III. Classification in Europe
Before the EU set rules allowing insurance companies to establish themselves freely in all other member states, Member States already provided for different categories of insurance. For example, in Greece the law provided for the following classes of insurance: accident, motor third party liability, transport, fire, life and capitalization, ships and airplanes and credit. These classes were found also in other European or non-European legislations.
The uniform classes of insurance business, which apply throughout the European Union, are set out in the first generation of Directives. The first generation of insurance directives (for non-life Directive 73/239 of 24 July 1973 and for life Directive 79/267 of 5 March 1979) coordinated rules and practices for the supervision of insurers, particularly their financial stability and their freedom of establishment. They provide for 18 classes of insurance for non-life and 9 classes of insurance for life.
1. Non-life
The Annex to the first non-life insurance Directive defines non-life (or ‘general’, as it is referred to in the UK) insurance business for the purposes of both the directive and subsequent insurance measures by reference to a number of insurance classes. Originally, there were seventeen, including accident and sickness (but excluding permanent health insurance), marine, aviation and transport risks, fire and other property damage, credit and suretyship, general liability insurance, miscellaneous financial loss and legal expenses insurance. A further class (No. 18) was added by the Tourist Assistance Directive, which covers assistance on the breakdown of a vehicle whilst travelling, in return for the payment of a premium. The need for this new class is found in the peculiarity of this business rather than the differentiation of the risks that are presented.
The Directive covers direct insurance only and therefore its co-ordination provisions do not apply to reinsurance, where individual Member States currently remain broadly free to regulate or not to regulate reinsurers as they please.
Thus, all insurance enterprises working in EU countries, irrespective if they are companies working on a premium basis (as a joint-stock company or other type of business unit) or as a mutual company, have to place all their direct insurance business in one of the above classes. The classes of illness and accident (numbers 1 and 2) can be granted as fixed sum insurance or as indemnity insurance or as combination of the two. The motor vehicles and railway classes could cover all vehicles travelling on ground, but the differences with motor vehicles, which develop very quickly technologically, justify a separate categorization. The other means of transport, vessels and aircrafts were traditionally classified separately in some jurisdictions in the past, and in the EU they are also classified separately. It should be noted that the four classes of insurance listed above which refer to means of transport cover the loss or damage to the vehicles themselves and not to any goods transported. The latter is covered by separate classification. This latter is the classification of cargo insurance. The class of fire and natural forces is the oldest classification because it refers to a typical risk that threatens goods. It is related to class number 9 (other damages to property), but it covers risks which are not included in class 5. Classes numbered 10 to 13 are interrelated because they cover the civil liability that arises from the use of vessels, airplanes or land vehicles but also the civil liability of the persons who professionally exercise the profession of the carrier using all three modes of transport. It should be noted here there is not a separate class for liability insurance for railways. This latter case as well as any other civil liability coverage business falls under the general liability class 13. The classes of credit and suretyship, although related with each other, are divided into two separate classes (numbers 14 and 15). There are special classes of insurance for legal expenses and tourist assistance (numbers 17 and 18). Last but not least the classification of number 16 refers to miscellaneous financial losses.
2. Life
The original classification of the category of life insurance in Europe used to include the classes of life, marriage and birth, accident and illness as well as pension insurance and capitalization. Later, in the 60’s when the capital market started to gain significance and the role that life insurance with a savings character can play as an investment instrument became more developed, the EU introduced a class that combined life insurance with investment. Thus, when the Directive of 1979 was introduced, it provided for nine classes of insurance that were already provided in Europe. Some amendments were brought by Directive 92/96 that included the concept of a single licence for insurance companies.
Permanent health insurance that is not subject to cancellation concerns only the UK and Ireland. Other Member States do not have to create a class of insurance that does not exist in their countries. The same applies to Tontines.
