NETHERLANDS - The Dutch Association of Insurers (VvV) is urging Social Affairs' minister Piet Hein Donner not to allow pension funds to sell income protection schemes as a disability insurance pension, because it would give them an unfair competitive advantage.

The so-called ‘WGA hiatus insurance' - aimed at helping partly-disabled workers redeploy to other roles - is an indemnity insurance which pensions funds are not best placed to administer, the VvV argued in a letter.

The organisation's response has been triggered by a proposal for additional legislation to rectify imperfections in the new Pensions Act.

According to the VvV, the WGA scheme is in fact an insurance for partial unemployment, which means it technically is neither a pension nor a life insurance, and therefore can only be carried out by indemnity insurers.

Insurers fear the extension of the pension funds' sphere of activity will cause unfair competition, because pension funds face lesser solvency requirements and also do not pay corporate tax.

Moreover, the VvV is afraid allowing pension funds to sell WGA schemes, will lead to WGA schemes being incorporated into pension schemes, implying there is risk of employees facing mandatory insurance charges.

In addition, insurers point to their skills and expertise at prevention of a person's full unemployment and reintegration into the working environment, which is their stimulus to promote labour participation - a move which funds can't provide a similar approach, they claim.

In the VvV's opinion, the problem is ‘enormous'.

"Workers are already cancelling their WGA insurance with insurers, because they have found that they are already insured with their pension fund," said the VvV in a statement.

"This illegal situation will worsen, if pension funds get the formal green light to operate WGA schemes and, as a consequence, integrate them in their mandatory schemes," the insurers explained.

VvV spokesman Hennie Zoontjes estimated the total market share for the WGA schemes is between €200 and €300m.

A spokesman of pension regulator De Nederlandsche Bank would not confirm or deny a claim from VvV suggesting DNB has indicated the WGA insurance cannot be classified as a disability pension, and therefore cannot be provided by pension funds.

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