Trained in liability

Because the market for private health insurance has become increasingly narrow, insurers are promoting poaching in other companies’ portfolios through training courses. The liability risk involved is downplayed. Few brokers are aware that the usual statutory minimum cover in VSH is often likely to be too low in view of the liability risk.


The fairy tale of the donated collective ageing reserve goes like this: insurers with over-aged portfolios often have very high ageing reserves on their balance sheets – in relation to premium income – for example five euros to one euro or more.

If you now terminate your contract with a younger insurer, which has only one or two euros of ageing provision per euro of premium income on its balance sheet, and switch to the older insurer, you lose little collective ageing provision, but gain a share of a much higher collective ageing provision with the new insurer.

Courts would also have found that the customer has no right to the ageing provision anyway. And, moreover, it was not high. In the end, one does not lose anything by switching, certainly not any ageing provision, because one cannot lose anything that does not belong to one. Brokers trained in this way quickly put their new sales knowledge into practice – and then just as quickly end up in front of the judge.

The broker then tells him, in response to the reproach that he has not provided information about the loss of the ageing provision and must now be liable for the customer’s loss, that he even provides very precise information on precisely this point. And on further inquiry by the judge, the broker then proudly spreads his sales fairy tale, learned for free or for a fee, about the collective ageing provision at the new insurer as a gift. As such training courses have become widespread over the past few years, this is not new to the judges and they know the true background from a number of cases that have already been judged.


Ageing provision has an individual effect

Lange insured customers in private health insurance no longer pay the new premium at their attained age, but a lower one if the tariff is calculated with ageing provisions. The difference – the achieved premium discount – increases with age and with the difference also the ageing provision of the customer.

This represents – roughly speaking – the cash value of the achieved contribution discount – approx. 200 times the monthly discount, often 20,000 Euro and more. The customer has an irrevocable individual legal claim to this – and thus to the associated ageing reserve – as long as he remains insured with this insurer.

However, he loses it – even in the case of partial transfer of the ageing provision for new business from 2008 onwards for the most part – by terminating the contract and switching to another insurer. The high ageing reserves in the balance sheets of the latter belong to the existing customers, who cannot pass on any of them, because they serve to finance their achieved premium reductions for life.

The loss of the premium discount then turns out to be a loss that the broker is entitled to recover. This means that a loss can “pile up” in front of the insurance broker which, extrapolated, is only partially insured because the insurance broker’s VSH broker has never determined the typical risk – and so in the end two brokers are liable: the PKV broker and his VSH broker.

Deliberately incorrect training that results in property damage can lead to liability for damages. Affected brokers should check their documents to see whether they have really understood everything correctly, and in this case have it checked – by a lawyer or actuarial expert – to what extent incorrect training has led to financial loss and the training manager can be taken into recourse.


by Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm

by courtesy of (published in Performance, issue 10/2010, page 45)

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About the author

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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