Insurance Quotes: Sample bills between non-binding and liability

– Wrong understanding creates error – wrong advice creates personal liability -.


Risk and return Insurance customers and intermediaries like to think that sample calculations tell them something about what the insurer (most likely) expects as the outcome of an investment in an insurance contract. That’s why prospective insurance customers also like to ask about “expected return”. In the context also the topic of a “security of the capital investment” comes up, whereby as yield can be safe only what is promised as a guarantee and is safe – but not the exemplary.


Warranty or example

Brokers thrive on success, and to motivate the customer they like to perpetuate the misconception that sample calculations offer anything in the way of probability. Yet the insurers themselves do not even claim that the sample calculation reflects the expected outcome or that they have given any thought to whether this is somehow likely. Rather, according to their own statement, it is only a fictitious illustration of what results such insurance could lead to. In doing so, last year’s profit declaration – and even the current hidden reserves – are often used without having even checked beforehand to what extent this could still be relevant for the future.

If the intermediary presents these “examples” – contrary to the warning notices of the insurer in the small print – as a binding prognosis, he alone is liable – and if the intermediary learned otherwise in the sales training, he must take recourse against the trainer.


No financial supervision in the case of sample calculations

Due to the increase in implausible and misleading sample calculations, the Federal Supervisory Office (BaFin) had issued a circular R 2/2000 in 2000 – the corresponding regulation on sample calculations has now been repealed because the law now requires certain standardised sample calculations with specified interest rates as consumer information. The customer also receives this in the large information package – but is advertised with much more “optimistic” sample calculations.

By repealing the “R2/2000”, abuses due to misleading advertising with sample invoices are no longer denounced by the supervisory authority. And because they are officially sold by the insurer only as an illustration of a fictitious calculation result, they are worth as much as the advertising example of a betting syndicate in which the lucky millionaire winner is shown as an example.

There is therefore no reason at all why the supervisory authority should criticise such fictitious example illustrations. Finally, the concept of yield has no place in insurance anyway, because there is a risk of confusion with capital investments – which in itself is misleading according to the Ba-Fin. For example, because the return on investment often tends to be negative if the investment is terminated before the scheduled expiry date.


Clients misled by bankers, financial planners and “certified financial planners”

It is therefore also a typical mistake to trust one’s “independent” banker in matters of wealth and risk:

In case of doubt, the latter converted the insurance benefit into current capital using the fancy software of an Excel programmer. The foolish thing about this is that you can never turn an uncertain death risk (if it doesn’t occur before the policy matures) or an accident or disability risk into some capital in the present – so you certainly shouldn’t use it to supplement an asset balance.

But some bank customers still have bills in the four and five-digit range issued and debited for such consequential errors on paper.


Sample calculations are not worth more than colorful pictures

Insurance brokers should classify such sample calculations, even if they are generated with the software of insurers, roughly like the colorful advertising images showing a retired couple on the golf course: It is only an illustration of the possible outcome with a private pension.

About such “pictures” then also that pensioner widow will not complain, which drags itself daily with the going carriage to the physician, and whose private pension planned for the common gulf sport and gulf vacation is sufficient straight once for the additional payments for medicaments, hydrotherapy as well as taxi and flowers for the grave care. It is – despite all the apparent accuracy of concrete figures – only an example of a calculation, not the calculation of an example.

Not a responsible calculation of the likely outcome of the specific contract example, but an example of what such a notional calculation would lead to. For fun, you can also ask the actuary in charge whether the result of the example calculation is also likely to occur – but you should not expect a written answer.


Insurance intermediaries are only personally liable – never insured

For this good reason, property damage liability insurers have not provided coverage in the event that the broker makes an inaccurate statement about “yields, forecasts, profitability” – clairvoyance and burning houses are unfortunately not insurable. In this context, the insurance intermediary is of course liable for false statements, and as a rule personally – due to intentional immoral damage: This is also confirmed by the new ruling of the Federal Court of Justice (BGH) of 19.02.2008 (Ref. XI ZR 170/07). The advisor had recommended an investment that did not fit the risk profile – in return, the client had terminated his life insurance policies for retirement provision.


Intentional immoral damage through false promises by intermediaries

Prerequisite for § 826 BGB is the intentional wrong recommendation – the intention (motive, aim) of an injury does not have to exist, it is sufficient to accept it (conditional intention, to consider it possible). Even grossly negligent, recklessly incorrect advice is immoral if it is recognisably important for the investor’s decision and is given in pursuit of one’s own interests in the awareness of possible damage to the investor. Already a bare loss risk for the investor is considered here as damage (BGH judgement 13.09.2004, Az. II ZR 276/02).

Courts derive the immoral injury from circumstantial evidence, in particular deception about risks and/or returns. This also includes faulty sales training (LG München, Az. 12 O 5224/07, judgement of 24.08.2007). Agents who turn colorful pictures into promises of returns need not be surprised about their own liability later on.


How do you advertise properly with sample calculations and returns?

As long as the customer must consider example calculations and yield “promises” unmistakably as unrealistic as driving up the ski jump with the Audi, one may calmly advertise with it. However, if the intermediary himself spreads such things in a serious tone, the boundary to misleading and false advice is quickly crossed, because the customer then begins to attach an information value to the matter that is not due to him.

Such brokers will then also have to recognize the example calculation of 5-digit monthly commissions with which they themselves were recruited as the pied piper it was meant to be, in light of the looming liability lawsuits. With example calculations and net yields the mediator of life insurances paying attention to its adhesion does not recruit thus simply – briefly – in principle at all.


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

by courtesy of (published on 15.09.2008)

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About the author

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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