Many brokers offer additional services. But there will certainly not be a simple answer to the question of which ones may be offered. In the second part – the first part you will find here – of an exclusive contribution for FONDS professionell ONLINE, attorney Johannes Fiala and actuary Peter A. Schramm explain the obstacles and problems that brokers face when collecting payments and what points need to be observed. (jb)
Collection agent for the insurer?
If an insurer (or agent) engages an insurance broker for collection, the power of attorney will normally be null and void by order of the company, unless the customer had previously released the insurer from the obligation of insurance or professional secrecy (§ 203 of the Criminal Code StGB, § 134 of the Civil Code BGB).
This also applies in the event that an agent assigns his commission claims, for example as loan collateral, according to the Federal Court of Justice (BGH) in its ruling of 10 February 2010 (VIII ZR 53/09). As is customary for other professions with a duty of confidentiality, an express release from the duty of confidentiality for insurers vis-à-vis brokers is not usually found either in insurance applications or in common broker’s powers of attorney. Assignment and authorisation for collection require the prior express consent of the policyholder (BGH, ruling of 10 October 2013, Ref. III ZR 325/12 – for the necessary written form see § 4a Federal Data Protection Act (BDSG)).
The broker does not require any further permission, for example for collection according to Section 10 of the Legal Services Act (RDG), especially if he has “negotiated or concluded” the insurance contract, so that collection is an auxiliary or ancillary service of the broker, and the insurance company has authorised – and not necessarily commissioned – the broker in such a way that the customer’s payment to the broker has a legally secured debt-discharging effect in favour of the former.
However, this will hardly ever be the case after a change of broker, for example through a Fintech app.
Debt collection broker for the policyholder as a risk profession
If the broker does not disclose to the future policyholder from the outset which orders, e.g. in framework agreements or brokerage fee commitments, he has already previously accepted from the insurance company – e.g. debt collection – he is setting indications for the accusation of double brokerage.
A typical example is an industrial insurance broker, who writes in his model power of attorney: “The broker is authorized to receive premium payments from the principal in order to pass them on to the insurers”. This puts him in the position of potential embezzler (as money trustee of the insurer). In the opinion of the BGH, every broker who – as is customary in the insurance sector – has an exclusive mandate and thus professionally tolerates “no gods beside him” is already in this position of utmost loyalty (§ 266 StGB and BGH, GA 1971, 209 et seq.)
Collection double broker
Initially, a broker had himself appointed as money trustee of the insurance customer in his brokerage power of attorney. Later, he sends the policy to the customer with the premium invoice from the insurer and encloses his own statement as a copy of the Company’s premium invoice – made out on his own letterhead, together with a request for payment in favour of the broker’s bank account. Subsequently, in the policy with a special broker clause and through the broker’s statement, the broker reveals himself as the insurer’s collection agent, i.e. as a double broker.
The customer will be surprised, because the broker has taken the side of the insurer when collecting. Later, it will be possible to say that the collision was written on the forehead of this mediation – ultimately as deception of the insurance customer by the power of attorney, and as disloyalty that only became apparent afterwards due to the lack of fulfilment of the loyalty owed by the broker, because now the collection activity of the broker (also) on behalf of the insurance company becomes apparent – as a double broker.
The incompatibility becomes obvious if the customer makes incomplete payments for several contracts: Does the broker then pass on the premiums of the insurers for whom he has a collection order or those of the insurance companies that are most important to the insurance customer?
Collection without legal security
The broker ignores section 12 of the Insurance Mediation Ordinance (VersVermV) and does not provide the customer – as his money trustee – with any security, such as a guarantee, before collecting the money. Later, he cannot prove that there was an alternative fidelity insurance policy in this respect in accordance with section 12 of the VersVermV.
From 50,000 euros of collected insurance premiums a potentially “serious case” according to the StGB. It is understandable if, in view of such disloyalty and lost loyalty, the Chamber of Industry and Commerce orders a special audit in accordance with section 15 of the VersVermV.
Customer money protection is only not required if the insurance broker is demonstrably effectively authorised to receive money for the insurer, so that the customer’s payment to the broker discharges the debt (§ 362 BGB). Only then can the insurance company not invoke Section 37 of the Insurance Contract Act to withdraw from the contract or not have to pay in the event of a claim – even if the broker had not forwarded the policyholder’s money to the company or had not done so in time. However, a power of attorney from the latter will (election determination) be proof of the double brokerage – he can therefore choose whether he wants to drink the poison from the red or green cup.
The authorisation as a money trustee of the customer can be ineffective from the outset (§§ 134, 139 BGB) if the associated legal activity in the brokerage agreement violates sections 4, 5 RDG (BGH, judgement of 16 December 2002, II ZR 109/01) and then double nullity also includes the authorisation (BGH, judgement of 26 March 2003, Az. IV ZR 222/02).
Authorisation for collection under the Payment Services Supervision Act
According to the Payment Services Supervision Act (Zahlungsdiensteaufsichtsgesetz, ZAG), the broker – when instructed by the customer to handle payment transactions with the insurer – requires a prior written Bafin licence. A glance at the authority’s website shows that apparently no collection agent has so far registered with the Financial Supervisory Authority under the ZAG. The Federal Court of Justice has already dealt with ZAG violations (order of 11 June 2015, ref. 1 StR 368/14, and of 28 October 2015, ref. 5 StR 189/15).
Only if the broker has been effectively commissioned by the insurer to handle payment transactions as its collection agent, the broker does not need a licence under the CISA. Whether this also applies to the dual collection agent – the client’s money trustee, the company’s collection agent – has not yet been decided by the courts in view of a conceivable collision.
Collection as misappropriation of funds from the insurance company Some brokers broker “policies” which are deceptively similar to real ones, but issued by alleged insurers who are not, because there was no licence – a clear suspicion of fraud if a Bafin licence or Bafin notification as an insurer from the EU/EEA area is missing (BGH, judgement of 4 March 1999, Az. 5 StR 355/98). If the insurer were licensed abroad, and if “only” the Bafin registration were missing, the mediation would also already be punishable under the Insurance Supervision Act (ISA) for the company as well as the intermediary.
If the broker forwards the client’s fiduciary money to the “fake insurer”, he exposes himself to the suspicion of embezzlement (BGH, HRRS 2010, 383). In a judgement of 4 March 1999 (file no. 5 StR 355/98) on broker embezzlement, the BGH stated as an example: “The broker’s service aimed at brokering void insurance contracts was economically worthless”.
Similarly, the cover of a fictitious VR is useless if the law requires that the risk carrier must be licensed to conduct business in Germany; or if the risk carrier identified in the insurance policy as an alleged insurer has only a fraction of the equity capital to be able to pay the insurance benefit in the event of a claim. Such damage can be measured by experts and can therefore be criminally condemned on a reliable basis.
by Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm
with friendly permission of www.fondsprofessionell.de, published on 08.04.2016
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About the author
PhD, MBA, MM
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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