In the meantime, there have been umpteen court judgments in which the importance of broker contracts, broker powers of attorney and other agreements between the broker as a trustee and his customers in terms of liability was emphasized. Just remember a lengthy lawsuit by a customer in the wake of the “Christmas storm surge” in December 2016, first against the insurer and ultimately against the broker. This would have had to organize the insurance protection that also covers the missing risk – in this case public liability claims due to environmental impacts.
As part of the ongoing support, an insurance broker must monitor the insured risk, as Versicherungsbote reported, and inform the policyholder of any changes and work towards an adjustment. In the case initially mentioned, the court saw it as proven that these duties had been violated. Finally, the brokerage company could not produce any documentation showing that the broker had informed the customer about the lack of insurance coverage.
This case with existential consequences makes it clear what role suitable contracts play for brokers and their customers, which cannot be covered with the VSH or blanket and outdated contracts. Oliver Meixner, specialist lawyer for insurance law, who fought for the customer, pointed out that brokers should agree an individual limitation of liability with their clients, especially in the case of larger risks.
The @AssekuranzDoc
The @AssekuranzDoc
dr Peter Schmidt is an expert in personal insurance and a management consultant in the field of insurance, sales and brokers with many years of experience as a manager and board member at German insurers and tweets as @AssuranceDoc.
The contract with the customer thus intervenes in the entire consultation process of needs assessment, selection of offers, product decision by the customer, documentation and ongoing support. And if the broker does not want to expose himself to unmanageable risks, then all contracts should also include duties and rights, liability limits and business processes that protect both sides from surprises.
Importance of the limitation of liability in the brokerage agreement in connection with the documentation
As can be seen from the damage case listed and the broker’s omissions in terms of the quality of the brokerage contract’s content and the lack of documentation, the brokerage contract plays a very decisive role. Renowned specialist lawyers for insurance law therefore repeatedly emphasize that the brokerage contract is THE most important document for the relationship between customer and broker.
A high-quality brokerage contract must regulate the rights and obligations of both parties as comprehensively as possible. This ensures transparency if it is properly formulated and designed. Otherwise there is always a latent risk for the intermediary of unpleasant liability cases, which may not be covered by the pecuniary loss liability.
Let’s go back to the above court decision. According to current assessments, the liability limitation clause was incorrectly drafted. Also, the provisions of § 67 VVG were not sufficiently taken into account in the brokerage contract. According to this, a limitation of liability for a breach of the consulting and documentation obligations is not possible. If you internalize this connection between brokerage contract, liability and documentation, because you hardly understand the brokers who never or only rarely use brokerage contracts and also take the topic of documentation very laxly.
Attorney Jens Reichow, Law firm Jöhnke & Reichow in Hamburg, but clearly shows that there are certainly possibilities for limiting liability. He writes:
“However, with regard to the violation of other obligations, a limitation of liability in terms of amount is of course sensible. However, in order for a limitation of liability to be effective in this area, the liability clause must not apply to a violation of the consultation and documentation obligations according to §§ 60, 61 VVG.
In addition to the issues of liability, a good brokerage contract includes the scope of the sectors advised by the broker up to the exclusion of certain sectors or a limitation of the sectors as a sectoral brokerage contract, for which the customer might want advice and, if necessary, the brokerage of products. This regulates or even excludes the obligation to provide advice. Then there are the customer’s obligations to report changes in the risks for which advice is desired and other obligations.
For the large part of the single broker is still on the subject Continuation of the brokerage contract after a possible death advised by the broker. Such a passage is missing in many brokerage contracts. This can lead to the termination of brokerage contracts in the event of death. The continuation of the brokerage contract can be determined by the heirs as a lump sum, in which case the expertise of the heirs is of course important. But this regulation also enables the portfolio to be sold after the worst comes to the worst. The specialist brochure “Succession – Knowing How” also offers more in-depth information on this topic.
Also interesting is the note from lawyer Reichow, who recommends that brokers make sure that the brokerage contract also contains a so-called prohibition of assignment. “In the event of liability, the customer cannot transfer the alleged claim against the broker to third parties and (must) himself appear as a witness in the lawsuit against the broker.”
Regulations on remuneration from brokerage fees, fees and service flat rates
In many brokerage contracts, reference is rightly made to remuneration for advice, brokerage of policies and customer care through brokerage. So far so good. Modern insurance broker contracts should also regulate and make possible further remuneration from the perspective of possible commission reductions or bans.
Even if here and there some brokers still turn up their noses at the topics of fees and service flat rates – the fact is: Both forms of remuneration can also enrich the consulting service for customers and are legally possible. Lawyer and executive director of the AfW Federal Association, Norman Wirth, has been summing it up for years: “It is undeniably possible to pay for these services”. Point.
Not every consultation has to lead to a conclusion, so it is also legitimate to agree on a fee for analysis, concept development and recommendations before the consultation if the focus is not on product brokerage. Numerous investment advisors and financial planners win satisfied customers in this way, because the focus is not on the conclusion.
The situation is similar with service flat rates, from which more and more brokers and customers are gaining advantages. “The brokers who started working with service agreements in 2015 now derive 30 percent of their revenue from flat-rate service agreements with the same or reduced workload,” he said was my assessment in 2020 from such thematic consultations with brokers. The trend continues upwards, giving these brokers more composure in the face of the looming dark clouds of a commission ban.
For more than ten years, cuts in remuneration for insurance brokers have been an issue again and again. The excesses in brokerage fees for the brokerage of life and health insurance policies, which consumer advocates describe as excessive commissions, have also come under the crosshairs of consumer protection policy in the past via the EU Brokerage Directive, the VVG reform and the LVRG.
An end to the current efforts from Brussels is not in sight, despite resistance from the intermediary associations. That’s another reason why I recommend Advisory Board of the AfW Federal Association – Organize yourself in the political advocacy group for brokers that suits you.
But back to the topic: As part of the insurance brokerage contract, you can make clear arrangements with your customers for the remuneration that will be due to you. These cases can be listed exactly. This includes analysis and consulting services without product sales, brokering “net policies” or brokering or taking over products from other brokers without commission.
Service agreements as part of the brokerage contract or the terms and conditions
A word about the service agreements, which can be concluded as part of the brokerage contract, the general terms and conditions or better as a separate agreement between the broker and the customer.
The start with service agreements can only be successful in the long term if you align your consulting concept and your brokerage contracts accordingly. From my point of view, it makes no sense to surprise a one-contract customer with a service agreement if the corresponding consulting model is not available.
For corresponding preliminary considerations on possible models and content of the design of service agreements, we have one for insurance brokers Checklist createdwhich leads interested brokers to an implementation plan, which we would be happy to accompany if desired.
Check whether the following content is included in your brokerage contracts:
- Subject of the order
- Obligations to cooperate customer
- Consistent regulation for full customer mandates or division broker contracts
- Selection of product providers (insurance companies, financial service providers, etc.)
- Exclusion of insurers (direct insurers…)
- Other regulations
- Term of the contract
- notice periods
- liability, statute of limitations
- allowances
- assignment prohibition
- explanatory fiction
- consent advertising
- Consent modern communication channels
- Mention of service providers (broker pools, broker cooperatives)
- German law
- VSH coverage and individual extension
Other possible agreements with the customer
Let us briefly list other agreements that supplement a brokerage agreement. As Duty can be seen:
- Broker power of attorney (proof to product providers that the insurance broker has been commissioned by the policyholder)
- Data protection declaration (DSGVO) on data protection, storage, processing and deletion
- General terms and conditions of business
Depending on the business model then come further agreements in question:
- Power of attorney (regulations for portfolio management)
- fee agreements
- Service Agreements
- if necessary, debt collection regulations and SEPA mandates
One final note on the subject of notice periods:
The brokerage contract is valid from the moment it is signed and can be revoked by either party. A written brokerage contract protects customers and brokers at the same time and is preferable to an implied brokerage contract. There are still far too many of these among brokers without brokers being aware of their risks.
Sure, the notice periods are regulated by the brokerage contract. But even if you have put a lot of effort and time into working with the customer and if you lose your right to brokerage fees if you cancel. Avoid a notice period. Because if a customer has actually lost his trust in you, then he should have the option of an immediate termination without notice.
And vice versa: If a customer is not willing to give you his full trust, then part with his mandate. Save yourself aggravation and frustration – says your insurance doctor.
2023-05-15 05:02:17
#Rethink #broker #contracts #Comment #Versicherungsbote.de
