It is ‘absolutely crucial’ for the Danish pensions industry to continue being able to bundle together pension and insurance products, according to Insurance and Pension Denmark.

The association has made the comments in response to a consultation from the Danish Financial Supervisory Authority (DSA), in which it has proposed to ban pension companies from offering pension and SUL (health and accident) insurance products together as a bundle.

In June, the FSA published a draft of a revised executive order on life insurance companies’ health and accident insurance business for consultation. It expects the new SUL executive order to come into force on 1 January 2022.

The FSA has made the proposal as it has noticed a number of life insurance companies give large discounts on health and accident insurance, so much that they are usually loss-making for the firm, in order to secure company pension contracts.

It believes that such an approach poses “significant risk” to the long-term sustainability of life insurance companies’ business models. It also believes there is a need for a more directive-orientated implementation of Solvency II requirements for internal separate statements for different business areas.

However, Insurance and Pension Denmark believes that such a move would have “unintended consequences” for consumers, the welfare system and competition. It believes that SUL products are an integral part of a customer’s pension scheme, and make a significant contributions to the security of Danes and the Danish welfare society. It has called on the FSA to safeguard the security this offers.

“It is absolutely central to the success of health and accident insurance that companies continue to have the opportunity to ‘bundle’ savings and insurance in one pension product. It has benefited millions of Danes who have received both a good pension scheme and health and accident insurance. That safety and security for Danes also has great value for our entire society,” Insurance and Pension CEO, Kent Damsgaard, argued.

The association said it understands that the FSA wants to address the fact that over the years imbalances have been built up between revenues on the one hand and claims expenses on the other in SUL businesses. However, it argued that the Danish pension sector is extremely robust and has the third largest capital adequacy ratio in Europe.

“The Danish model protects the weak parties, and it is absolutely central that changes in the SUL executive order do not have adverse consequences for groups of the insured. Therefore, one must be very careful in regulating prices in detail within individual product areas and avoid too harsh a detailed regulation of the area,” Damsgaard said.

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