– Why policyholders wrongly go away empty-handed in whole or in part in the event of a claim –

In the past, many customers were notified of changes to the General Insurance Conditions (AVB) that were invalid. In some cases, the insurers (VR) were forbidden by the courts, under threat of punishment, to refer to notified changes for which there was also a trustee’s consent – which was also found to be invalid. Some benefits administrators use them anyway. And customers may never have been informed that the AVB change communicated to them does not apply to them.

Invalid changes and service restrictions

Occasionally – such as on the occasion of the insurance contract law reform in 2008 – new GCI were sent to customers with the explanation that these were the ones that applied to them, although in many places they did not apply to them at all, including a number of benefit restrictions. It is not uncommon for insurers to lose track of the GCIs they have agreed with customers. Ultimately, also because these only become effective with the receipt of a simple letter, the receipt of which does not have to have taken place, but which is assumed by the BoD – however, it cannot prove it as a rule.

Customers who want to be sure of their true full benefit entitlements should compare their original policy terms and conditions with those most recently asserted by the insurer and ask the insurer’s board very seriously and forcefully which individual clauses the insurer actually intends to rely on and which do not apply or apply differently than most recently asserted by VR. The authors are aware of up to more than seven pages of reply letters with detailed corrections.

A typical example of deception are the tariff change guidelines of private health insurance to be implemented as of 01.01.2016 – where old and new conditions are not correctly compared and the policyholder is not informed about more favourable conditions and benefits that are actually still valid for him and that he will lose through the change. In this way, misadvice by tariff change brokers tends to be encouraged.

Claims staff and benefits departments hardly know about ineffective clauses

Of course, the AVB download options offered by many VRs are not safe if customers have been insured for a longer period of time, as some changes were only allowed to be implemented for new entrants. So, to be on the safe side, it is advisable to check with the board of directors (almost any other body is inappropriate due to regular lack of knowledge). There, the policyholder (VN) should request the insurance conditions that actually apply to him and on which the VR actually wants to rely, without clauses that were never implemented for a longer insured person like him or that were later – or their amendment – subsequently determined to be invalid.

If doubts remain with the policyholder after this – in view of the fact that VR not infrequently really no longer know what has been agreed – they should complain to BaFin. BaFin has been aware of the problem for decades – as publications show – and therefore closely examines whether the conditions allegedly submitted by the VR for the policyholder are actually correct.

Penalty payments by insurers due to use of clauses

The consumer protection agency could also be pleased if monetary payments are due by the VR in the event of a claim for injunctive relief backed by a penalty – up to several thousand euros in each case of invocation of such clauses.

Some judges do not accept the alleged changes of GTCs already because the VR cannot prove what it had agreed with the customer. Any changes made in 1994 or 2008, for example, are thus ignored – older clauses that are more favourable for policyholders often apply. Thus, some old AVB clauses are simply invalid if they have not been adapted to the VVG reform of 2008 (OLG Cologne, judgement of 19.08.2010, ref. 9 U 41/10).

Ineffective clauses also in occupational pension schemes

The own excessive demands of insurance companies are already shown by the fact that the Federal Supervisory Office has had to inform insurers for decades (e.g. Az. O 11 – A 120a/01 of 10.10.2001) which clauses are invalid in direct insurance business in life insurance contracts.

Even if the Insurance Contract Act (VVG) grants the VR the unilateral right to adjust premiums and benefits with the consent of the trustee, silence on the part of the policyholder in response to other “voluntary offers of change” does not constitute consent to a contract amendment. The Federal Supervisory Office for Financial Services (BaFin) investigates customer complaints in this regard as part of its maladministration supervision (BaFin Journal 02/2016).

In the case of premium increases in the insurance of occupational disability or life insurance, the policyholder can also demand a reduction in benefits – instead of payment of a higher premium. In the case of premium increases in private health insurance, the VR must point out the possibility of changing tariffs, and advise free of charge, § 204 VVG.

Ineffective rescission and unjustified challenge by the insurers

Some insurance companies repeatedly have judges write into their books what has been standard case law for decades. If, for example, an insurance agent incorrectly includes the answers to the application questions in the questionnaire, “what is brought to the attention of an agent of the insurer in the course of taking up the application with reference to this application is also brought to the attention of the insurer even if it is not included in the application form” (OLG Oldenburg, judgement of 19.12.1990, ref. 2 U 180/90). Withdrawal or reduction of services are therefore excluded. However, many courts recognise rescission on the grounds of error on the part of the board of directors.

Claims processing like in the stone age – leads insurance brokers into liability

Insurance brokers are well advised not to simply believe what is written in the latest AVB of the policyholder – for liability reasons, they must ask the VR and critically examine the answer. Insurance advisors and lawyers also have such a duty: “In view of the fact that even judges have only imperfect human cognitive faculties and that the possibility of error can never be ruled out, it is the duty of the lawyer to do everything in his power to counteract the occurrence of errors and oversights on the part of the court” (BGH, NJW 2016, 957).

Tariff change brokers are also affected in terms of liability. Because if they simply compare the current alleged GCI of the customer with those of a change tariff (in which the most current ones then apply), they may overlook the fact that the policyholder in reality still has legally old, far more favourable GCI, without suspecting it.

The same should apply if VR advise on tariff changes in accordance with the new guidelines and only compare the most current GCI of the policyholder’s tariffs with the change tariffs, but omit the more favourable old conditions. A VR is also liable for this and may have to pay later according to the more favourable conditions or even restore the old tariff.

Higher court case law more often remains unknown

Some insurers still work in the Stone Age, to put it mildly. For while sales people rave about “FinTech” and Internet sales, they are already technically not at all set up in the day-to-day business of claims processing to be able to differentiate in a tariff according to which various conditions have been effectively agreed with customers. Normal clerks are completely clueless here. IT in benefit processing will usually not be able to tell the difference either.

Hundreds of millions of VR would have to be invested in order not only to make the IT systems fit for distinguishing between generations of conditional strata in each tariff, but also to reconstruct this correctly afterwards with the insured persons and to train the clerks, whereby it slows down processing in any case. Only a robot would be able to keep track of this, if it had the applicable information – a practically unsolved problem. Especially if one does not know which notifications of change have been effectively received by the insured party at all or which receipts are disputed without any possibility of proof to the contrary.

The Federal Court of Justice (BGH, judgement of 06.07.2016, file no. IV ZR 44/15) ruled that the usual clause in the daily sickness allowance regarding the reduction of premiums and benefits is invalid, Section 307 of the German Civil Code (BGB). Nevertheless, this ineffective clause is still used by claims processors, so that the insured person receives far too little daily sickness benefit. An everyday violation of the law.

Mass phenomenon of invalid clauses in GPCs

A conscientious broker would have to ask himself whether the content of clauses is comprehensible to average policyholders; whether technical terms are used without a fixed meaning, which disadvantages and burdens are expressed too vaguely, and whether certain industry knowledge on the part of the policyholder is important. More often, exclusions and limitations of the VR are then ineffective.

The insurance customer is left out in the cold, because in the event of a claim he first has to see for himself what he has insured in the first place and under what conditions – or possibly settle for a fraction of the originally promised insurance benefit. Sometimes this proves to be a risk to one’s own existence – this is also accepted in the event of damage.

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