Incorrect information by insurers for consumers is anti-competitive

– How a new ECJ ruling opens the door for insurance brokers to issue warnings –


The European Court of Justice ruled by judgment of 16.04.2015 (Case C-388/13) that “the provision of false information by a trader to a consumer […] must be classified as a ‘misleading commercial practice’ within the meaning of this Directive, even if that provision of information concerned only one consumer”.

This also opens up the possibility for insurance brokers, for example, to request insurers to issue a cease-and-desist declaration with a penalty clause or to announce this without any lawyer or court costs.


Everyday misinformation

Wrong (also accidentally, often however – possibly not provable – intentionally) information e.g. to notice periods, surrender values, to be expected expiration payments, or the question whether something is insured in the private health insurance (e.g. also with a benefit refusal with wrong reasons) are very frequent with insurance companies. However, as the ECJ suggests, a direct claim by the contracting party in the case of such anti-competitive misrepresentations cannot be derived directly from this. The contracting party could, however, inform the so-called Wettbewerbszentrale or a consumer advice centre about the conduct – and thus trigger a warning with an action for injunctive relief.


Insurance brokers as competitors

But: the broker is a competitor of the insurer. Thus, because he himself may be affected by false information in competition, e.g. because customers of other brokers receive more careful and therefore correct information, or the customers of his own agents are treated better, he may be entitled to injunctive relief, which may also be punishable by law.

Brokers who are annoyed by incorrect information are thus given an instrument to prevent incorrect information in the future: By means of a cease-and-desist declaration with a penalty clause, they could also present the insurer with the alternative – to pay “damages” (which may not actually be enforceable) or to pay a contractual penalty in the future for any further incorrect information.


Infringement of competition by prospect of excessive benefits

If a piece of information was false and, for example, the customer was promised too high a performance before expiry, then this is usually judged by the courts not as a declaration of intent but as a non-binding declaration of knowledge. As a precaution, however, the declaration of intent is contested by the insurer on the grounds of error.

Since with correct information only the smaller benefit would have been paid, however, also then legally no compensation is to be paid at height of the smaller benefit opposite the wrong information. However, by way of a detour via the threat of a warning by the broker, expert costs could perhaps be reimbursed and a “goodwill payment” achieved, because this is still preferable to the VR than to give the broker a punishable commitment to no longer provide more detailed false information, at least to the broker’s customers. Some courts considered the prospect of excessive benefits to be an unconditional guarantee in economic terms and ordered British insurers, for example, to pay.


Insurance brokers enforce diligence in providing information

A side effect of warnings with cease-and-desist declarations can be that the broker receives much more careful information from the VR for his customers in the future. The relationship between brokers and some VR is often already very clouded, in particular also by intransparency and representation of untenable positions on the part of VR, so that many brokers will gladly accept such a means of calling the insurer to order.


A head start by breaking the law?

Typically, insurance brokers feel led by the nose when they receive only half-truths about the available alternative tariffs from the policyholder when they want to change tariffs, § 204 VVG. If the policyholder then turns to an expert or special tariff change broker with a more comprehensive database, the initially engaged broker may still be subject to claims for damages by the policyholder, which the latter would then like to pass on to the VR with reference to the latter’s immoral damage within the meaning of § 826 of the German Civil Code (BGB) or the VR’s breach of its consulting duties pursuant to § 6 of the German Insurance Contract Act (VVG). Private health insurers are increasingly fulfilling their obligations to provide advice under Section 6 of the German Insurance Contract Act (VVG), which have been in place since the reform of the VVG in 2008, when changing tariffs under Section 204 of the VVG for current contracts. You are liable according to § 6 VVG also for advice that is not provided, incorrect or incomplete. Two years ago, for example, a customer was told that there was no suitable tariff for switching. Now that he was offered a change, he asked how long this tariff had been available. And after the insurer discovered that the tariff already existed two years ago, it voluntarily converted it retroactively due to the incorrect advice given at the time and paid back several thousand euros in premium difference.


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


by courtesy of (published 07/17/2015)


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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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