– When insurers are also obliged to provide notification of the risk of cancellation –
Some insurance brokers wonder whether they could continue to demand a brokerage fee from the insurer (BoD) if the BoD did not inform them immediately about an imminent termination of the policyholder (UN), i.e. their client. In principle, the broker is in the UN’s warehouse as its contractor – an insurance agent is on the side of the BoD as its “eye and ear”. The BoD is not regularly obliged to inform the broker.
Nor can anything initially be deduced from the duty of the BoD to conduct correspondence via the broker after presentation of a suitable broker’s power of attorney. It is quite possible that the broker is not informed about the customer termination as a correspondent broker until a final premium statement or a termination confirmation from the BoD. If the customer has withdrawn the power of attorney from the broker, for example by notifying the insurer, the broker will no longer receive further correspondence. If a client expresses that the BoD may only correspond with him in the future, this means that the BoD is obliged to observe insurance secrecy – also vis-à-vis the broker. If, on the other hand, the power of attorney has not yet been revoked and is correct in terms of content, the broker can, in the event of a breach of the correspondence obligation, request the insurer to refrain from circumventing the broker, subject to penalty.
Structure of the power of attorney
If a power of attorney is revoked by the customer or expires, the original must be returned, § 175 BGB. The broker could come up with the idea of protecting the client from damage caused by a careless insurance termination by adding to the UN power of attorney a provision according to which declarations of intent by the client to the BoD are invalid if they are not confirmed by the broker (as long as the power of attorney exists). But even then, the client could revoke the brokerage agreement and terminate it himself.
In any case, it would be conceivable to make the granting and revocation of the power of attorney (by legal transaction) subject to the written form. In addition, it can also be regulated that the revocation of the power of attorney also means the (immediate) termination of the brokerage agreement. This, of course, with the aim of achieving more extensive cancellation prevention. Such arrangements could help protect the “supervising broker” in particular from later liability for recourse.
Brokerage from the BoD after the UN breached the brokerage agreement?
It is conceivable that the UN is in breach of its obligations towards the broker – i.e. the broker can claim damages from his customer. However, no damage can be proven if the broker would not have been in a better financial position if the UN had acted in accordance with the brokerage agreement. However, the BoD is not involved in this process anyway:
Because the sentence “The brokerage fee shares the fate of the premium” always applies – if the client no longer pays the BoD a premium, there is no longer any brokerage fee to distribute. The insurer has calculated the acquisition costs (including brokerage) and tacitly undertakes to pay the brokerage debt of the policyholder to the broker (Icha, Alina, Die Nettopolice, Verlag VVW, Berlin 2014, p.98 ff.). The broker’s customer therefore owes the brokerage fee as the client of the broker – the insurer only covers the monetary transactions; by virtue of trade practice only the brokerage fee – not the compensation of the customer.
Insurance agents and pools at an advantage?
In particular, pursuant to § 87a III HGB, the BoD must inform the insurance agent of a termination – for example, so that the agent can approach the customer and perhaps earn a retrieval commission for the subsequent withdrawal of the termination of the insurance contract.
If a pool is a (multiple) agent, the BoD will inform the pool – and the pool may (but does not necessarily have to) inform the broker. The downside of being an agent or insurance representative is that the respective portfolio belongs to the BoD and not to the intermediary. In this constellation, if the obligation to correspond is violated, the pool is in any case in the forefront as the party potentially to be dunned by its broker.
If the pool is a (genuine) broker, the affiliated pool brokers are not even actively legitimised – they could hardly act themselves if they were to breach the correspondence obligation, because the connection to the BoD concerns the relationship of the pool to the BoD, and not the relationship of the pool broker to the BoD. In case of doubt, the pool (as a service?) would then have to communicate with the BoD if the pool broker is bypassed by the BoD contrary to any customary practice.
Risk of cancellation, default of payment, breach of duty of disclosure
The termination is just one example of what might interest an insurance broker. Default of payment or breaches of duty of disclosure may also trigger an interest of the intermediary in timely notification, as the BoD may be about to terminate the contract. Then it comes to the actual “cancellation risk notification” – a cancellation already made by unilateral termination is actually no longer a cancellation risk, but its realisation, at best with the possibility of a return.
Only in the case of the agent could compensation for damages be considered, if a cancellation, for example in the case of private health insurance, is simply confirmed by the board of directors in the case of a sick customer, and no re-advertising was even considered. As a rule, customer termination is not causal in order to be able to claim damages from the insurer as an agent or broker. At best, it will only rarely be possible to prove that the client would still have been insured if the BoD had acted in accordance with its duties. However, the law does not provide for a duty of loyalty or fidelity on the part of the BoD to brokers. The situation is regularly different at the pool broker opposite the pool.
Compensation of the UN against the VR?
It is conceivable, however, that a UN could demand compensation from the BoD for an unfavourable termination (e.g. in the event of late payment) if the BoD has not fulfilled its correspondence obligation. It is possible that the broker would have made a provable and successful effort to settle the payment. The loss from terminating a life insurance policy or switching to another private health insurer, which can usually only be determined by an actuarial report, can be considerable compared to the continuation of the contract.
Compensation from the UN to the broker?
It would also be conceivable, however, that a UN would demand compensation from the broker for an unfavourable termination of the BoD if the BoD had not fulfilled its obligation to correspond, but the broker was aware of this behaviour on the part of the BoD without having reacted efficiently, e.g. by issuing a warning to the BoD or ceasing to cooperate with it. This was also the case with the pool broker, if he had accepted that the pool did not make efforts to comply with the obligation to correspond with the BoD, possibly by issuing warnings. The pool broker may also seek recourse against the pool for failure to comply with the correspondence obligation if the broker had clearly but unsuccessfully demanded corresponding efforts by the pool from the BoD.
by Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm
by courtesy of
www.experten.de (published in the Expert Report 11/2016, pages 22-25)
Our office in Munich
You will find our office at Fasolt-Strasse 7 in Munich, very close to Schloss Nymphenburg. Our team consists of highly motivated attorneys who are available for all the needs of our clients. In special cases, our law firm cooperates with selected experts to represent your interests in the best possible way.
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.
»More about Dr. Johannes Fiala
On these pages, Dr. Fiala provides information on current legal and economic topics as well as on current political changes that are of social and/or corporate relevance.
Arrange your personal appointment with us.
You are already receiving legal advice and would like a second opinion? In this case please contact Dr. Fiala directly via the following link.
The first telephone call about your request is free of charge.