Bid Quality Suffers As Danish Pensions Competition Worsens

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Competition to grab workplace pensions contracts in Denmark has deteriorated recently after two of the previous seven commercial bidders for the work were swallowed up by rivals, according to one of the sector’s main brokers.

Aon in Denmark says it has witnessed the development over the last year or more.

Jannik Andersen, head of broking and solutions within Aon’s retirement and health solutions in Denmark, told IPE he thinks there is a lack of healthy competition in the Danish occupational pensions market at the moment.

“Going from seven to five commercial providers is critical itself, and we have experienced in the last 12 months that providers do not want to bid on certain clients – specifically in certain industries with low wage earners and businesses dominated by young women,” he said.

Skandia Denmark and SEB Pension Denmark used to be among firms bidding for the contracts, but these businesses have now merged with AP Pension and Danica Pension respectively.

The other three commercial providers still active are Velliv, PFA and Topdanmark.

Andersen said the development was apparent from Aon’s experience as an intermediary. “When we do tenders it is critical if we do not get a variety of bids since clients tend to ask for different things,” he said.

“When we negotiate with the same providers over and over again, they tend not to give their best every time if they know with high probability that they will win,” he said, adding that this situation had been going on for the last year or so.

PKA, Sampension not yet ‘scary’ enough

Two of Denmark’s traditional labour-market pension funds, PKA and Sampension, have been actively pitching for new contracts outside their core areas in recent years.

Recent successes for the newcomers include PKA winning two pension contracts from retail chains Synoptik and Neye from rival Velliv, and Sampension snapping up pension contracts for the Army Constables and Corporals Association (HKKF) from Velliv and Nordea.

Asked whether the business push by these pension funds had helped ease the dearth of competition, Andersen said the entrance of PKA and Sampension had definitely been positive.

“But they still need to learn to be in a commercial market and with all that that takes,” he said.

“I don’t think the prevalent commercial providers are scared by these two pension funds yet, and we need to see some clients actively moving to these two providers.

“If we get a handful of pension funds in the commercial market, we might see change, but it takes a lot of time, and it will not alleviate the market in the short run,” Andersen said.

From a broker’s perspective, he said, it was always good to have more providers to choose from, noting that this could be from pension funds, but also from foreign carriers going into the Danish market.

“Furthermore, a more transparent price setting will give the possibility of unbundling savings and insurance, and that could also be a game-changer in relation to the competition,” he said.