3.2 A FREE MARKET IN FLOOD INSURANCE IN ALL THREE CASE STUDY...

7.3.2  A  Free  Market  in  Flood  Insurance  

In all three case study countries there exists competition between private insurance companies even in

Belgium and France where there is also an active role for government and mandatory flood insurance.

If the Dutch government wishes the private sector to takeover a portion of flood risk from the public

sector it should concentrate on creating the conditions for the free market in private flood insurance to

flourish.

The evident scarcity of private sector flood insurance in the Netherlands begs the question if there are

significant structural or regulatory barriers to selling private flood insurance there

¹⁸

. Since 1998 there

have been no legal or major regulatory barriers preventing the sale of flood insurance by private

companies in the Netherlands. Even after the 1998 European competition ruling, members of the Dutch

Association of Insurers, which control approximately 95% of the insurance market, have individually

chosen to not sell this particular product. Examining the membership structure and powers of the

Association is beyond the scope of this thesis, however, it might not be an unreasonable conclusion to

draw that the influence of the Dutch Association of Insurers has not encouraged their members to

individually launch flood insurance products (EP, 2013). The Association has, however, on three

occasions attempted to introduce private flood insurance on a collective basis for its members but each

proposal has been rejected. A change of policy away from collective bargaining by the Association

would perhaps be a condition for more private flood insurance is sold by its members unilaterally. This

change in attitude is not a necessary condition, however. The entry of Neerlandse into the Dutch

market in 2012 proves that outside of the Dutch Association of Insurers there has been some sort of

dormant free market. Although in 1998 the European Union competition laws were enforced, the

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This question has to a limited extent been answered by recent changes in the Dutch insurance market. In 1954 a

voluntary agreement was made among Dutch insurers that none would offer flood insurance. This collective agreement was

overruled by European competition in 1998. Soon after, a Dutch Lloyd's ‘coverholder’, EuroLloyd's, began selling flood

insurance as part of a catastrophe risk policy. This product was withdrawn around 2008 when this family business was taken

over by Delta Lloyd's - a member of the Dutch Association of Insurers (Insurance Magazine, 2008). No private flood

insurance was then available until December 2012 when Neerlandse, a new entrant to the market, launched a private flood

insurance product aimed at the Dutch domestic market

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decision by individual members of the Dutch Association of Insurers not to sell flood insurance

continues on voluntary basis regardless.

If the Dutch system followed the UK model of more free market or voluntary private insurance, to

ensure high enough penetration, the Dutch public might be required to take out flood insurance to

qualify for a mortgage. This would make flood insurance a quasi-obligation but still maintaining more

customer choice and competition compared to the Belgian or French system where insurance is

automatically bundled with other insurances with no active choosing on the part of citizens. In the UK,

insurance companies have to compete under almost free market conditions to sell their products to

potential policyholders. There appears to be great deal of variation and consumer choice of flood

insurer in the UK. Given the number of new entrants to the UK insurance market - for example online

only insurance offers - the market is highly competitive even though most households are obliged to

buy flood insurance to qualify for a mortgage. The question therefore is whether it is possible for a

similar level of competition between Dutch insurance companies selling flood insurance.