– Why insurance customers should expect qualified advice –

The Saarland Higher Regional Court (ruling of 27.01.2011, ref. 5 U 337/09) ruled that insurance brokers who cannot provide any or only incomplete documentation of their advice bear the full burden of proof for correct advice. The advice and reasons should therefore be noted because courts will otherwise accommodate the customer by easing the burden of proof up to and including the reversal of the burden of proof.

Duty to document – but not to record

Insurance brokers cannot avoid the legal obligation to document by using masses of pre-printed forms about a waiver of documentation by their clients. Because documentation is a legal obligation for the broker, as a guiding principle of the legislator. Therefore, pre-printed waivers are simply judged to be invalid as general terms and conditions. In case of doubt, the broker will have to justify and prove that a waiver by the customer was only made in an individual case. This already becomes difficult if he has used the same pre-formulated declaration several times with the same customer. He then remains under an obligation to advise. With a bit of luck, the broker’s liability insurance will then not pay a cent, because the breach of the documentation obligation would also be punishable. Liability insurance does not cover intentional and/or criminal acts.

Minutes of the interview as evidence

It has been known for decades that the insurance broker has at least the secondary burden of proof. So if a customer claims that he was given incorrect advice, the broker will have to explain the course of the consultation in detail – even if the customer only sues after almost 10 years, i.e. shortly before the expiry of the absolute limitation period. Many insurance brokers think they can get by just fine with legal half-knowledge, and shy away from the cost of continuing education, professional advice and secure contracts. By doing so, they end up risking their license and a perhaps deserved assetlessness before that.

Liability even without brokerage: Example of tariff conversion in private health insurance

Even for favors, even a private citizen can be held liable. This applies all the more if the object in question is insurance cover, i.e. an object with recognisably great economic significance for the customer. In the case decided, the broker had in particular cancelled the daily sickness allowance supplementary insurance for the future – instead of extending the waiting period by several weeks with a similar effect of a considerable reduction in premiums. Few brokers have specialized in tariff changes according to § 204 VVG with the same insurer – here one can agree on a brokerage fee with the customer, or refer to the insurer for advice. This is because insurers are under a legal obligation to advise their own customers at any time when required, unless a broker is specifically involved.

Tariff change brokers: Illegal business model?

• Section 59 VVG stipulates that “insurance advisors within the meaning of this Act are those who professionally assist third parties in agreeing, amending or reviewing insurance contracts …” – whereas insurance brokers “act as intermediaries or conclude” insurance contracts. With the insurance broker there is an exception, namely § 34 d Abs.1 Sentence 4 GewO: According to this, the broker may advise non-consumers in particular on the amendment of insurance contracts (in terms of insurance law).

Thus, since the introduction of the new VVG in 2008, the insurance broker is allowed to give legal advice to a consumer detached from the brokerage of a policy “at the … amendment … of insurance contracts” is in principle not permitted or not covered by the broker’s licence. Rather, in the present constellation, it must be assumed that the provisions applicable in this respect (§ 34 d GewO, § 5 RDG, 11, 14 VermVersV) have been circumvented. The examination of benefits and premiums, which is also to be carried out in the context of a change of tariff, necessarily also requires a legal consideration and thus advice. However, an insurance broker is not permitted to do this to a consumer for a separate fee.

Exception: if the original contract has already been brokered by the broker or if the change of tariff proves to be a better alternative to an actually planned change of insurer, and even then only against a brokerage fee in the event of success.

Usurious fee with the tariff change broker?

If one compares the frequently demanded fees for the private health insurance tariff change with the usual brokerage fee in the private health insurance switching, one would not come on the idea that a usury could be present. However, it should be borne in mind that the brokerage fee refers to the total premium saved, and not to the real “savings”. If the customer changes from a tariff with extensive reimbursements to one with limited benefits, the “value of the service” of the broker is not (only) the premium saving, since this is “paid” for the insured person with considerable restrictions in the insurance cover. In this respect, the relationship between performance and consideration must always be considered. Thus, a merely superficial (premium) saving is offset by possible additional burdens due to uninsured medical expenses.

Way out: cooperation with specialists

However, the broker cannot demand a non-performance-related fee, e.g. on a time basis, without thereby leaving his brokerage profession and thus the insured activity. The only way out is to cooperate with specialists who may charge a fee, such as suitable actuarial experts, insurance consultants or lawyers, each of whom will have a different focus.

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