Insurance within Europe through Freedom of Service
Insurance within Europe through Freedom of Service
Insurtechs have been continuously rising in recent years, transforming insurance products by making them more accessible, more customer-centric and more user-friendly.

The insurtech landscape has been evolving rapidly, driven by innovation and technology, and therefore opening new possibilities within the insurance landscape. Those that have been able to successfully navigate the regulatory hurdles are slowly emerging as resilient challengers to traditional players, optimizing the offering and delivery of insurance products to their clients, especially in the B2B and B2B2X space. 

Innovative solutions can be especially found within the B2B2X space. B2B2X models, consist of a regulated insurance company or insurtech (first B), and either an insurance intermediary, or a business that wants to add insurance to its value chain (second B). The end-customer (X) can be either a an individual or a business itself. The end customer always deals with the intermediary and never with the regulated insurance company. As businesses or intermediaries (second B) seek to continuously expand their product offerings and grow their customers base to new geographies, new business models play a more important role in navigating the regulatory landscape. 

The combination of innovative insurance solutions and the regulatory set up within the European Union serve as a perfect match to facilitate this expansion. Thanks to the freedom to provide services and the free movement of people and goods, business have access to 30 countries that are part of the EEA and 447 million people, being the ideal target 

for multi-market insurance solutions. This poses a decisive advantage versus individual countries or non-harmonized markets like the US, where different laws, separate approval processes and regulations may apply depending on the state.

This set-up therefore becomes especially attractive to businesses and insurance intermediaries that wish to expand to countries within the EU, while minimizing the lengthy regulatory process that comes with it. Especially those regulated insurtechs that specialize in API integration and white label solutions have the potential to fill this need, leveraging the EU regulation around Freedom of Service (FOS).

But what is Freedom of Service exactly? How does it work? 

According to the European Parliament, the freedom to provide services and the freedom of establishment guarantee mobility of businesses and people within the EU. Those businesses that are authorized to carry out their business activities in any European Economic Area (EEA) country are in principle permitted to carry out their business in other member states too. 

The freedom to provide services and the freedom of establishment are closely interrelated. The right of establishment entitles persons and companies to set up agencies, branches or subsidiaries in other Member States under the conditions laid down for its own nationals by the law of the country where such establishment is affected. The freedom to provide services facilitates business to offer services in another Member State, without having to be established in that market via a branch. In the context of insurance, this means that via freedom to provide services, insurance companies and intermediaries can distribute insurance products across the EEA from one member state without the need of establishing multiple branches, by notifying their home-country regulator. 

In order to benefit from the simplicity of freedom of service, certain processes need to be in place to ensure that key decisions across the insurance value chain are taken in the country where the regulated insurer is based.

The process of passporting the relevant license to multiple EU countries then takes only a few short weeks and is a major advantage over the lengthy process of getting approval for freedom of establishment.

How can Freedom of Service simplify internationalization?

Traditionally, when a business wants to roll-out in ten markets at once, they need to work with ten regulated insurers or business units from the same insurer, ten teams and countless processes. The roll-out would imply a multi-fold of effort and carries the risk of creating a lengthy, parallel, or even duplicate processes. In some cases, that given regulated insurer or business unit might not have appetite for certain countries, which can result in a need to negotiate with other insurers altogether, not to forget the language differences and local specificities, which can pose additional hurdles for international partners

As a solution for these challenges, a pan-European insurer, covering all EU markets via FOS ensures scaling across multiple geographies simultaneously, via one single process, and with one international dedicated onboarding team for faster roll-out. A flexible set-up also makes sure that the claim handling can be managed by the insurance intermediary or the regulated insurance company, depending on capabilities. Thanks to an API set-up, the key decisions across the insurance value chain, including underwriting and claims approval can happen in real time where the regulated entity is located. This ensures compliance with the FOS regulation and does not interfere with the intermediaries’ business processes.

As a regulated insurance company, specializing in API integration for B2B2X models and white-label solutions, ELEMENT is championing the freedom of service opportunities supporting its partners, being the leader in the seamless delivery of insurance across the EU, already active in several countries with multiple lines of business. 

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