior approval or systematic notification of premiums as a condition precedent for the freedom of an insurance company to operate. The requirement of prior notification and the power to approve or otherwise of a proposed increase in premiums are permissible only as elements in a general price control system. The absolute prohibition of premium increases in a particular sector for a particular period is therefore contrary to the directive. For companies operating in the insurance business in Italy, the Italian legislation represents measures restricting the freedom to set premiums.

Italy pleads in justification that the measures are part of a general price control system. Other measures were also introduced, such as tax measures for the oil industry and instructions concerning the provision of public services. In the opinion of the Advocate General, however, these are measures affecting specific areas, which, although limited in time, were issued so as to have strongly regulatory effects on only one specific sector of the economy, namely that of compulsory motor insurance. The coherence in measures necessary for there to be a "general" price control system is absent in this case. The measures in dispute do not therefore form part of a general price control system within the meaning of the Community directive.

Italy also relies in justification for the legislation on the fight against inflation. The Advocate General argues that, since the entry into force of the Community directive, the Italian Government no longer has the freedom to exert influence unilaterally on the shaping of insurance premiums.

Finally, Italy argues that, in view of the sudden and dramatic increase in insurance premiums (up to 400%), the measures were necessary in the interests of consumer protection. The Advocate General argues that, because the freedom to set premiums envisaged in the Community directive is not to be regarded as a minimum requirement, there is no room for the Member State to provide for a more far-reaching level of protection, by legislation if necessary. Therefore, consumer protection did not justify the absolute prohibition on premium increases either.

The Advocate General sees no justification.

(2)    The complaint concerning unlawful gathering of data

The Advocate General states that, according to the directive, where an insurance company operates across national borders, it is under a duty to provide information only to the competent authority of its State of origin. It is the responsibility of the latter to pass on the necessary information, on request, to the Member State in which the insurance company carries on business. Under the directive, insurance companies are under no duty to provide information directly to the competent authorities of the State in which they do business. Rather, the directive prohibits a Member State from requiring systematic notification of insurance conditions and other commercial documents. Therefore, the duty of insurance companies under Italian law to provide information infringes the directive.

By way of justification, Italy pleads that the aim of the law is to combat fraud. In the opinion of the Advocate General, however, a renewed demand for information by the authorities of theMember State in which the insurance company does business is an obstacle to economic activity and does not represent an increase in the level of consumer protection.

Therefore, the additional obligation to contribute financially to the establishment of a system designed to provide information about events which, in respect of undertakings which do business in Italy under the freedom of establishment or the freedom to provide services, can in any event be obtained from contact between officials, is a further unjustified limitation of these basic freedoms.

Unofficial document for media use only; not binding on the Court of Justice. Available in English, French, German and Italian. For the full text of the opinion, please consult our Internet page www.curia.eu.int  at approximately 3pm today. For further information please contact Mr Reinier Van Winden: Tel: (00 352) 4303 3355; Fax: (00 352) 4303 2731