Life Insurance

Consulting errors


There are claims for additional payments for life insurance customers in the billions.

The Federal Court of Justice (BGH) decided in its ruling of 26 September 2007 (ref. IV ZR 321/05) that policyholders may be entitled to a minimum surrender value after termination. This also applies to unit-linked life insurance policies. Experts estimate that insurance customers are entitled to several billion euros from terminated unit-linked and other endowment life insurance policies.

The BGH points out that contract clauses on the charging of acquisition costs may also be invalid in the case of unit-linked contracts due to lack of transparency. In the event of premature termination, the insurance customer is entitled to a minimum surrender value from the insurer. Legal grounds are non-transparent or ineffective clauses in the insurance conditions, in the contract in question in §§ 12 III and 24 I GCI.

The insurance companies should have informed the customers transparently about the economic disadvantages of an early termination already at the time of the conclusion of the contract. The clause on offsetting the acquisition costs (including the commission for the brokerage) by way of Zillmerisation is also non-transparent and thus invalid if the insurance customer “cannot see the extent of the disadvantage associated with the offsetting”. The BGH refers to earlier decisions according to which a contract amendment made by the insurer by means of clauses with the same content is also invalid. The insurer had apparently assumed itself that its old clauses were invalid – the replaced new clauses, however, had not even been validly concluded in the trustee procedure according to the ruling of the BGH.

Insurers have so far not considered the previous BGH rulings of 12 October 2004 to be relevant for unit-linked life insurance because they relate the minimum surrender value to the unzillmerised actuarial reserve. In unit-linked life insurance, however, there is no such unzillmerized actuarial reserve, only a fund account.

However, the court now ruled clearly that in the case of unit-linked life insurance, the “unzillmerised fund account” instead of the unzillmerised actuarial reserve represents the starting point for the customer’s claim for subsequent payment. The ruling does not mention cancellation deductions – these were originally only invalid because their calculation was based on the “current value”, a term which the BGH also considered to be non-transparent. However, there is also no non-transparent current value in the case of unit-linked contracts, as the fund account takes its place. So if cancellation deductions are provided for at all in unit-linked contracts, these at least cannot be challenged with the preceding BGH rulings.



Only a fraction of endowment policies are “held out” until expiry – the cause is often massive errors in advice by brokers. The Federal Court of Justice (BGH) also commented on this this year (ruling of 14.06.2007): Agents or insurers are liable if the brokered life insurance does not meet the needs of the customer, for example does not correspond to his financial capacity. In this respect, claims for damages from terminated life insurance policies of the last 30 years are addressed. The ambiguity of contractual clauses (which are not completely non-transparent) results in the interpretation which is more favourable to the policyholder. In its judgement of 18 August 2006, the Heidelberg Local Court (AZ: 30 C 122/06) ruled against MLP AG that around 90 percent of the acquisition costs in certain contracts must be reimbursed.

In the court’s opinion, the insurer had not made it sufficiently clear in its clauses that the acquisition costs were incurred in each of the first ten years and was therefore only allowed to charge the costs calculated annually for the first ten years in total. Often, only an actuarial appraisal reveals how the insurer has actually calculated, based on the clauses it has used or without such clauses. Only in this way can the disadvantages be identified and made accessible to further legal review. Insurers usually do not offer this transparency for good reasons.

by Dr. Johannes Fiala

by courtesy of (published in Landpost, issue 30/2008, page 25)

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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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