Insurance obligation in the KV? Part 1

On 15 July 2015, the Federal Financial Supervisory Authority (BaFin) issued a statement on foreign private health insurance (PKV), including considerable legal errors.

“And just don’t say one thing, “I will do this tomorrow,” unless (you add) “If God wills it.” And remember thy Lord, when thou forgets, and say, “Perhaps my Lord will guide me to something nearer the right way out than this. (Qur’an 18: 23-24)


Errors about the nursing care insurance

BaFin claims:

“In accordance with § 23 (1) and (2) of the Eleventh Social Security Code, privately insured persons must also insure themselves against the risk of needing long-term care with a private insurance company. However, this only applies in principle if the concluded health insurance contract actually fulfils the insurance obligation pursuant to § 193 Para. 3 Sentence 1 VVG. To the knowledge of BaFin, EEA service providers do not offer private long-term care insurance. It must therefore be concluded separately with a German health insurer. They are obliged to conclude such a contract with those persons who are required by law to have long-term care insurance upon application – but only with them.

Thus, if someone has concluded a health insurance contract with an EEA service provider, German health insurers are only obliged to conclude a private compulsory long-term care insurance with that provider if the contract with the EEA service provider complies with the provisions of Paragraph 193(3)(1) of the VVG. If this is not the case, the German insurer with whom admission to compulsory long-term care insurance is sought can reject the application.



This statement is first of all already incorrect according to § SGB XI, because it is sufficient according to § SGB XI. § 110 SGB XI, that the KV in the hospital (KH) offers standard services so that every company offering nursing care insurance (PV) must conclude a private compulsory nursing care insurance (PPV) with the customer at the latter’s request – the PKV does not also have to meet the stricter requirements of § 193 Para. 3 VVG. Because in § 110 Abs. 3 SGB XI states

in accordance with § 23 para. 1 SGB XI “Entitlement to general hospital services … or which satisfy the insurance obligation according to § 193 Para. 3 of the Insurance Contract Act”.

And secondly, the statement wrong, because according to § 23 Abs. 1 SGB XI is only obligated to PPA at his own company, i.e. he is not obligated if his private health insurance does not offer any PPA. He can, but does not have to, make an application elsewhere, which is then to be accepted there, even if his private health insurance only offers regular services in the hospital and nothing else. This follows clearly from the wording of Section 23(2). 1 and 2 SGB XI:

  • “Persons who are insured against the risk of illness with a private health insurance company with entitlement to general hospital services or within the scope of insurance contracts which are subject to compulsory insurance pursuant to Section 193 (1) of the German Medicines Act. 3 of the Insurance Contract Act, are obliged, subject to paragraph 2, to conclude and maintain an insurance contract with this company to cover the risk of the need for long-term care.
  • The contract referred to in paragraph 1 may also be concluded with another private insurance undertaking. …“


Error concerning the obligation to insure

The BaFin continues to believe:

“Contracts which are concluded with EEA service providers for the purpose of fulfilling the insurance obligation are subject to German law”.

After all, the contract does not have to (and may not even be suitable for) fulfilling the insurance obligation. A contract which is merely concluded in the opinion that it fulfils the insurance obligation but does not do so is not necessarily subject to German law. Nevertheless, such a contract does not require the customer to take out insurance that fulfils the insurance obligation. Because according to § Section 193, paragraph. 3 VVG applies:

The obligation pursuant to sentence 1 shall not apply to persons who:

  1. are insured or liable to be insured in the statutory health insurance scheme, or
  2. are entitled to free curative care, are eligible for aid or have comparable claims
  3. …have, to the extent permitted by their respective authority…” “

A comparable claim is therefore sufficient to ensure that an insurance obligation does not arise in the first place. As a result, the entire starting point of BaFin is ultimately without foundation and thus invalid.


Error regarding the applicability of the Insurance Supervision Act (ISA)

The BaFin also believes:

“On January 1, 2016, the new ISA will enter into force. Then the restriction that the ISA only applies if EEA service providers in Germany operate through intermediaries will no longer apply. In the future, the business activities of EEA service providers will fall within the scope of the new ISA and thus under the responsibility of BaFin, regardless of the distribution channel – i.e. whether they involve intermediaries or not.


However, this does not apply to insurers from the European Economic Area (EEA) if the contract has been concluded by correspondence without the EEA company offering its services across borders in Germany at all, nor is it even registered here. For then it will not formally be an EEA service provider at all, but simply a foreign insurer abroad and without any connection to Germany. Furthermore, this new regulation does not apply if the contract is concluded with a private health insurance company outside the EEA – then only by correspondence – for example from Switzerland or Dubai.

Already according to the private international law in the EU, Art. 3 of the Rome I Regulation (VO), EU citizens have in principle a free choice of law, such as the right of the Vatican to choose in the private health insurance. However, this freedom of choice is limited in certain circumstances for the protection of the policyholder (UN), so that according to Art. 7 of the Rome I Regulation, the (insurance contract) law of the place where the risk is situated at the time of conclusion of the contract is automatically applicable, for example the law of the place of the UN habitual residence. If there are several places of residence, the centre of life is decisive – as in international tax law with a regular obligation to pay tax on world income – with primarily personal factors (e.g. where does the wife live) and secondarily economic indicators (e.g. place of income sources).

However, it may also be necessary to split the statutes if several risks are located in different places, so that each risk is treated as a separate contract under conflict of laws, provided that no possible and effective choice of law has been made in accordance with Art. 7 III of the Rome I Regulation (VersR 2008, 443 et seq.). And in the case of compulsory insurance contracts, the obvious rule is that the law of the country prescribing the insurance obligation applies to these, but only if the respective country has expressly stipulated this, Art. 7 IVa, IVb of the Rome I Regulation. In the local JPA, the UN must nevertheless be included if it wants to.


Correspondence insurance remains legally possible

In § 61 (1) VAG n.F. (previously 110a VAG), the addition “via intermediaries” has simply been omitted for the provision of services, that is all, and applies only to EEA insurers. In any case, companies outside the EEA may only operate in Germany via branch offices, otherwise not at all – but anyone can obtain insurance there by correspondence. An EEA-CC may also continue to conclude contracts with UN in Germany by correspondence. This is stated in the explanatory statement to § 61 VAG:

“Correspondent insurance, whereby a person resident in Germany seeks insurance cover with a non-resident insurance company on his or her own initiative, does not remain subject to authorisation (in line with Germany’s position under the Code of Liberalisation of Current Invisible Operations 2013 of the OECD).

In any case, however, the following applies in accordance with § 57 VAG n.F. that the location of the risk in the CT depends on where the UN has its seat or residence. Contracts of every foreign insurer (BoD) with a UN in its own country (e.g. an association), according to which persons in Germany (D) can then “register” as an insured person (VP) (because they are insured by the UN), do not fall under the activity of the BoD in D, i.e. not under the ISA. Furthermore, the recruitment of the CP for the UN does not constitute insurance mediation, as no insurance contract is concluded with the CP, and is therefore not regulated. Unisex is also obsolete, commission limitations as well – the association is allowed to pay commissions for new members, because member recruitment is not insurance mediation. A possible prohibition of commissions and preferential treatment does not apply either to an association which is not already an insurer or to the foreign insurer.

This also applies to a German “association” which procures insurance abroad by correspondence and then registers its German members (if they so wish) there. Consequently, they should not receive an insurance certificate, but only a confirmation of insurance, as is customary in such cases today. The claim for benefits can be granted directly to the VP, by the UN, and the payment of contributions is the sole responsibility of the VP, without any liability on the part of the UN – all this is harmless.

Although this does not fulfil the insurance obligation in the CT, the CP is otherwise covered by this, which means that an insurance obligation does not arise in the first place. Direct insurance mediation from non-EEA insurers to German UN insurers who do not themselves contact the BoD by correspondence is not a good idea, however, because of the risk of criminal prosecution, §§ 140, 144 VAG old version.


Knowledge gap at BaFin?

There is another possibility, which BaFin may not yet know: Not the adult insured person (VP), but someone else takes out a private health insurance policy for them. Then (there are judgments on this) the insurance obligation is not fulfilled (because you can only fulfil this obligation for yourself, unless you are legally incompetent). It is also not a substitutive CT, because the contract does not replace any of the CPs in the SHI system. Then the calculation is free even with an insurance in a German private health insurance, so not mandatory according to the type of life insurance (LV). Nevertheless, Merchant may have sufficient “comparable” benefit claims there, which would require an insurance obligation pursuant to Section 3.1. § Section 193, paragraph. 3 VVG do not arise.


Error concerning the concept of intermediary

The BaFin also writes:

“In the future, the business activities of EEA service providers will fall within the scope of the new ISA and thus within the competence of BaFin, regardless of the distribution channel – i.e. whether they involve intermediaries or not”.


The justification for the law is much clearer here:

Insofar as § 110a, Subsection 1, VAG, old version, in the case of activities in the provision of services, required this so-called notification procedure only under the qualified condition that the provision of services took place “through intermediaries”, the legal situation is adapted to the legal situation according to the Directive by deleting this element. In order to protect the domestic market, it no longer seems appropriate to include only one activity in the provision of services “through intermediaries” in the regulatory framework of the ISA, while leaving unregulated an activity directly from abroad, e.g. via the internet”.

This means that activities from abroad across borders in Germany, not only through intermediaries, but also through temporary entry for mediation during home visits, as well as websites explicitly aimed at the German public, are subject to the ISA. In case of doubt, the German VVG and § 134 BGB shall apply. For example, home visits to Germans by bank(s) from Liechtenstein and Switzerland, but also the handing over of account opening documents of the local credit institutions by employees of a domestic subsidiary with BaFin approval, lead to the contracts being null and void in case of doubt. A fine option to convert any investment losses of the German national into an investment profit through compensation for capital use by the foreign bank by means of reversal.

Distribution of foreign VR via the Internet in Germany is only given if the Internet presence is explicitly aimed at interested parties in Germany, not if a German comes across the site of a foreign provider (preferably in German), which is actually aimed at the customers there, e.g. Swiss or the German population in Namibia, Argentina or on the Volga. A distinction must be made between whether the insurer takes the initiative and actively seeks customers in Germany through its site, or whether the customers take the initiative and come across the foreign site themselves, even though it is not specifically directed at them. The fact that such opportunities get around on the Internet without the intervention of the foreign insurer is harmless. Then, however, it is still correspondence insurance, just as in the case that a German has an account with a bank in Switzerland and buys a foreign policy via the Internet portal of the bank in Switzerland, because it offers higher benefits for men than in Germany according to the unisex calculation.

Read about further consequences on 15.04.2016 in part 2.




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


with friendly permission of (published on 12.04.2016)


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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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