Payment protection insurance
A payment protection insurance (also known as payment protection insurance or credit life insurance ) is a protection of the borrower or his surviving dependents in the event of death, illness or unemployment. It also serves as the lender as additional collateral and as such in the loan agreement to the bank ceded . In Germany, the average amount of the new residual debt insurance in 2009 was 11,600 euros. In terms of the new entry in life insurance, residual debt insurance had a market share of 2.9% in relation to the sum insured in 2009.
Subject of the residual debt insurance (RSV)
Borrower or lender close in connection with the borrowing on the person of the borrower - and often at his own expense - an insurance policy, for example, against death ( death ), disease / disability or unemployment during the repayment period. In the event of death, the outstanding balance of the loan taken out will be repaid by the insurance benefit or the installments due will be paid in the event of illness or unemployment. As a rule, the borrower joins a group insurance contract concluded by the lender (or credit intermediary ) , which means that the conclusion of the contract by the individual borrower is not subject to the same formal requirements (especially those of the VVG Insurance Contract Act ) as a normal individual insurance contract.
The RSV originated in the USA in the 1950s . In 1957, the first RSV was approved in Germany by the Federal Insurance Supervisory Office . For installment loans and annuity loans, the RSV is typically concluded against payment of a single premium (co-financed by the loan). In the case of current account or revolving loans, the contracts are designed in such a way that the outstanding balance is determined for each month and the contribution for that month is calculated.
In the meantime, various forms of protection against further risks are offered: After the classic RSV risks of death and incapacity for work, protection against the risk of involuntary unemployment and, since 2006, "serious illnesses" (cancer, heart attack, stroke, etc.) and various benefits ( Assistance ) to support the borrower to reintegrate into working life.
Criticism / disadvantages
The RSV is often criticized for the size of the contributions and the distribution method coupled with the lending. In fact, RSV contributions tend to include relatively high commissions for the lender or credit intermediary. Because of the not inconsiderable costs of such an insurance, it can have a noticeable effect on the total cost of borrowing.
Only at a few banks does the conclusion of an RSV lead to improved credit scoring . If the lender stipulates that a residual debt insurance must be taken out, the costs for the RSV must be included in the effective interest rate under German law . Most of the time, the conclusion of the RSV is optional, but is offered aggressively by many lenders in order to earn additional contribution margins through the conclusion commission.
The contractual exclusion periods for the respective insurance benefits in the RSV are also criticized. These require that the insurance cover only comes into effect after a certain period after the conclusion of the RSV contract ("waiting period") or that the benefit case (in the event of incapacity for work or unemployment) must last a minimum time before benefits from the RSV can be claimed (" Grace period ").
An investigation by the market watchdogs at the Hamburg consumer center indicates unusually high cancellation rates for residual debt insurers . That is the result of a non-representative survey of 23 residual debt insurers on benefit and cancellation rates. Half of the residual debt insurers in the life division stated a cancellation rate that was above the industry average. For consumers, a cancellation is often particularly disadvantageous financially because of reduced reimbursements.
revocation
According to Section 7a (5) of the Insurance Contract Act (VVG) and Section 7d VVG, consumers who take out residual debt insurance must be instructed again about their right of withdrawal one week after the conclusion of the contract. The product information sheet (PIB) must also be made available to new customers with this instruction. The insurers usually use a so-called welcome letter as a cover letter. PIB and cancellation policy are attached to this letter. The market watchdog team at the Hamburg consumer center carried out a provider survey to evaluate how these welcome letters are designed by the providers. Result: In the opinion of the market watchdog, none of the welcome letters sent by the providers in this context fully fulfills the legislative intention to provide neutral information about the right of withdrawal regardless of the loan agreement.
Great Britain
In Great Britain, the sales practices of various banks in connection with the payment protection insurance (PPI) there called residual debt insurance led to a scandal. The residual debt insurances are said to have been partially hidden, for false reasons or to people who cannot avail themselves of them. In the autumn of 2012 the UK financial industry had set aside provisions of over £ 10 billion . This sum rose to just under £ 40bn by 2016, largely spread over five banks: Lloyds Banking Group (£ 17.1bn), Barclays (£ 8.5bn), Royal Bank of Scotland ( £ 4.7bn). Pounds), HSBC (£ 2.9bn) and Santander UK (£ 1.2bn). At least £ 6.5 billion in compensation was estimated by the Financial Services Authority .
advantages
One advantage of the RSV is the lack of acceptance and health checks compared to individual insurance, which enables the necessary simplified and quick contract conclusion. However, insured events due to existing and known previous illnesses in the first two years of the RSV contract are usually excluded from the benefit. In the case of existing pre-existing illnesses, the protection is limited to non-pre-existing causal illnesses / incapacity for work or causes of death. In addition, only the RSV offers protection under private law against the risk of involuntary unemployment.
Individual evidence
- ↑ Statistics from BaFin - primary insurance companies '09 (text part), table 22, page 22, online (pdf / 3274 kB)
- ↑ Harald Schulz: residual debt insurance, 2nd edition 1988, ISBN 3-7819-1147-0 , page 13
- ↑ marktwaechter.de: High cancellation rates with residual debt insurers . October 4, 2018, accessed January 8, 2019 .
- ↑ The welcome letter in the residual debt insurance . marktwaechter.de. November 7, 2019. Accessed January 1, 2020.
- ↑ BBC News: Banking industry gives up on PPI mis-selling battle. [1]
- ↑ Financial Times Online: Bill for PPI mis-selling passes £ 10bn , accessed October 4, 2012. [2]
- ^ Jill Treanor: Bill for PPI mis-selling scandal tops £ 40bn . In: The Guardian . October 27, 2016, ISSN 0261-3077 ( theguardian.com [accessed October 28, 2016]).
- ↑ Financial Times: Bill for PPI mis-selling passes £ 10bn , accessed October 4, 2012. [3]