What compensation does the customer owe in the event of premature cancellation of his insurance premiums?
The German Federal Supreme Court (BGH, ruling of 12 December 2013, file no. III ZR 124/13) decided that not only a broker but also an insurance agent can be promised a remuneration by his customer for brokering a life insurance policy with a net policy. Capital investors and medium-sized companies are increasingly taking advantage of the opportunity to save up to more than 95% commission. For this purpose, customers agree on a remuneration with the insurance broker or insurance agent, sometimes combined with an agreement on payment by instalments.
Price agreements are beyond judicial control
Insurance brokers and insurance agents can effectively agree with their customers on a remuneration, which may have to be paid in instalments, for net policies. Performance and consideration, as a genuine price agreement, are beyond judicial control (BGH, judgement of 13.05.2014, Ref. XI ZR 405/12). The limit finds this with the usury – interest usury as well as commission usury. Actuarial reports on the usual brokerage and commission rates are regularly requested by courts in connection with net tariffs, whereby, depending on the case, only the usual is owed, or this can be exceeded up to the usury limit, e.g. double. In the case of ancillary price agreements, on the other hand, courts can also generally review the validity of the agreement under the law of general terms and conditions, so that, for example, additional credit processing fees in addition to the agreed loan interest are inadmissible (BGH, judgments of 13 May 2014, Ref. XI ZR 405/12 and XI ZR 170/13). In insurance brokerage, it will also be permissible to charge the customer for his expenses and outlays, §§ 670 ff. BGB.
Since price control with regard to the consideration, i.e. the direct object of the customer’s main service, is not subject to judicial control under the law of general terms and conditions (BGH, judgement of 06.02.1985, Az. VIII ZR 61/84; of 12.03.1987, Az. VII ZR 37/86), an insurance agent or broker could by all means also – up to the usury limit – agree a multiple of the usual remuneration with the customer. In principle, courts may review additional benefits, for example to determine whether they are incompatible with statutory regulations or whether they are still in line with the model of corresponding legislation. Such legal provisions would be, for example, laws, unwritten legal principles, commercial practice and judicial law (BGH, judgment of 10.12.1992, Az. I ZR 186/90).
No fate sharing of insurance premium and brokerage fee
In the case of a remuneration agreed with the agent for the brokerage of net policies, the principle of destiny sharing, according to which a commission is only payable as long as an insurance premium is paid for the main contract, no longer applies. This means that the agreed remuneration must also be paid if the customer later gives the insurer premature notice of termination or, for example, later revokes the insurance contract. The only requirement, also vis-à-vis consumers, is that the insurance brokerage had been successful. In the same way that a flight assistant can be promised subsequent payment of his or her performance-related remuneration in instalments (BGH, judgments of 29 September 1977, BGHZ 69, 295; 69, 303).
Incorrect revocation instruction leads to compensation
Even if the consumer is still entitled to a right of withdrawal due to incorrect information on the right of withdrawal, a brokerage service that has been provided in full cannot be returned in nature if the insurance brokerage is successful. The consumer then owes the intermediary compensation for the objective value of the advice and mediation service, but not exceeding the agreed remuneration. The usual compensation, or alternatively an appropriate remuneration, without regard to the individual value for the insurance customer, is possible as compensation for lost value. Thus, the fact that the customer has prematurely terminated or possibly revoked his insurance contract is not taken into account. However, what exceeds the usual is not owed, even if it was effectively agreed and did not exceed the usury limit.
The BGH points out that the agent or broker has special obligations to provide advice and information if an independent remuneration agreement is concluded between him and the customer. The agent of net policies is also obliged to inform his private and commercial customers about the consequences of taking out a net policy in the event of premature termination. In the absence of such an instruction, there is a real presumption that the customer would not have opted for a “net policy” if he had been properly informed. Then the remuneration is reduced accordingly, down to zero.
For example, the Düsseldorf Regional Court decided in its judgement of 2 April 2014 (Case No. 23S 150/13) that, in the absence of any indication by the agent of the disadvantages of the remuneration agreement, a claim for compensation exists in the event of premature termination of net policies, § 63 VVG. This is based on exemption from the entire agreed remuneration and therefore also on the repayment of the payments already made in instalments.
For the assessment of the insurance agent’s claim for compensation
The value of an insurance agent’s advice or mediation will be significantly lower than the value of an insurance broker’s service, given the typified and objectified approach that may be offered. This is because one of the essential duties of the insurance broker, to base his advice on a larger number of insurance contracts offered on the market by a wide variety of insurers, will not or only insufficiently be performed by the insurance agent, § 60 para. 1 sentence 1 VVG. This also applies to the quite frequent case that the net policy is provided by a pseudo or sham broker who only works with one or a few insurers.
However, the agent may also be a large sales organisation to which an insurer has transferred, for example, its entire sales organisation, the costs of which are borne by the policyholder under the agency fee agreement. Sometimes such distributors even have to pay a royalty to the product supplier for an exclusive agreement, from which the product supplier covers its internal distribution costs, unless the distributor has also taken over these tasks, including setting up and training the distributor, risk assessment and policy issuing. This increases the value of the brokerage activity for the policyholder, despite the fact that the quality of the advice provided is the same externally, because he does not have to pay these costs to the insurer with the premium. A simple typecast division into brokers and agents is therefore not possible.
Acquisition cost agreement with insurer
The BGH takes a different view of separate – otherwise very similar – acquisition cost agreements between the insurer itself and the policyholder. These costs must be paid separately with the premium, often also in instalments over the first 60 months. The Federal Court of Justice considers this to be permissible, but the principle of sharing the fate of the premium applies. This means that the obligation to pay the remaining instalments of the acquisition costs does not apply if the underlying insurance contract is cancelled – the agreement on acquisition costs can thus also be cancelled together with the insurance contract.
by Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm
by courtesy of
www.experten.de (published on 04.10.2017)
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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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