LVs must meet the needs and capabilities of the customer

Published on 27.09.2007

In its decision of 14 June 2007 (Ref. III ZR 269/06), the Federal Court of Justice (BGH) indicated that damages must be paid if a life insurance policy was brokered to a customer which did not “meet the customer’s needs and … financial capacity”. If such a contract only runs for a short time, e.g. only one year, the customer does not even get two percent of his payments back according to a study by Prof. Adams – a negative return of over 98 percent. The Munich lawyer Dr. Fiala points this out. If a claim for damages is based on incorrect advice, investors can also demand capital market interest for lost profit in addition to the premiums. Investors still have the opportunity to claim damages from claims made over the last 30 years. The cases of incorrect advice do not only include contracts where it was questionable from the outset whether the customer would be able to pay the fixed premiums at all in the long term. Often, insurers have their customers submit “non-binding sample calculations” with unrealistically high returns when taking out a policy. According to some rulings, this can lead to the insurer not being allowed to reduce the surpluses at a later date (claim for performance) or to the contract having to be rescinded with repayment of premiums including interest.
(Client letter from the Jani law firm dated 25.09.2007)
Courtesy of www.jani.de.