In addition to a current study, the procontra practice test also confirms that advisors have so far largely ignored the VVG reform.
Dr. Johannes Fiala, Attorney at Law “Detailed documentation can be excellent self-promotion.”
The reformed Insurance Contract Act (VVG) has been in force since the beginning of the year. But advisors and brokers do not seem to have warmed up to the new regulation yet. On the one hand, the majority of the broker community attaches little value to the reform. On the other hand, advisors are ill-prepared for the day-to-day running of the AMC. This was the result of the VVG study conducted by the research and consulting institute psychonomics AG. The moderate level of preparation was also confirmed by the advisory test which procontra editors carried out on a random basis among brokers, multiple agents and general agencies. The latter in particular committed serious consulting errors and ran the risk of falling into liability traps. Exclusivities with knowledge gaps. Friday afternoon. I inquire on the phone if I could come in for a consultation today. The friendly representative of HanseMerkur answers in the affirmative and an hour later I am standing in his office. Next to the entrance I place myself at a small table. “I’ll be right with you,” it calls out from behind a large yucca palm. Mr Bader* (name changed) sits down at the table with a few pieces of paper in his hand. Already on the phone he had asked my name, my age as well as the reason for my need for advice. It should be a private comprehensive health insurance. On the laptop I am shown the different possibilities. So actually just a single rate that Mr. Bader was kind enough to pick out for me beforehand. Depending on the service modules, the monthly premium would then be calculated, I am instructed. Anticipating my approval, Bader crosses his arms behind his head and leans back. It’s gone quiet now. I skim the performance characteristics again. “It all sounds rather good,” I say rather indecisively. An initial spark for Bader. “Well, that’s what I mean, too,” he agrees. “Do you want me to pull out the application?”… The way the conversation has gone so far, the representative is already in violation of two points of the ICA reform. First, against the duty to inform. This requires that the customer is provided with all contractual provisions and the consumer information prior to application. Bader did neither, even after the application was filed. On the other hand, the consultation and documentation obligation was not fulfilled. Comprehensive advice always includes enquiring about the client’s financial situation and needs. This must also be documented, together with a recommendation and its justification. None of this was the case, which could put Bader in liability trouble. Liability trap number three lurks in the application itself: the health questions. “Are you healthy? Have you had any illnesses recently?”, he summarises the content of the ten or so questions. I am fit as a fiddle and can’t remember any serious illnesses in the past, I tell him. He then ticks all the questions with a “no”. Another consulting error. The regulation of the pre-contractual duty of disclosure states that the customer only has to disclose the circumstances about which he was expressly asked in text form. Therefore, advisors should be particularly meticulous in asking questions about health. The following applies to the disclosure of brokerage fees
Heinz-Gerhard Wilkens, HanseMerkur “I doubt that all intermediaries have read the information on the VVG.”
still a transitional period until July 1 of this year. Here, of all places, Bader is already showing a willingness to provide information. “Between 200 and 300 euros commission I earn on this contract,” he answers when I ask. A good hourly wage, because after only 15 minutes I leave the office again together with the application. When we presented the interview transcript to the management, they reacted uncomprehendingly: “We can’t explain this approach. With this kind of advice, we run into considerable liability problems,” said a surprised Heinz-Gerhard Wilkens from HanseMerkur. And even if no policy would have been issued without a consultation protocol, as Wilkens points out, it is impossible to determine the quality with which, for example, the health issues were handled. Irrespective of legal innovations, a complex and consultation-intensive topic such as comprehensive health insurance cannot be dealt with in a single appointment, Wilkens adds. Bader should have known that. “In the run-up to the reform, information material was sent to the distributors. In addition, on-site training sessions were held specifically on this topic,” Wilkens assures. Apparently, consultant Bader himself was not on site at this appointment. Admittedly, this conversation set the standard in our test in the negative sense. But he did not remain an isolated case. The tested general agents of R+V Versicherung, Allianz, HUK Coburg or DBV-Winterthur also pushed down the grade average (see test result). For example, one HUK Coburg adviser did not hand out the consumer information before the application was made. She didn’t even when the application was completely filled out. She handled the health issues with similar negligence as predecessor Bader. The wishes and needs of the customer were also left unasked, and no documentation was produced. Confronted with this case, a HUK spokesman affirms: “We have informed all affected sales channels in detail about the changes with the implementation of the VVG reform. The individual procedures were also presented. In this respect, all sales channels are in a position to fulfil the legal requirements in the customer’s interest.” So it does not seem to be due to the willingness of the insurers to provide information. The question arises as to whether advisors are already sufficiently sensitized to the topic of the VVG reform. Wilkens himself doubts that the extensive information, printed on sheets of paper weighing tons, will be read by all representatives. In practice, the intermediary is thus constantly exposed to a liability risk. If there is an increase in violations and complaints, the license may be revoked after fines. Brokerage distributors as test winners. The broker sales organisations tested were far removed from the withdrawal of licences. Particularly commendable was the fulfilment of the duty to advise. Without registering, I ring the doorbell of OVB-Vermögensberatung. After a short waiting period, I describe my interest in a comprehensive health insurance policy to the advisor. It does not name specific insurers or rates. First, he gets a picture of me. He notes the insurance policies I already have and the amount I can freely dispose of each month. I’m ready to close. And yet: “I would pick out a few rate variants for you now and present them to you in a second appointment,” the financial advisor suggests. I agree and appear a week later in the same place. He prepared two rates from different providers. I’ll go for the cheaper one. In gleeful anticipation that he is about to fall into the trap of information requirements, he does mention consumer information. And in accordance with the VVG before the application is made. He lets me choose whether I want them in hard copy or on a CD-ROM. I’m opting for the digital option. Accurately he reads out the health questions. The only thing he doesn’t say about his commission is that he smiles at me when I ask. But as of July, he must be able to answer that question. MLP Vermögensberatung, which specialises in academics, also contributed to the good overall result of the brokers. As a bonus, the consultants tested here also quantified the amount of their commission. Making a virtue of necessity. The lack of comprehensive advice turned out to be the main fault in the test. Customers with a specific request for advice also need to be looked at in a more complex way. Existing insurance policies, pension products or reserves must be enquired about. A practical problem also seems to be the timing of documentation. There is certainly enough time for follow-up work after the customer meeting, but the law stipulates that documentation must be prepared at the latest when the application is submitted. Almost all consultants missed this point. Careful documentation is also a safeguard. In the event of subsequent liability claims, it serves as proof that the former
Dr. Johannes Fiala, Attorney at Law “Detailed documentation can be excellent self-promotion.”
advice was comprehensive and the recommendations suited the client’s life situation. “There is no question that the new regulation creates additional work for the broker. But he should convert this often annoying duty into his own positive marketing”, recommends lawyer and liability expert Dr. Johannes Fiala. Detailed documentation can be excellent self-promotion, he adds. Amazingly, in almost all of the test calls, we learned the amount of commission the salesperson would earn by closing. This is curious because, on the one hand, this point was judged to be particularly critical by 74 percent of the brokers in the study mentioned at the beginning. On the other hand, because a transitional period still applies to this point of the ICA. The disclosure of commissions will only become mandatory from 1 July 2008. mhu
Text: Dr. Johannes Fiala
(procontra 2/2008, 72)
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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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