Company pension scheme: Insurance broker bribes works councils

– Deferred compensation: Thousands of employees harmed by acquisition costs/zillmerisation –


A bribery scandal with a long tradition

The sparrows have been whistling it from the rooftops for many years:

Works councils, personnel managers and company directors are happy to let the agent/insurance broker give them a share of the commissions. There is the renowned X management consultancy in southern Germany – the personnel manager has earned a nice extra income by setting up direct insurance policies.

Or think of the business-minded director of an exclusive clinic who asked his daughter to open an insurance agency right away – because “then at least the commission stays in the family”. But even businesses that are significantly state-owned are not always free of nasty rumors.


Six-figure bribe – over 2000 employees

The public prosecutor’s office in Ulm is now investigating such a case. The Südwest-Presse reported that the chairman of the works council had confessed – the role of an insurance company from northern Bavaria was still “unclear”. In any case, it is unknown whether and what the insurer has done so far to restructure the supply.


Commission payoff or bribery?

The giving of commissions is forbidden by law to every intermediary – a case for the supervision, i.e. the Federal Financial Supervisory Authority (BaFin), which pursues such cases again and again, as can be seen regularly from the business reports. It also gets tricky from a tax point of view, because bribes have not been tax-deductible in Germany for years – but to cover up such facts, you can write something else on the receipt, and then you add forgery and tax evasion:

As a result, the insurance broker has at least a criminal record – and is rid of his nice license because of “unreliability”. In addition to bribery, breach of trust is also a possibility in this case – the criminal charge may also include aiding and abetting by the broker.


harm to employees

Of course, the employees are also injured, because the broker was apparently able to select zillmerised or non-zillmerised tariffs, insurance contracts with or without acquisition costs, together with the works council.

The insurer concerned is also likely to offer a wide range of products to make the employee’s loss more or less. This is because in the case of company pension schemes it can happen that an employee pays in a lot of money via his employer in the first few years, foregoes salary payments in return, but there is hardly any surrender value.

If the broker wants to make a good living and also pay a bribe to those responsible at the employer or works council, he will choose a tariff with particularly high acquisition costs where as little as possible remains of the converted remuneration of the employees. Thus, the converted remuneration first ends up in the pockets of the broker, the works council or other responsible parties for the first few years.

This is what “insurance lawyers” tend to call a “value-equivalent” conversion of remuneration into a pension for the employee.


Restructuring of ailing old-age provision?

Insurance costs money Of course, the insurer will now do everything it can to keep the money in-house – in fact, management and employees have the option of a reversal, including compensation for the tax benefits and investment loss that would then be lost.

The employer is liable for performance – claims for company pension would only become time-barred in 30 years. In this respect, the balance sheets would probably also have to be adjusted retroactively – at least a better insurance tariff could be selected. But if, as here, the “criminal turnover” has already been skimmed by the prosecution, the insurer faces the question of whether it will ever get the overcharged commissions back – after a rate change.

And then the employer also considers whether to pay the costs of the “bribe tariff” first and then have the intermediary or insurer reimburse part of it.


Typical isolated incident:

Heide Hitzelmüller (name editorially changed) agreed to deferred compensation of EUR 200 per month from 2003. She left that employer after two years. The surrender value was “zero” – the insurer told the employee her policy had “lapsed without value.” She had been sold this old-age provision as a “discounted individual tariff” – allegedly with particularly favourable conditions.


EUR 4,800 and zero can also be equal in value?

According to the law, deferred compensation must be equal in value – apparently many insurers take the view that EUR 4,800 in deferred compensation can also be equal in value to zero. Or it is argued that she did receive something of equal value for this fee – namely a consultation that was worth EUR 4,800.

In fact, she is permanently left with a correspondingly expensive experience and not with nothing at all for the payment that has been converted to equal value. The insurer’s lawyer then explains to the judge that no employee can believe that the consultants work for free out of pure philanthropy or that the employer pays for the consulting costs for deferred compensation.

Surely an explanation will also be found as to why the works council, personnel manager or company boss is also allowed to keep a little something in the 6-figure range from the converted pay of all the other employees – after all, he is the one who made this deferred compensation possible in the first place and made sure that the employee received well-rewarded advice. However, some labour courts do not agree with this assessment, which is attributed by insurers to certain problems of understanding on the part of labour judges.

After all, the high acquisition costs had been included in the premiums – i.e. offset against the converted remuneration of the first two years – by an actuary of a licensed and state-supervised insurance company in accordance with the generally recognised actuarial equivalence principle. If such an actuary calculates something with an equivalence principle, it can actually only be equivalent and thus only of equal value in name alone – is the argumentation that is repeated again and again and is still readily believed today.

It is regrettable that judges increasingly lack an understanding of such necessities and that insurers have to complain about a slow crumbling away of convictions built up over decades.


by Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm

courtesy of

from (published on 01.10.2008)

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About the author

Dr. Johannes Fiala Dr. Johannes Fiala

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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