ESTONIA: Insurance broker sanctioned for manipulating insurance rates

10 June 2013 —
Yesterday Estonia's Financial Supervision Authority (FI) issued an injunction to Insurance Broker Services, owned by IIZI Group, for illegally influencing rates offered by insurers.

The regulator said that the company has sold insurance companies information on their competitors' rates, so that purchasers of the information know how much they can raise their own prices by.

Insurance Broker Services called it a "market positioning service."

Many insurance companies were offered the information and a few purchased it as well.

FI ordered that the broker terminate the activity, stressing that insurance brokers should serve the interests of customers, not providers.

It also said that if the company does not cease offering such a service, it will be fined in the amount of 3,200 euros.

CEO: market prices have not gone up, FI approved our service

Chairman of Insurance Borker Services, Risto Rossar, said in comment that the so-called market positioning services has forced insurers to decrease, not increase insurance prices on the market and that the interest of the company is to bring down insurance tariffs, not to increase them.

"The market position service makes up about 1% of our revenue. The income from the service is practically zero and they would be ready to offer it also for free. We stopped offering the service a few weeks ago are now considering how to restructure it," said Rossar.

Rossar claims before launching such a service on the market, the company asked for the permission of FI.

This claim was denied by the head of FI who said that if there had been such a permission, no injunction would have been necessary. "We have not allowed the insurance broker to provide such a service," said the authority's representative.
IIZI Kindlustusmaakler has about 18% of the market, Insurance broker services controls about 11% and Marsh Kindlustusmaakler has a market share of 11%.
Jesse: it's unethical, and a disgrace

Mart Jesse, head of the Estonian association of insurance companies, said that the provision of such a service which told insurers which of their services are too cheap in comparison with their competitors is unethical.

"As much as I understand, under the market position service, the company analysed the insurer's pricing and compared it prices of other competitors. In other words, it showed the insurer that if their service price was lower than that of competitors, how much they could theoretically increase the prices. I am worried that pricing is a business secret of every insurer and insurers give it to brokers so that they can make offers to clients that comply with the clients' insurance needs, not for re-selling it," said Jesse.

He added that his other concern is that since the insurance broker's commission is a percentage of insurance payments, the higher the service the more money the broker makes.

Read the full story on

ESTONIA: Insurance broker sanctioned for manipulating insurance rates