According to the Association for the Protection of Investment and Insurance Intermediaries e.V. (VSAV), the German government plans to introduce an obligation to disclose commissions for all insurance intermediaries this summer. This is the result of the new paragraph 61 of the Insurance Contract Act (VVG), which was passed by the cabinet at the beginning of June.
The legislator had added a third paragraph to the previous standard: “(3) The insurance intermediary shall inform the policyholder of the commission contractually agreed with the insurance undertaking for the conclusion of the contract as a total amount in euros. He shall document this in accordance with § 62.” In addition, according to the VSAV, an amendment to Section 7 of the VVG will require insurers to disclose administrative costs to customers in life and health insurance in addition to acquisition and distribution costs.
“Given the haste with which the expert hearing has been held so far and with which the German government is pushing this bill, it is to be expected that the Bundestag will also pass the new legislation roughly as it has been formulated so far,” says VSAV board member Ralf Werner Barth. The new law becomes effective upon promulgation.
Commission disclosure for all insurance companies
According to the wording of the draft law, the disclosure of commission is not limited to life insurance and must therefore be observed for all types of contracts, according to the VSAV. Because of the different amounts of commissions, the Ministry of Finance wants the information on commissions to be given “in euros and cents” in future.
In addition, according to the assessment of VSAV confidential lawyer Johannes Fiala, the entire commissions of the respective sales company agreed with the insurer must be disclosed, i.e. not only those of the respective intermediary. This presentation of the disclosure would be similar to that from an AIF investment prospectus in which the entire commission is also to be disclosed. For broker pools, distributors and underwriters, this is likely to make business with insurance much more difficult, according to the VSAV’s assessment.
VSAV recommends realignment to intermediaries
“Insurers, simply by virtue of your newly imposed GDV Code, will need to check that intermediaries or sub-intermediaries have correctly reported total commission. Incorrectness could lead to reversals,” says VSAV lawyer Fiala. If there is even a deception about the amount of the commission, the license of the intermediary is at stake.
Overall, according to the VSAV, the policy appears to be trying to strengthen consumer protection in favor of honorary advice through the new law. The VSAV recommends that intermediaries quickly adjust to the new situation and, if necessary, realign their existing working methods.
It will provide its members with all the support they need through the services of its network partners and its information policy. According to the VSAV, intermediaries could even benefit from the new legislation by positively distinguishing themselves from the competition in the required legal stipulation and with a high quality of advice, and also by performing well in comparison with fee-based advisors.
by Dr. Johannes Fiala and Ralf Werner Barth
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About the author
Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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