Germany: New law with regard to remuneration of insurance intermediaries
On 3 June 2021, a new law has been published in Germany which also has effect on the future remuneration of insurance intermediaries who distribute PPI contracts.
The new law ("Law on the accompanying implementation of Regulation (EU) 2020/1503 and the Implementation of Directive EU 2020/1504 on the Regulation of Swarm Finance Service Providers (Swarm Finance Accompanying Act) and other financial market regulations under European law"), inter alia, contains provisions which amend the German Insurance Supervisory Act ("Versicherungsaufsichtsgesetz" – VAG) as well as the German Industrial Code ("Gewerbeordnung" – GewO).
Especially, a new sect. 50a VAG has been entered into the law. According to this new provision, if an insurance undertaking grants an insurance intermediary an acquisition commission for the conclusion of a PPI policy, the remuneration granted may not exceed 2.5 % of the loan amount or other monetary amount secured by the PPI policy. The conclusion of more than one PPI policy relating to the same policyholder and covering the same loan amount or other monetary amount shall be ineffective. If the conclusion of several contracts is necessary to include different risk carriers (i.e. life insurers and property/casualty insurers), this shall be deemed to be the conclusion of only one PPI policy, i.e. the commission cap will apply to the contracts as a whole, avoiding the multiplication of the acquisition commission by splitting it among several formally independent policies. The same provisions apply if the remuneration is granted to the policyholder of a PPI group insurance contract. In addition, it is possible to either grant an acquisition commission or any other remuneration for services rendered by the insurance intermediary and used by the insurance undertaking only.
As a consequence of the entering of sect. 50a VAG, the provisions of the German Industrial Code applicable on insurance intermediaries have been amended accordingly. Sect. 34d GewO now expressly refers to sect. 50a VAG as well. The amendment ensures that sect. 50a VAG applies not only to insurance undertakings, but also to insurance intermediaries, namely in the context of "intermediary chains" in which the insurance intermediary acting vis-à-vis the insurance undertaking in turn engages sub-intermediaries.
The purpose of the law is in particular to avoid false incentives in the sale of PPI contracts due to the excessive sales remuneration. Moreover, in the legislator´s view the limit of 2.5 % of the loan amount needs to be implemented in order to avoid the current practice that the costs for the PPI contract are levied as a lump sum and are also part of the loan amount leading to a much higher loan amount and possible financial problems of the bank´s customer later on. With regard to provision on the conclusion of more than one PPI contracts for the same loan amount, the wording avoids legal uncertainty, especially in the case of cross-insurance of loans by spouses in separate contracts (example: loan of EUR 100,000, but two separate PPI policies for EUR 100,000 each).
Sect. 50a VAG is part of the provisions which are expressly applicable on EU/EEA-insurance undertakings who conduct insurance business in Germany on an FoE or FoS basis. Thus, EU/EEA-insurance undertakings who conduct insurance business in Germany need to obey to the new provision as well. The same applies to insurance intermediaries registered in another EU/EEA member state which mediate insurance contracts in Germany.
Sect. 50a VAG and the amended sect. 34d GewO will come into force on 1 July 2022. Until then, already existing agreements on acquisition commission need to be amended. Otherwise, as the German legislator points out, the agreements will become invalid.
