Commission submission only together with the insurer

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A comparison portal wanted to make agreements with its customers on the issuing of commissions and prevent BaFin from classifying the business conduct as fundamentally illegal. The Frankfurt Administrative Court had a clear opinion on this.

With a not yet legally binding judgment of November 5, 2020 (Az. 7 K 2581/17 F, VersR 6/2021, 356-361), the Frankfurt / Main Administrative Court, which is responsible for lawsuits against the Federal Financial Supervisory Authority (BaFin), has an alleged loophole illuminated in the legal regulation on commission levies.

Insurers and intermediaries are not allowed to promise advantages

With the implementation law of the European Insurance Distribution Directive IDD, a new § 48b VAG was created under the title prohibition of special remuneration and commission submission. According to this, insurance companies and insurance intermediaries are prohibited from granting or promising special payments to policyholders, insured persons or beneficiaries from the insurance contract. Such agreements are ineffective.

However, the VAG allows a few exceptions. One applies to so-called company-affiliated insurance brokers. Another applies to minor amounts of up to 15 euros per insurance relationship and calendar year. A third exception concerns special payments that are used to permanently increase performance or reduce premiums. The case negotiated in Frankfurt am Main was about this exception.

Commission for a flat-rate supervision fee

The complaint was made by a broker who operates a comparison portal and offers both new contracts and support for current insurance contracts. The customers were offered the option of forwarding the closing and existing courtesy days flowing to the portal to them. In return, customers should pay an annual flat rate of twelve euros for each insurance contract handled on the portal.

In 2017, the portal asked BaFin in writing how the above-mentioned exception was to be understood. In its response, BaFin pointed out that it would only not be considered a prohibited commission levy if the commission levy was agreed directly with the insurance company and became effective as a permanent benefit in the insurance contract. On the other hand, an agreement between the insurance broker and the customer is not sufficient, even if this also leads to a permanent advantage.

BaFin and IHK have different opinions

In July 2018, the portal operator also asked its responsible Chamber of Commerce and Industry (IHK). This resulted in a different interpretation of Section 48b of the VAG that was favorable for the portal’s business model. All that matters is that there is a demonstrable contractual agreement on a permanent advantage.

This is one of the recurring cases where the BaFin supervisory authorities and the chambers of industry and commerce are at odds with each other in assessing behavior in sales and in the end the intermediaries concerned get caught between all stools.

In this case, the dispute entered the next round in August 2018, when BaFin wrote to the insurance companies it supervised and explained its legal opinion that a contractual agreement on the payment of commissions only between the agent and the customer falls under the statutory prohibition on the payment of commissions. The intention was also announced to issue prohibition orders against those insurers who either work with the plaintiff or with other intermediaries with a comparable business model. On the other hand, the broker filed an urgent application against BaFin in order to prevent the issuing of such orders that would have resulted in a ban on the business model. However, the Administrative Court of Frankfurt / Main rejected this urgent application by order of September 28, 2018 (Az. 7 L 3307/18 F). A complaint to the Kassel Administrative Court also failed (decision of February 5, 2016, Az. 6 B 2061/18).

Nobody intends to issue prohibition orders

In October 2018, BaFin informed the insurers again, pointing out that a prohibition order would not mean that an insurer would no longer be allowed to work with this broker – it would just not be allowed to support the business model of paying commissions. Reference was also made to the still open legal dispute and the differing opinion of the responsible Chamber of Commerce.

With the currently decided lawsuit, the portal operator wanted BaFin to write to the insurers again and inform them that they were not responsible for the supervision of insurance brokers and that they did not intend to issue prohibitive orders against insurers who work with this broker. This action was dismissed by the Frankfurt / Main Administrative Court.

First the damage, then the lawsuit

The reasoning states that the broker has no right to demand proactive circulars from BaFin, but can only avail himself of legal protection to eliminate the consequences of the actions of the defendant parties. This means that provable, disadvantageous consequences would first have to arise from the actions of BaFin through illegal interference in the rights of the entrepreneur, so that the broker can successfully defend himself against this. But that has not happened so far.

The previous circulars of the BaFin are not objectionable, although as “sovereign real acts” they specifically affect the right to free professional practice (Art. 12 Para. 1 Basic Law). The court does not gloss over the effect of the circulars and that it was even the intention of BaFin to urge insurers to terminate or restrict the business relationship with the broker of their own accord in order to avoid prohibition orders. Nevertheless, the court considers these consequences to be justifiable and BaFin to be entitled to express its legal opinion as part of its supervisory activities, even if this could have consequences for individual market participants.

Disincentives arise not only from acquisition commissions

It is interesting that the court did not accept the broker’s argument that the prohibition of commission payments is essentially intended to avoid false incentives through one-off, high sales commission. It is true that the reasoning for the law actually mentions the avoidance of false incentives as a key argument in favor of the prohibition of commission payments.

However, the court points out that follow-up commissions can also trigger false incentives, at least if they are above the de minimis limit set by the legislator of the aforementioned 15 euros. There is a risk that customers will be tempted to forego advice or to give up existing contracts for financial reasons and to conclude a less favorable contract. And that advice should not necessarily be offered at the low fee of twelve euros, the portal itself pointed out, it is noted. However, this also raises the question, which is irrelevant in this procedure, as to whether an insurance broker is not generally violating his obligations.

Author (s): Matthias Beenken

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