The Danish Financial Supervisory Authority has published a report following a review of six banks’ practices on requiring insurance in connection with home loans, concluding that banks may only impose such requirements where the insurance is necessary to secure repayment of the loan or protect the value of the property taken as collateral. It also concludes that banks cannot require customers to take out the policy with a specific insurer, including the bank’s own partners. The report sets out that insurance requirements must be linked to a real, case-specific risk, and that blanket requirements (for example for all first-time buyers to take out life insurance) do not meet the relevance test. If a requirement is justified but the customer already holds an adequate policy, the bank must accept it even if it is with another provider. Additional points include that banks should remind borrowers when a home loan ends that the insurance can be cancelled, that insurance cannot be used to improve a borrower’s creditworthiness because it reduces financial headroom, and that if a bank intermediates the insurance it should assess, based on borrower information, whether the borrower needs more coverage than the minimum required for the loan.
Danish Finanstilsynet 2025-06-25
Danish Financial Supervisory Authority concludes banks may only require mortgage-related insurance when needed for repayment and cannot steer customers to partner insurers
The Danish Financial Supervisory Authority's report on six banks' home loan insurance practices states that insurance must be necessary for loan repayment or property value protection, and banks cannot mandate specific insurers. Requirements must be linked to specific risks, and banks must accept adequate existing policies from other providers. The report advises banks to remind borrowers about insurance cancellation post-loan and assess coverage needs if intermediating insurance.