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Why shouldn't Europe follow Norway's lead?


It will not come as a surprise to those active in the Norwegian risk management and insurance community that the Oslo-based government plans to prevent brokers from taking commissions from insurance companies.

But it may quite rightly send a shiver down the spine of brokers in European nations outside of the Nordic region.

The Norwegian market agreed to a voluntary agreement to cease the practice back in 2003 and, according to its architects at the Norwegian Insurance Association, it has worked well with almost all market participants adhering to the code.

Sweden also has a voluntary code of conduct designed to safeguard the independence and integrity of its broking community, and both Finland and Denmark have already adopted statutory rules that formally ban the practice.

Nordic countries sensibly tend to adopt similar laws to try and make life as easy as possible for companies and consumers that operate in a region, with a very high degree of cross-border business and ownership.

Norwegian insurance professionals may not be overjoyed at the pending arrival of a bunch of new, mandatory rules that have to be discussed, designed, implemented, administered and monitored, when the existing voluntary code apparently works pretty well.

But, as ever, it seems that the odd rotten apple is making life difficult for all the other shiny, good apples and has forced the hand of—in this case—the Norwegian Ministry of Finance.

Maybe the problem was very serious within the Norwegian municipal market and only statutory rules could sort it out.

Or maybe an ambitious finance minister took a look at the rocketing career of former New York Attorney General Eliot Spitzer over in the United States, and the column inches and photo opportunities gained by European Commissioner for Competition Neelie Kroes, as she leaps from supposed cartel to cartel, and decided they would like a bit of that exposure.

Whatever the real—and very local—reasons for the decision to plough ahead with amendments to legislation the basics are, however, very simple to grasp.

Everyone—even the brokers—agreed, that transparency is the way ahead and that taking payments from parties at both ends of the risk transfer chain is not the right thing to do.

But the Norwegian insurance industry quite rightly tried to tackle the issue of brokers taking commissions from both customers and insurance companies to avoid the introduction of more time-consuming and expensive rules and failed in the purest sense.

So the Norwegian Ministry of Finance stepped in and ordered its Standing Committee to come up with some clear rules for all to follow.

It is by no means inevitable that this so-called "Nordic disease" will spread across the rest of Europe.

Perceptions of transparency and business culture are still very varied in Europe, particularly as you head further south and east from the Baltic.

But if, as is expected, the Swedish government follows suit, those within the rest of Europe who don't like brokers taking payment from both ends of the risk transfer chain will surely feel emboldened.

They will make political currency of the "disease" and ask why the Nordics are prepared to adopt a fair, transparent system—both economically and legally—and the rest of Europe is not.

Those carrying out the E.C. sector inquiry into business insurance will find that a tricky question to answer, for standard domestic lines at least.

Moreover, it is likely that those in charge of the inquiry who have political ambitions will quite like the look of the ammunition provided them by Norway—and possibly Sweden—at just the right time.

And who would bet their house against the probability that the successor to John Tiner at the U.K. Financial Services Authority will use his neatly-laid platform to make a big, decisive impact and follow Norway's lead, regardless of what happens in Brussels?

There's no pleasing some people

Every time the European Commission announces something that looks good on paper for society as a whole, it seems to get kicked in the teeth by the very people it is apparently trying to help.

When the E.C. recently announced new targets for reducing carbon emissions that went much further than anything emanating from the United States or elsewhere, Greenpeace, Friends of the Earth and other environmental groups cried foul.

They said that the E.C. had once again failed its citizens and the world by failing to stick its multinational boots where its big mouth dared to go and really tackle the world's biggest problem.

And two weeks ago, when the Commission announced a new strategy on health and safety at work aimed at slashing the rate of accidents at work by 25% in five years—guess what? The workers' champion—the European Trade Union Confederation—said it was rubbish.

The ETUC said that the E.C. had failed the workers of Europe and "taken a backward step" by not consulting it on its new plans and by missing the much bigger issue of disease at work, particularly cancers and musculoskeletal disorders.

It said that the E.C. had "muddled" occupational diseases and work-related illnesses and missed the point.

The ETUC said that the E.C. is obliged by the European Treaty to harmonize and strengthen European law to protect workers from accidents and disease, and the worker body naturally called for more and stronger rules.

The E.C.'s package was a rather wooly-sounding set of initiatives, designed specifically to avoid the introduction of any new rules and, if possible, consolidate existing ones.

It places its trust in the ability of a new network of consultants and consulting systems to ensure that employers are doing the right thing.

More rules are bad, of course, for everyone. Europe has enough of them already and the E.C. is correctly trying to trim them back and consolidate.

But surely with something as basic as the prevention of death in the workplace, margin chasing employers actually need clear, strong and sensible rules, rather than another bunch of well-meaning bureaucrats crawling all over the factory floor?