The new Danish Act in general - new Act new requirements
The consequence of the Act is that more players will be subject to the requirements and in general all distributors of insurance will be subject to the same disclosure and conduct requirements as a result of good practice rules.
Among others, the Act will affect enterprises making price and product comparisons of insurance products for a customer through a website or the like if the customer is able (directly or indirectly) to enter into an insurance contract through the website. And it will also affect agents and sub-agents that now have to be authorised by the Danish FSA.
New requirements of authorisation from and registration with the Danish FSA
The new Danish Act on Insurance Distribution came into force on 1 October 2018 and extends the relevant group of players that are to be authorised by or registered with the Danish FSA.
The result of the new Act is that it is no longer enough for agents and sub-agents to be registered. They are now to have an authorisation from the Danish FSA (provided that they come within the new definition of insurance intermediaries).
Enterprises selling goods or services and selling insurance in connection with the sale of such other goods or services are not to have an authorisation but are to be registered. This could be the case for travel agents and car dealers.
One requirement for receiving the FSA's authorisation to distribute insurance is that the registered office of the enterprise is in Denmark. It is also a requirement that the enterprise has liability insurance or another corresponding guarantee against claims for damages and has measures in place ensuring that customers are protected against the distributor's inability to pay. The enterprise must also have a management fulfilling the suitability and integrity requirements of the Act, ensuring a responsible and efficient operation of the insurance intermediaries.
It follows from the transitional provisions of the Act that enterprises already authorised as insurance brokers before the commencement of the Act have to submit a new application, but that the enterprise may continue the activities until the Danish FSA has made a decision in the matter.
The same applies to enterprises registered as insurance agents or as sub-agents and to enterprises distributing insurance that did not require an authorisation under the preceding act. Such enterprises are to submit an application for an authorisation but may continue the activities until the Danish FSA has made a decision.
Focus on consumer protection - increased requirements to be fulfilled by distributors
The new Act increases the protection of consumers by for instance introducing the stricter authorisation and registration requirements.
These requirements contribute to making sure that consumers get the same protection regardless of whether or not they purchase insurance directly from an insurance company, from an agent or from an enterprise distributing insurance. This is done by making all parts of the distribution of insurance comply with the same rules.
A standardised product is to be developed that contains the most important elements of the individual insurance product. In addition, all insurance intermediaries are to prepare an analysis of their customers' requirements and needs so that they are only offered the products that suit their requirements and needs.
The increased focus has resulted in adjustments of the statutory orders on the distribution of information material, good business practice, good practice, qualification requirements and the analysis of the customer's requirements and needs.
The revised statutory orders also came into force on 1 October 2018.
As an additional protection of consumers, the Danish Ombudsman is given the authority, as something new, to institute legal proceedings regarding actions in conflict with good practice.
Supervision and punishment
The Danish FSA is to supervise the players subject to the new Act and their compliance with the new rules.
It means that enterprises are to be aware that, as something new, the Danish FSA has been authorised to obtain information from the enterprises subject to the Act, but also to obtain information from persons and enterprises not subject to the Act in order to assess whether the enterprises should be subject to the rules.
The Danish FSA has a right to withdraw authorisations.
The level of punishment has also been adjusted in compliance with the other financial legislation. The consequence is that a violation of the rules of the new Act could be punishable by a fine or imprisonment for up to four months.