“Fee-based advisors” instead of multiple agents, exclusivity or insurance brokers? *
– A megatrend with built-in liability for insurance intermediaries – *by Dr. Johannes Fiala, lawyer (Munich), MBA Financial Services (Univ.), MM (Univ.), certified financial and investment advisor (A.F.A.), lecturer in civil and insurance law (BA Heidenheim, Univ. of Cooperative Education), (www.fiala.de) and Dipl.-Math. Peter A. Schramm, expert for actuarial mathematics (Diethardt), actuary DAV, publicly appointed and sworn by the IHK Frankfurt am Main for actuarial mathematics in private health insurance (www.pkv-gutachter.de)
EU directive, MiFiD, FRUG, VVG reform, Info-VO, transparency requirement, kick-backs, etc. Collective disorientation was a reaction of financial service providers in view of the numerous changes in the legal requirements. In the meantime, the realisation is gaining ground that the legal objective is the change “from intermediary to advisor”.
However, the legislature has not regulated the profession of “fee consultant” at all: Is this an oversight or rather a liability trap for brokers?
Five “collection” theses are expected to bring new money into the insurance broker’s coffers: a) Brokers could be remunerated separately for “support, administration”, in addition to the brokerage fee which they may receive from the insurer anyway. (b) Brokers could arrange genuine net tariffs, then charge the customer only for the relevant advice. The customer can always deduct the costs. c) Brokers could also broker any tariffs, e.g. a private liability insurance, without a brokerage fee commitment: Some (mostly unknown) agent would then receive a commission, but the broker could charge his client a consultancy fee. d) Brokers can also broker “CIC, Sovag” etc., i.e. “price” any brokerage fee into the premium for themselves, and additionally charge a consultancy fee. e) On all such remunerations for “support, administration, if necessary mediation” the broker can also still charge value added tax – thus he becomes entitled to input tax deduction.
Insurance (legal) advice by agents? The insurance agent (§ 34 d GewO) is the “representative” of the insurer; an activity as an insurance consultant (§ 34 e GewO) is ruled out from the outset because of the duty of loyalty to the insurance company, § 86 HGB, but also because there is usually no licence as an insurance consultant.
The Munich Higher Regional Court (Case No. 29 U 3771/06) therefore did not prohibit the insurance industry without reason from having its employees and its independent agents refer to themselves as “insurance consultants” or “pension and insurance consultants”.
Insurance (legal) advice by brokers? Also for the insurance broker is still valid what was decided about 10 years ago: The publishing house IWW published in its medium “Wirtschaftsdienst für Versicherungsmakler” (Business Service for Insurance Brokers) already in 1999 on insurance consulting: “An insurance broker is generally not (!) granted permission [zur Versicherungs-„Honorar“-beratung]. An activity as an insurance intermediary and [zugleich als] Insurance advisor in one person is generally excluded (LG Stuttgart, decision of 10.12.1990 – Az. 371 a – 678, LG Mönchengladbach, decision of 2.4.1991 – Az. 3713 E 484, LG Aachen, decision of 22.08.1991 – Az. 3 T 80/91 VersR 1991, 1409).
In its decision of 05.05.1987 (NJW 1988, 543), which led to the reintroduction of the insurance adviser, the Federal Constitutional Court emphasised that “the need for objective advice on insurance matters, free from any ties of interest to the insurance industry, exists and this profession must be preserved for the future.” Can an insurance broker be “incited” by an insurance adviser to leave the profession illegally?” Informed insurance brokers have known such details for years, of course !
A licence to provide insurance advice requires that the person concerned does not act as an insurance broker (BVerfG, decision of 5.5.1987, Ref. 1 BvR 981/81, NJW 1988, 543).
The insurance broker may advise “third parties”, but not consumers, on “the agreement, amendment or review of insurance contracts” for a fee, § 34 d I 4 GewO.
Since the “Pilz ruling” (LG Stuttgart, Az. 17 O 592/89) it is known that insurance brokers are allowed to advise their clients (these are not “third parties”) also against payment: It should not be overlooked that the (insurance) legal advice given by the insurance broker is a permitted auxiliary business according to § 5 RBerG – in future a secondary business according to the RDG. The area of permitted (insurance) legal advice is left by the insurance broker where, for example, he also adjusts and designs the general terms and conditions of his own client to the insurance conditions: If the provision of legal services stands independently next to other professional tasks, this constitutes prohibited legal advice, so that the client does not owe any remuneration, §§ 5 RBerG, 134 BGB. In addition, the insurance broker risks his license, because his “reliability and suitability” is in question. It is then not sufficient to claim that the aim of the counselling was mediation.
However, the broker can always demand his compensation for success (even if it is designated as remuneration or fee) also or solely from the customer as well as his agreed expenses additionally reimbursed, § 652 II BGB. The legal model for the insurance intermediary is the success fee, § 652 I BGB !
Remuneration for insurance brokers, even without successful brokerage? The brokerage contract can have elements of a service contract, for example in the case of a real estate agent’s sole mandate: Here, the agent is obliged to work – yet he only receives remuneration in the event of success. If the insurance broker wants to receive remuneration in any case (i.e. even without successful mediation), i.e. remuneration for his advice, he must agree this with his client.
Since this deviates considerably from the statutory remuneration model, an individual agreement is required – this cannot be implemented in a legally effective manner by means of “terms and conditions, pre-formulated sample texts, etc.”, § 307 BGB (formerly § 9 AGBG). This has been decided many times by the courts, for example by the BGH in its judgement of 20.03.1985 (Ref. IV a ZR 223/83).
Liability for ineffective forms by advisory boards, auditors, professors etc. Thus, whoever distributes such forms will almost certainly be liable for damages ! Professors, lawyers and auditors who promote such concepts could also soon have the opportunity to become more familiar with the case law of the BGH on “guarantor and marketing liability” as well as on “intentional immoral damage, § 826 BGB” in their own matter, i.e. on a highly personal level, cf. BGH, judgement of 22. 5. 1980 – II ZR 209/79 and LG München I, judgement of 7 November 2007 – 28 O 23767/06.
Incidentally, this also applies not least to (scientific?) advisory boards of debt collection companies and/or in the case of closed participations; cf. LG Mosbach, judgment of 15.08.2007. Supervisory boards are already liable here according to legal regulations anyway.
Remuneration for insurance brokers if only advice is given? It is still not possible for insurance brokers to offer independent fee-based advice to consumers, which includes the insurance (legal) advice of the auxiliary business separately (i.e. without insurance mediation): This is namely reserved for licensed lawyers and insurance advisors.
In practice, reference is repeatedly made to the “Pilz” judgement (OLG Stuttgart of 28.12.1990, ref. 2 U 121/90, VersR 1991, 883) and the similar judgement of the LG Kiel of 19.10.1988 (ref. 14 O 192/88): Both judgements allow an additional remuneration (e.g. as hono-rar) for the brokerage including auxiliary transactions under insurance law (e.g. analyses of prices and sets of conditions, of risks and coverage concepts, negotiations with insurers, examination of premium invoices or insurance documentation, as far as one understands these as legal advice at all and not, for instance, as other auxiliary commercial transactions which are permissible anyway), because the remuneration agreements were closely connected with the insurance brokerage contract. This was the only reason why the courts in both cases did not see this as a violation of the RBerG. Because insurance (legal) advice is considered a necessary part of the brokerage activity !
It follows that the insurance broker is not permitted to offer this insurance legal advice as an independent service for a fee.
Only through illegal “fee advice” to the input tax deduction? Anyone who provides legal insurance (legal) advice as a broker in connection with a brokerage contract acts as an insurance broker in the service relationship with the customer (but not as an insurance or business consultant), cf. ECJ, Case C-8/01, Judgment of 20.11.2003. Thus § 4 No.11 UStG: “Of the turnover … the following are tax-exempt: … 4. the turnover from the activity as … insurance broker”. And unfortunately, you can’t do without it like you can with real estate tax-saving molluscs according to § 9 UStG.
Section 75 of the VAT guidelines clearly states that it depends on the profession in which a trader is active: anyone acting “as” a broker, legally licensed, may not charge VAT “in the exercise of that profession”. As decided by the BFH in its ruling of 9 July 1998 (BStBl. 99 II 253), this also applies to activities in a sales structure, especially training, administration, control and support – the (super) commission is a weighty indication, but not the only decisive factor.
Whoever nevertheless charges VAT (unjustified) for brokerage activities may of course hand it over to the tax office, § 14 c UStG: However, this does not entitle the insurance broker to deduct input tax.
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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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