What legal obligations do life insurers have to inform their customers before the conclusion of the contract about the possibility of reducing claims, and what is the practice of life insurance policies as established by Bafin? The German Bundestag recently dealt with this question.
The answer of the Federal Government of (BT-Drucksache 18/7221) to this question is: “There is no express obligation for life insurers to inform their customers before conclusion of the contract about the possibility of reducing claims”.
Obligations of the insurer and its sales department
However, an obligation (not explicit, but resulting) to provide advice follows from the legal regulation of § 6 of the German Insurance Contract Act (VVG). This obligation applies not only to the insurer itself, i.e. its dependent employees, but also to its sales department (insurance representatives, agencies, insurance brokers).
Until the conclusion of the insurance, prior to the conclusion of the insurance, the distributor must provide the customer with documentation, §§ 61, 62 VVG – otherwise he is liable for damages, § 63 VVG. Scientific studies show that up to more than 85 percent of all consultations are not even documented – this can even lead to a reversal of the burden of proof for the customer.
Misleading advice is also harmful, for example, if it is not only stated that “this is the guaranteed maturity benefit”, but added: “This means that you can be sure of it”.
DAV draws up guidelines for possible cuts
The German Association of Actuaries (DAV) has already drawn up a paper explaining how surrender values can be reduced for a limited period of one year for the insurers concerned, in accordance with the German Actuarial Association’s (DAV) guidelines. § Section 169 paragraph 6 VVG. After such a reduction period, however, the original surrender values do not exist, but it is decided whether and how much the reduction is extended. This is intended to take countermeasures in the event of a reduction in the value of the investments or to prevent a run on life insurance surrenders by reducing the surrender values in such a way that the termination becomes at least as unattractive as the continuation of the life insurance.
The DAV expressly points out that this reduction is also permissible if the imbalance was caused by the insurer, for example through miscalculation, and even if this was foreseeable. Neither the insurance supervisory authority nor an independent trustee needs to be consulted for this.
Contestation, revocation and reversal
The consequence of incorrect advice and instruction may be that the policyholder may contest the contract, for example on the grounds of deception, or may first sue the agent for a declaration that the agent is liable for the personally given guarantees, or even that the agent must reimburse the premiums.
For years, customers with private pension insurance have been finding that they receive less than half of what they were originally calculated to receive.
Since the BGH-Bond-judgement (Az. XI ZR 12/93) credit institutions and financial advisors have the obligation to provide “investor and property-oriented” advice when brokering capital investments. This means to examine the customer needs, but also the investment product or investment object.
Obligated to pay damages
The Federal Court of Justice (BGH) already added to this in 2007 in its decision (ruling of 14.06.2007, file no. III ZR 269/06), in that, for example, insurance brokers are obliged to pay damages if they broker an annuity or life insurance policy to a customer which does not “meet his needs and financial capacity”. At the time, the BGH-Bond-judgement was thus extended to the brokerage of pension and life insurance policies.
by Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm
by courtesy of
www.versicherungsmagazin.de (published on 22.03.2016)
