Order on Payment of Certain Costs for Life Insurance Business

Order on Payment of Certain Costs for Life Insurance Business

Pursuant to Section 27, paragraph 3, Section 29, paragraph 3, Section 30, paragraph 7, and Section 316, paragraph 1, of Act No. 718 of 13 June 2023 on Insurance Business, the following is enacted:

Scope of Application

Section 1. This Order applies to life insurance companies, cross-sectoral pension funds, and branches of foreign companies that have permission to conduct life insurance business pursuant to Section 14 of the Act on Insurance Business. These entities are hereinafter referred to as life insurance companies.

Paragraph 2. The Order applies to life insurance business and business within insurance classes 1 and 2, cf. Annexes 1 and 2 to the Act on Insurance Business.

Establishment Costs

Section 2. Establishment costs are understood as:

1) One-off costs for the establishment of an insurance contract, paid to an insurance broker, cf. Section 2, paragraph 1, no. 1, of the Act on Insurance Intermediation. One-off costs correspond to the size of the agreed amount in the cooperation agreement entered into between the insurance brokerage business and its customer.

2) One-off costs for the establishment of an insurance contract, paid to insurance agents, cf. Section 2, paragraph 1, no. 3, of the Act on Insurance Intermediation.

3) One-off costs for the establishment of an insurance contract, which correspond to the one-off costs mentioned under 1) and 2), regardless of the remuneration method for direct sales personnel.

Ongoing Costs

Section 3. Ongoing costs are understood as:

1) Ongoing costs for benefits during the term of the insurance, paid to an insurance broker, cf. Section 2, paragraph 1, no. 1, of the Act on Insurance Intermediation. Ongoing costs correspond to the size of the total costs that have been associated with using the insurance brokerage business, excluding establishment costs.

2) Ongoing costs for benefits during the term of the insurance, paid to insurance agents, cf. Section 2, paragraph 1, no. 3, of the Act on Insurance Intermediation.

3) Ongoing costs for benefits during the term of the insurance for direct sales of insurance, which correspond to the ongoing costs mentioned under 1) and 2), regardless of the remuneration method for direct sales personnel.

Payment of Costs

Section 4. Establishment costs shall be charged directly to the company or the policyholder who is the cause of the costs. Establishment costs shall be charged over a period of maximum 3 years.

Paragraph 2. Ongoing costs shall be charged directly to the company or the policyholder who is the cause of the costs. Ongoing costs shall be charged in the year the life insurance company incurs these costs.

Paragraph 3. An insurance brokerage business may not receive commission or other remuneration from the insurance company in connection with the specific customer relationship.

Paragraph 4. If a policyholder repurchases their policy or the agreement with the life insurance company is terminated, and this does not occur in accordance with the rules in Section 29, paragraph 1, no. 7, of the Act on Insurance Business, and the life insurance company has not charged all establishment costs for which the policyholder was responsible, the missing amount shall be charged to the company or the policyholder upon repurchase or termination, unless the missing amount can be covered by non-repurchased funds.

Paragraph 5. If a policyholder repurchases their policy or the agreement with the life insurance company is terminated, and this does not occur in accordance with the rules in Section 29, paragraph 1, no. 7, of the Act on Insurance Business, and the life insurance company has not charged all ongoing costs for which the policyholder was responsible during the elapsed part of the year, the missing amount shall be charged to the company or the policyholder upon repurchase or termination, unless the missing amount can be covered by non-repurchased funds.

The Responsible Actuary

Section 5. For life insurance business, the charging of establishment costs and ongoing costs to the policyholder shall be reported to the Danish Financial Supervisory Authority as part of the technical basis and other matters, cf. Section 29 of the Act on Insurance Business.

Paragraph 2. The responsible actuary must, in the separate declaration for the notification, cf. Section 9 of the Order on Notification of the Technical Basis and Other Matters for Life Insurance Business, state that establishment costs and ongoing costs are charged to the individual company or the individual policyholder in accordance with the above provisions.

Penal Provisions

Section 6. Intentional or grossly negligent violation of Sections 4 and 5 is punishable by a fine.

Paragraph 2. Companies and other entities (legal persons) may be subject to criminal liability according to the rules in Chapter 5 of the Criminal Code.

Entry into Force

Section 7. This Order enters into force on 1 January 2025.

Paragraph 2. Order No. 1097 of 7 November 2006 on Payment of Certain Costs for Life Insurance Business is repealed.

Danish Financial Supervisory Authority, 5 December 2024 Louise Mogensen / Line Bergmann

5 December 2024. No. 1402.
Ministry of Industry, Business and Financial Affairs, Danish Financial Supervisory Authority, file no. 24-019581 CQ003082