Since 1970 legal aid insurance (including home, motor and contents insurance) has been an integral part of private insurance products provided to Danish consumers. Since the introduction of the Danish Competition Act of 1997 all agreements regarding standardized practices and other measures that might be construed as hindering free competition must be reported to the Competition Authority. In certain cases a group exemption from the ban on non-competitive agreements may be granted.
In 1998 the Association of Danish Insurers applied for group exemption, arguing that the standardized legal aid insurance scheme ensured that the majority of Danish citizens are covered and thus have the means to take legal action. The association also argued that standard terms and conditions for insurance sums and lawyers fees gave financial equality to all parties in consumer cases.
In the Competition Authority's ruling of June 21 2000 the arguments of the association were not upheld. The authority ruled that (i) the standard terms and conditions for legal aid insurance were contrary to the Competition Act and (ii) general group exemptions for the terms could not be granted. The association was given until December 31 2000 to amend and/or withdraw the standard conditions regarding the limit of cover of Dkr75,000 and a deduction of 10% of the costs (minimum Dkr2,500). Furthermore, the authority ruled that once these changes were made, an exemption for the remaining standard terms and conditions of legal aid insurance could be made.
The authority expects that, in the future, either (i) legal aid insurance products will be sold as separate products instead of as integral cover in other consumer insurance products, or (ii) the consumer will have the option of choosing additional cover.
The association has decided not to appeal against the ruling. Thus, as of December 31 2000 legal aid insurance can no longer be expected to be an automatic part of Danish consumer insurance products. Several major insurance companies are already drafting new, individual legal aid insurance products giving customers an option to choose higher or lower coverage than before.
Although the ruling could make way for new, foreign players in the Danish legal aid insurance market, this is not likely in the foreseeable future. The reasons are that legal aid insurance is (i) a comparatively small market with claims not exceeding Dkr150 million and (ii) still a low interest product to policyholders who will probably still take it as an accessory to other insurance products.
For further information on this topic please contact David Rubin or Jesper Windahl at Bech-Bruun Dragsted by telephone (+ 45 7733 7733) or by fax (+ 45 7733 7744) or by e-mail ([email protected] or [email protected]).
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