– How insurers’ false claims are believed and cost the middle class millions –

No protection from imputation in the case of Hartz IV and other social benefits

In an admirable act of lobbying, life insurers have managed to persuade intermediaries, customers and even the Federal Employment Agency that the capital saved in a Rürup pension would be safe from being drawn upon in the event of hardship – for example, when applying for Hartz IV. In reality, however, the narrowly limited exclusion of realisation serves only to ensure that the pension saver actually receives his capital as a lifelong pension and cannot consume it beforehand for his own purposes. Yet if the state were obliged to pay Hartz IV or other social benefits – or even legal aid – it may demand the prior consumption of the Rürup capital, as is expressly set out in the explanatory memorandum to the seizure-protected old-age provision and as the legislator intended. As stated there, an extraordinary right of termination in special circumstances – such as, the example given there, the refusal of Hartz IV benefits because the saved Rürup capital is counted as an asset – may under no circumstances be excluded, even where there is a merely contractual ordinary prohibition of termination. The state has no interest in immediately granting social benefits to a Rürup saver so that the assets in his Rürup contract are preserved for a more comfortable supplementary pension later on.

Ineffective clauses permit ordinary termination by the policyholder

What is more, even those provisions in the General Terms and Conditions of Insurance (GTCI) that exclude the right of termination without restriction and, in addition, seek to convert the Rürup contract into a non-contributory policy upon termination must be called into question: they may simply be ineffective as contradicting the will of the legislator. Nowhere has the legislator permitted insurance companies to exclude every kind of termination with the consequence of a complete contract termination with their customers – including, for example, termination without notice or extraordinary termination “for good cause”. To continue depriving the customer of the assets accumulated by the insurer through his premium payments “by merely releasing him from the obligation to pay premiums”, despite an extraordinary termination, is likely to violate the prohibition on unreasonable disadvantage (§ 307 BGB (German Civil Code)) and to be more than surprising (§ 305c BGB).

In some insurers’ legal departments there is apparently the mistaken belief that one may try to push beyond the statutory limits – but in such cases the courts treat the entire clause (for instance on the exclusion of termination, or on the release from premium payment instead of a repayment of capital) as null and void. This means that such contracts no longer contain any effective exclusion of termination and, contrary to the wording of the GTCI, may be terminated at any time – including by ordinary contractual termination.

Numerous grounds for extraordinary termination of Rürup contracts without notice

Anyone holding a Rürup contract whose saved capital is counted against Hartz IV is, because of the refused Hartz IV benefit, in a situation of hardship, and may therefore terminate the Rürup contract extraordinarily – a contract to which not even the legislator failed to refer clearly enough in the legislative materials – and need not then content himself with a mere release from contributions. Only the payment of the Rürup capital following notice corresponds to the legislator’s intention that it should be counted against Hartz IV.

Since the first financial market crisis, extraordinary terminations of life insurance policies have become more frequent because one insurer or another has become financially unsound. The BGH (Federal Court of Justice) ruled long ago on the right to terminate without notice “where performance of the insurance contract by the insurer has become uncertain” – a right that can never be excluded by general terms and conditions – in its judgement of 04.04.1951 (Ref. II ZR 32/50). In this constellation, too, a mere premium waiver is plainly no suitable solution in the event of extraordinary termination, because the contract is not fully terminated and the capital remains at risk with the unsound insurer. Moreover, a customer who has, for example, paid in a single premium or has already converted to a non-contributory policy would in this case have no remaining possibility whatsoever of rescuing his capital by terminating the policy with an insurer that has become unsound, in line with the BGH. Clauses that then provide only for a release from premium payment and refuse to pay out the capital are therefore likewise likely to be simply null and void.

Can the Rürup contract be rescinded?

If, however, these provisions are invalid, then not even the ordinary right of termination is effectively excluded, nor is the conversion into a non-contributory benefit – provided exclusively for the case of ordinary termination – effectively agreed. As a result, such ineffective provisions unfortunately satisfy neither the tax requirements of a basic pension nor the requirement of the Code of Civil Procedure for the very limited attachment protection of an old-age pension at the level of social assistance. Not only because of the attendant danger that one might end up being pursued as a tax evader on account of one’s Rürup contract, but also a rescission of the entire contract may come into question alongside the termination.

In addition, the Rürup contract was advertised and promoted with the tax privilege, the protection against seizure and the Hartz IV security. If even one of the conditions relevant to the conclusion of the contract is absent, that would already be reason enough to be entitled to rescind the contract on grounds of deception. Otherwise, what remains is the somewhat less favourable option of termination with payment of the actuarial reserve, or the deliberate acceptance of the threat of future losses through seizure, set-off against social benefits, or tax reclaims.

The legislator makes the right of termination with repayment of capital clear

The claim that no extraordinary right of termination would exist under the BGB (German Civil Code) is therefore incorrect, because this statutory right of termination cannot be excluded by contract at all. With particular regard to the asset imputation in the case of Hartz IV / ALG II, the legislature already expressly addressed this in Bundestag printed paper 16/886:

“Unaffected by this exclusion of ordinary termination remains the possibility – within narrow limits, and also for life insurance – of extraordinary termination pursuant to § 313 para. 3, § 314 of the Civil Code, or exceptionally as a result of other unreasonableness. Continuation of the insurance contract could, for example, be unreasonable for the policyholder if termination is necessary because the policyholder is denied benefits under SGB II (German Social Code, Book II) owing to existing pecuniary claims under the contract.”

In light of this clear statement, it is obvious that the contrary assertions of insurers should be judged as deliberate misrepresentation. This also applies to the claim that, in the case of Rürup contracts, there is already a statutory exclusion of realisation, just as in the case of the tax-subsidised Riester contract. One can no longer believe in a mere error or oversight on the part of the insurers here.

The General Association of the German Insurance Industry recognised the legal risk in its opinion of August 2006:

„In principle, the employment agencies must provide benefits to job-seekers who are capable of working where they are in need, in accordance with § 19 SGB II. If a person seeking assistance were denied benefits, for whatever reason, this would also have consequences for his or her ability to agree to an effective waiver of disposition. For the failure of the benefits gives rise – at least according to the present legislative materials – to a special right of termination (pursuant to § 313 para. 3, § 314 BGB) for the person concerned, as foreseen by § 165 para. 3 VVG (German Insurance Contract Act). In that case, it would also no longer be possible for the person seeking assistance to claim the allowance under § 12 para. 2 No. 3 SGB II; this requires the agreement of an effective waiver of disposition.

Ultimately, neither the policyholder nor the insurer would therefore be able to assess in advance whether a contract concluded between them pursuant to § 165 para. 3 VVG is legally effective or not.“

That is precisely the legal situation.

Employment agencies unlawfully spare the Rürup capital

According to settled case law, the state cannot reasonably expect self-employed persons who have made old-age provision through a private life insurance policy to fall to its charge as welfare cases: self-employed persons may therefore (only upon application to the court pursuant to § 765a ZPO (German Code of Civil Procedure)) prevent the seizure of current pension payments to that extent. In the pension phase, this will often amount to more than may be saved “protected against seizure” under § 851c ZPO.

The capital before the start of the pension, however, cannot be protected in this way. Yet, to the detriment of the taxpayer and of the unemployment contributions payable by employers and employees, the Employment Agency has so far regularly failed to apply this option of crediting, thereby ignoring the will of the legislator. Here the insurers’ lobbying – which has even persuaded the employment agency of an incorrect legal position – leads to harm to the middle class and the taxpayer through unnecessarily high unemployment contributions, in order to make up for the funds lost through the failure to lawfully count and draw upon the Rürup capital. Apparently, the Federal Court of Auditors has not yet become aware of this maladministration.

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