An extract from The Insurance and Reinsurance Law Review, Edition 9
The majority of Danish insurance companies are members of Insurance and Pension Denmark (IPD), an association that promotes the interests of the entire insurance (and pensions) industry. Foreign insurance companies engaged in the provision of services in Denmark may become 'info' members.
The Danish insurance market is characterised by strong competition for customers. According to the statistics published by the association, the number of Danish insurance companies has more than halved over the past 20 years, from 138 companies subject to Danish supervision in 1999 to 62 in 2019.2 In the same period, the number of employees fluctuated, from 13,751 in 1999 to 10,305 in 2005, to 13,533 in 2014, to 10,343 in 2017, to 8,211 in 2018 , but then rose to 10,636 in 2019.3 Customers are also switching between companies more frequently to get better cover and prices.4 Customer satisfaction in 2020, with a score of 77.2 per cent, was at the lowest it has been since 2012, when the customer satisfaction score was 75.7 per cent.5
The annual profit of the insurance industry increased by 65.1 per cent from 2018 to 2019, to 13.8 billion Danish kroner before tax.
In terms of the balance sheet total in 2019, Tryg Forsikring was the biggest insurance company in Denmark, followed by Codan and Danica.6 The statistics only cover companies in the Danish market under Danish supervision.
Year in review
In Denmark, as in most of the world, covid-19 has been the dominating topic in 2020. This also holds true for the area of insurance law, where questions such as whether insurance policies cover covid-19-related losses (e.g., a business interruption policy and losses related to Denmark's lockdown) have yet to be answered. It is reported that covid-19 made the second quarter of 2020 very busy for insurance companies, which had to help thousands of Danes who had to end their holiday abroad abruptly, cancel their planned holiday or were stranded abroad. During the summer, however, the insurance companies recorded a lower number of claims arising from burglary. The IPD reports that this decrease resulted from more people working from home. The insurance companies have in general also reported a lower number of claims under car and travel insurance policies in this period. There has, however, been an increase in claims under private health insurance policies, as people working from home have experienced more physical health detriments as a result of their changed working conditions.40
As expected, 2020 was a year of increased focus on cyber risk, and this was also due to covid-19. Both the sales of cyber insurance and the number of incidents and consequential claims increased in 2020. In 2019, Tryg sold 10,000 cyber insurance policies (22 per day) to mid-cap companies.41 In September 2019, the Danish hearing healthcare company Demant announced in a message to its investors42 that a ransomware infection had resulted in a significant loss of up to US$95 million, including an anticipated payout from Demant's insurance company of 100 million kroner.
The Danish Insurance Mediation Act entered into force in October 2019. There has been an intense focus of attention on the Act, but so far there have been no published complaints or cases to show how the Act will be administered or sanctioned and thus it must be assumed that there will be a continued focus on the Act in 2021.
Outlook and conclusionsi Climate change risk and litigation
There has been a significant focus on climate change risk and litigation in 2020 and this focus is expected to increase in 2021. While our Scandinavian neighbours in Sweden and Norway as well as a wide range of other European countries have been hit by climate-related legal actions against the oil, gas and energy sector and against public authorities, Denmark has not (yet) seen any climate-related litigation. Thus, the various actions and decisions within this field highlight the need for the Danish insurance industry also to address the issue of climate change, at both the underwriting and the structural level.
An aspect to consider is the fact that some companies, such as those in the oil, gas and energy industry, could be more vulnerable to climate change risks. It will become even more important in 2021 for directors and officers (D&O) to demonstrate that they have considered climate change risks and taken action to mitigate these risks where necessary. This means that D&O insurers may be affected by climate change disclosure claims in the year ahead.
It is also likely that more may be asked of insurers in terms of taking steps to prevent a worsening of the situation in relation to climate-related losses, including adjusting activities to mitigate the impact of risks of this kind.ii Cyber risk
The above-mentioned increased focus on cyber risk in 2020 is likely to continue in 2021, with constantly evolving cyberthreats giving rise to different scenarios concerning the devolvement of losses and ongoing considerations as to how customers' risk should be assessed and how premiums and damage coverage should be priced.
Also in relation to cyber risk, covid-19 continues to create new challenges for businesses as they adapt to an operating model in which working from home has become the 'new normal'. Despite the rising use of technology, many organisations still do not provide a 'cyber-safe' remote working environment.
Thus the question of whether claims from shareholders against boards of directors and senior executives in relation to cyberattacks can trigger D&O insurance is expected to continue to be a hot topic in 2021.
As a result of increasingly sophisticated information technology and the corresponding extent of cyber-related damages, we expect to see an increased focus on asset tracing investigations, especially in relation to fraud concerning chief financial officers.iii Digitisation and new technologies
Digitisation and new technologies provide insurers new opportunities for customer retention, customer satisfaction and access to new segments that have been out of reach, so far.
Several new insurtech startups are challenging the traditional Danish industry with user-friendly solutions. A common feature is that they have a clear focus on the customer's needs while offering flexible solutions and good user experiences. An example of this is Undo,43 a Danish start-up that reaches its customers through an app and has a focus on, and mainly appeals to, a young target group.iv Covid-19
As mentioned above, the hottest topic in 2020 within the area of insurance law (as in most areas of law) has been covid-19. As yet, there have been no (published) judgments regarding covid-19 related claims and only a few Insurance Complaints Board cases have been recorded – all relating to travel insurance policies. It is thus expected that questions and disputes regarding coverage for covid-19-related losses will continue to be a hot topic in 2021.