View from the Top: No need for European consumer collective redress

The European Commission is continuing to push for a system of collective redress for consumers that would allow a type of class action litigation.

Commercial insurance buyers across Europe, as represented by the Federation of European Risk Management Associations, have called on the Commission to ‘calm down' and to undertake a through economic assessment of the proposals, including careful consideration of the possible impact on professional indemnity and product liability insurance, before going any further.

We share the concerns expressed by the insurance industry that a collective redress legal system would have a major adverse effect on these insurance markets. Claims would become more frequent, more expensive and potentially more complex with little added value. Ultimately the burden of compliance will fall on insurers and in time, insurers would be forced to pass on this burden through an increase in premiums, which in turn may lead to price increases to end consumers, adding further fuel to the fire of inflation.

"Claims would become more frequent, more expensive and potentially more complex."

Fixed frustration
Having taken part in the continuing European debate on collective redress over the last two years, we are somewhat frustrated that the commission seems to have a fixed objective. We believe that instead of creating another European legal framework, the commission should work to develop quicker and less expensive means of resolving consumer grievances than collective litigation.

In our response to latest European Commission's staff working document, Towards a Coherent European Approach to Collective Redress, we urge the commission not to waste its limited resources but to direct them towards improving out of court settlement methods.

The EU should encourage member states to work with industry to improve the range of alternative dispute resolution schemes already available. They are the best means of providing quick and relatively low-cost dispute resolution rather than pursue an adversarial mass tort approach.

"We urge the commission not to waste its limited resources."

Increasing awareness
Certainly, there is a need to increase consumer awareness of what is available so that ADR mechanisms become the preferred option to resolve disputes. This should be done, not under the threat of the imposition of a collective redress framework, but by a more conciliatory and constructive approach that brings together consumer groups and industry with the member states to design effective solutions.

Scope remains to exploit and expand the dispute resolution mechanisms already available to consumers. We do not believe there is sufficient evidence of a need for a collective redress system to protect consumers in the single market.

Julia Graham is vice president of the Federation of European Risk Management Associations and a member of Insurance Insight's Advisory Board.