Most policyholders believe that their private and business secrets entrusted to the insurance agent and broker are protected. But in fact the situation is quite different, and the protection is often no better than if you had entrusted them to your hairdresser.
No reliance on the legal private secret
The Higher Regional Court of Saarbrücken (judgment of 14.11.2012, Case No. 5U 343/10-55) ruled that the insurance contract could not be challenged by the insurer on grounds of fraudulent misrepresentation if the insurance agent had not correctly adopted all the answers provided by the insurance customer in the application form because the policyholder had designated them as confidential. However, the insurance agent should have forwarded all information to the insurance company as its agent, including confidential information. So no insurance customer is protected from the insurance agent not keeping confidential information to himself – the opposite is true, because he has to pass it on to his company.
Gaps in the private secrecy of § 203 of the German Criminal Code (StGB)
After all, the agent is even obliged under the German Penal Code (StGB) to keep private secrets from third parties, § 203 (1) No. 6 StGB – insofar as these have been entrusted to him as a member of a health, accident or life insurance company. However, this does not apply to, for example, property and liability insurers and insurance brokers. It is irrelevant whether the insurance agent or multiple agent is employed or self-employed. Even in the case of a broker via a supplementary clause in the brokerage contract, there is no protection under the StGB if the broker breaches the contract. Brokers in general as well as insurance agents, e.g. in the property, liability and legal protection lines, may therefore pass on private and business secrets of the policyholder to any third party just as unpunished as the policyholder’s own hairdresser.
No collection of agent’s commissions via settlement agents
In principle, the insurance agent is not permitted to assign his commission claims to a collection agency for collection. The Federal Court of Justice (BGH judgement of 10.02.2010, Ref. VIII ZR 53/09) declared corresponding contracts null and void due to violation of § 203 StGB (German Criminal Code) if this is done without the consent of the insurance customer regarding private health, life or accident insurance. The very fact that an insurance contract exists must be kept secret by the insurance agent from third parties.
Private secrecy hits insurer when changing caregivers
If an insurance agent decides to transfer his managed insurance portfolios with the future management commissions to another insurance agent, only the health, life or accident insurer also has to observe private secrecy. In the case of private health, life or accident insurance, even the assignment of service commissions would, in case of doubt, be punishable and void (OLG Stuttgart, judgement of 03.02.2009, file no. 1U 107/08).
The death of the insurance agent (or of the policyholder) does not mean that the duty of confidentiality ends here, but the heirs have to observe this mandatory, § 203 StGB. The right to release from the duty of confidentiality does not pass to the heirs, so that the transfer of care to another intermediary may fail. Finally, an insurance broker is occasionally entrusted with additional tasks by the insurer, similar to an agent, so that he also runs the risk of criminal liability in the event of a portfolio transfer. Typically, British insurers had integrated their intermediaries into the sales organisation in such a way that they appeared as “knowledge representatives” of the insurance company. Some insurance syndicates entrust brokers with the receipt of declarations from the policyholder or with the settlement of claims, so that they are considered to be part of the insurer’s sales force and, in case of doubt, are also to be treated like agents under criminal law.
Necessary confidentiality agreement
In the case of all property insurance policies, such as liability and legal expenses insurance policies of a private or commercial nature, on the other hand, the policyholder may not rely on either the broker or the agent to protect his business or private secrets, and would have to regulate this within the framework of a business secrets or confidentiality agreement. However, since a violation of this would only be a breach of contract obliging to compensation, whereby a material damage is often difficult to prove, it is recommended to be on the safe side to impose a substantial contractual penalty for each case of betrayal of secrets.
In many cases, insurance brokers will represent their clients by power of attorney, and forward to the insurer their correspondence with the client. It is then not up to the insurer – and there is also no law protecting him here – to induce the broker to maintain secrecy, but rather the customers must arrange this themselves with a contractual penalty.
It is not uncommon for insurance brokers to fail to forward copies of their correspondence to their clients in breach of their duty to inform, and are therefore liable for proven damages resulting from this – here too a contractual penalty can have a preventive effect.
The provisions of the Federal Data Protection Act, on the other hand, are generally of no help, as these concern other matters. In the case of private or commercial insurance contracts, self-employed professionals, such as insurance agents, are also not subject to the duty of confidentiality pursuant to Section 17 UWG, because they are not employees (BGH, judgment of 26.02.2009, Case No. I ZR 28/06).
by Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm
www.pt-magazin.de (published 09/04/2018)
www.innovationundtechnik.de (published in issue 4/2018, pages 38-39 under the heading: Insurance agents must also disclose confidential policyholder communications to their companies).
http://www.komet-pirmasens.de (published in Issue 5604, page 12, under the heading: Insurance Agents Must Also Disclose Policyholder’s Confidential Communications to Their Companies).
www.bindereport.de (published in issue 04/2018, page 26 under the headline: “Confiding” insurers)
www.cash-online.de (published March 02, 2018 under the headline: Intermediaries: private and business secrets mostly unprotected)
www.handwerkernachrichten.com (published March 2018 under the headline: Why Private and Trade Secrets are Mostly Unprotected by Insurance Intermediaries).
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About the author
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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