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What general rules, requirements and procedures govern the conclusion of (re)insurance contracts in your jurisdiction?
The Insurance Contracts Act regulates insurance contracts and the relationship between an insurer and a policy holder.
Different rules on consumer protection and good practice also apply (eg, the insurer must give correct advice on insurance products). These rules must be complied with, otherwise the professional liability of advisers may be incurred.
The rules on good practice are laid out in Part 6 of the Financial Business Act. The rules apply to insurers in contractual relationships.
In practice, underwriters draft policy terms and enter into an insurance contract with customers on behalf of the insurer.
In case of reinsurance, the Insurance Contracts Act does not directly apply; however, the act is applied by analogy together with the general law of contract.
Are (re)insurance contracts subject to any mandatory/prohibited provisions?
To a large degree, the Insurance Contracts Act cannot be derogated from to the detriment of the policy holder. For example, the act stipulates that an insurer may not make cover conditional on the payment of an insurance premium. The insurance premium must be paid 21 days after a claim for payment has been made. Only then may the insurer terminate the insurance contract.
Reinsurance depends on the general principles and the rules of construction of the Danish law of contract. As parties have freedom of contract, they can determine the framework for the reinsurance contract and are generally not bound by any mandatory issues.
Can any terms be implied into (re)insurance contracts (eg, a duty of good faith)?
Denmark has a civil law system that to some extent relies on general rules and principles. Any issues relating to the insurance contracts between an insurer and a policy holder are regulated by the Insurance Contracts Act. However, the general rules and principles of the law of contract regulate the issues relating to the contract included in the Insurance Contracts Act.
In case of reinsurance, the general rules of the law of contract apply. The Insurance Contracts Act is also applied by analogue. A reinsurance contract is made between an insurer and a reinsurer.
When it comes to (re)insurance contracts, the Insurance Contracts Act and the general rules of the law of contract must always be read together with the trade usage, case law and other legal standards.
A general duty of good faith and fair dealing in respect of other contracting parties applies to all contractual relationships. However, the specific content must be assessed based on the contract and the specific details of a situation.
What standard or common contractual terms are in use?
The rules on insurance contracts are laid out in the Insurance Contracts Act. Insurance contracts and the terms always follow the framework laid out in the act.
With regards to personal insurance, the products are similar and often have more or less the same scope of cover regardless of the insurer. However, there can be differences and generally personal insurance is becoming more customised. This can be seen with contents insurance where the policy holder receives a basic cover of his or her furniture and household effects and then adds on travel insurance or similar products to the policy.
Traditionally, business insurance has also been standardised. However, it is now common that the cover is customised to the business customer's needs.
Danish law has rules on compulsory insurance, which are laid out in legislation. The rules ensure that compulsory insurance is standardised.
Freedom of contract applies to reinsurance and a contract must observe the general rules of the law of contract. The Insurance Contracts Act is also applied by analogue to contractual terms.
What is the state of development in your jurisdiction with regard to the use of ‘smart’ contracts (ie, blockchain based) for (re)insurance purposes? Are any other types of financial technology commonly used in the conclusion of (re)insurance contracts?
Recently there has been a prevailing focus on digitalisation in Denmark, including an analysis of the advantages and disadvantages of using digitalised contracts. However, this is an area which is still undergoing development. Smart contracts and other types of digitalised contracts are not yet commonplace in Denmark.
What rules and procedures govern breach of contract (for both (re)insurer and insured)?
The Insurance Contracts Act regulates insurance contracts together with the invalidity rules laid out in the Contracts Act, including determining whether insurance cover can be:
- terminated for breach; or
- invalid in whole or in part.
Insurance cover may be terminated for breach retroactively. This means that the policy holder may be in a situation where he or she no longer has cover for damage that has already occurred.
Individuals also have a right of cancellation under the Insurance Contracts Act. This means that within a short period from the conclusion of the contract – which is typically two weeks – they can cancel the contract.
The general rules of the law of contract apply to reinsurance contracts. This means that the termination of a contract and invalidity must be assessed in compliance with such rules.
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