Insurance contract (Germany)

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Example from 1959

An insurance contract regulates the contractual granting of insurance protection for the policyholder or the insured person against payment of an insurance premium in favor of the insurer .

General

Insurance contracts are subject to a special insurance contract law . Anyone who concludes an insurance contract by granting insurance cover operates the insurance business and, as an insurer, is therefore subject to special regulatory , commercial and corporate law provisions.

Definition of the insurance contract

There is no legal definition of the term "insurance contract" in German law. The case law is based on criteria developed solely under contract law. The Insurance Contract Act (VVG) applies if these criteria are met. Companies that conduct insurance business are subject to supervision under supervisory law. Various characteristics have been established as assessment criteria for the decision of the supervisory authority as to whether there is an obligation to supervise. The assessment criteria of contract law and supervisory law are not necessarily congruent. The commercial law assessment for the application of the special commercial law rules for insurance companies follows the regulatory assessment.

In insurance business theory , the following characteristics of an insurance contract are cited as typifying:

An insurance contract is that

Various theories about the nature of insurance have developed in insurance science, e.g. B. the needs coverage theory, the cash benefit theory, the risk assumption theory and the agency. However, the latter was rejected by the Federal Constitutional Court in 2005 . According to this, not only the relationship between the insurer and the individual policyholder must be taken into account in an insurance contract, but also their membership in the risk group of all insurance contracts of the insurer. Risk balancing as a group is an essential feature of an insurance contract.

Also, European law requires the concept of insurance. With the adoption of the International Financial Reporting Standard 4 insurance contracts in European law, a definition for the term insurance contract has become legally binding for the first time. This only applies to the question of the applicability of this provision.

For groups that prepare consolidated financial statements in accordance with IFRS in accordance with Regulation (EC) 1606/2002 , the special provisions for insurance contracts of IFRS 4 apply to contracts that meet the definition. In the German version relevant for Germany, it reads:

"A contract under which one party (the insurer) assumes significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder concerns. "

Insurance risk is defined as: “A risk, with the exception of a financial risk, which is transferred from the person who takes the contract to the person who holds it.” The definition of a financial risk excludes those risks that are specific to one of the parties of the contract are. Only such risks can therefore be insurance risks.

Significance is defined: “An insurance risk is significant if and only if an insured event could cause an insurer to provide significant additional benefits under any circumstances, other than those circumstances that lack commercial significance (ie that have no noticeable effect on the economic point of view of the business). "

Insurance contracts according to IFRS have the following characteristics:

  • It is a contract between two or more parties (e.g. no mandatory insurance without a contract, no self-contracting, no contract between parties consolidated in the consolidated financial statements)
  • The subject matter is a specific risk for the insured person, which does not arise from the contract, but is transferred from the insured person to the insurer (i.e. no risks in the capital markets, no reference to general indices such as weather indices or other general statistical values, no bets or games).
  • The event triggering the entitlement to benefits must be uncertain, future and specific and adversely affect the policyholder.
  • The entitlement to benefits must consist of some kind of compensation for adverse consequences.
  • There must be some economically relevant sequence of events in which significant additional compensation is to be paid compared to the otherwise due contractual cash flows.

Legal issues

The insurance contract is a private law contract in Germany . Due to the emphasized economic importance of insurance and the numerous specialties of insurance law, the law on insurance contracts (Insurance Contract Act - VVG) came into force in 1908 . As a special norm of insurance law, it takes precedence over the norms of the German Civil Code ( BGB ), of which only the generally applicable provisions such as the General Terms and Conditions and the specific language used in the interpretation for the VVG are decisive.

In addition to the VVG and BGB, the Insurance Supervision Act (VAG) and the Commercial Code (HGB) have an indirect influence on the insurance contract, as this sets legal and economic limits to the decisions of the insurer when drafting the contract.

The VVG does not apply to the branches of social insurance , marine insurance and reinsurance .

In addition to the legal standards, the contract provisions applicable to the respective insurance contract are of central importance. These are documented in the contract document (legally referred to as an insurance policy). Possibly. Contract provisions, in particular for pre-contractual obligations, may also be of importance on the application. Contract provisions can be individual agreements or terms and conditions. Legally, the contractual provisions of an insurance contract are referred to as "insurance conditions", the general terms and conditions as "general insurance conditions" and the individual agreements as "special insurance conditions". However, special care is required when using these terms, as they are used with different meanings.

With standard policy conditions are referred to:

  • the terms and conditions of the insurance contract, regardless of where they are located in the contract document,
  • the contractual provisions that were subject to approval until 1994 and did not include all general terms and conditions,
  • the collection of part of the terms and conditions of the contract, which are usually printed in closed form at the end of the contract document ("AVB") or
  • the contractual provisions on which a large number of insurance contracts are based regardless of the individual differences in the individual risks.

With specific insurance conditions are referred to:

  • the individual agreements of the insurance contract,
  • the contractual provisions that did not require approval until 1994, regardless of whether they are general terms and conditions or individual agreements or
  • the collection of part of the terms and conditions of the contract, which are usually printed in closed form at the end of the contract document, insofar as they relate to special or optional risks or facts concluded in the contract ("BVB"), e.g. B. for supplementary insurance.

The contract document (legally referred to as insurance policy) is usually divided into several parts: The first page is a data sheet with the essential individual information about the insurance contract (this is, in contrast to the definition in the VVG, in practice referred to as "insurance policy") This is followed by the appendices to the insurance policy (which are actually part of the insurance policy in the legal sense), which contain all the other contractual provisions. The individual information includes, in particular, the insurance premium and the insurance benefit, insofar as their amount is determined individually, the start and end of the insurance cover, but also the internal contract codes of the insurer, such as the insurance or insurance policy number and internal product name of the insurer (tariff). However, the legally required information about the insurance contract is also printed within the contract document, so that it is not always clear what the contractual term and what is just information.

The variety of differently used, mostly even superfluous, but sometimes also inevitable technical terms, makes it difficult for the layman to understand insurance contracts. The reason for this is the linguistic requirements of the VVG, the supervisory law, the supervisory authority and the case law, which have grown over decades but are seldom oriented towards the linguistic usage of consumers. Since the insurance product is purely a legal construction, the language must follow the legal requirements exactly. Even the smallest changes in the choice of words can have the effect that the clarifications by courts in the past are no longer relevant on the point, but a new judicial clarification with an unforeseeable outcome must be sought. For this reason, linguistic innovations represent an incalculable risk for insurers and are therefore avoided as far as possible. This is a fundamental problem in insurance contracts worldwide. Radical solutions would create legal uncertainty for the term of the new insurance contracts, which could be years or decades, even though insurance contracts are supposed to create security.

All terms and conditions must be measured against the consumer protection provisions of the BGB (§§ 305 ff BGB): ambiguity is at the expense of the insurer, surprising or excessively disadvantageous terms and conditions are ineffective. In some cases, the terms of the contract reflect the legal regulations, in some cases they deviate from or specify them. You have to determine all contractual rights and obligations from the insurance contract of both parties, insofar as these do not result directly from the law.

The German insurance market was regulated until 1994 . This meant that the “general insurance conditions”, in life and health insurance also the actuarial calculation of contributions, benefits and the actuarial reserve, had to be explicitly approved by the competent supervisory authority (mostly the Federal Supervisory Office for Insurance at the time). In order to simplify the approval process for the individual insurer, the contractual provisions that require approval were used consistently in the various insurance lines. For example, the private liability insurances of all providers were identical with regard to their contractual provisions requiring approval, and competition was almost exclusively at the price level. Due to the deregulation of German insurance companies in 1994, which went hand in hand with the introduction of the European internal market for insurance, there was no longer any need to obtain approval for contractual provisions or price calculation, so that after a short time there was fierce competition in some areas ( e.g. occupational disability insurance ) when it came to structuring insurance cover developed. If a new insurance contract is to be concluded today, a comparison of the contract provisions is essential.

Participants in the insurance contract

Insurers and policyholders

The contracting parties to an insurance contract are the insurer, i.e. the party providing insurance coverage, on the one hand and the policyholder on the other. Insurers can have different legal forms . Policyholder can be exchanged according to the principles of general contract law policyholder change , d. H. all contracting parties must agree to the change. This possibility also exists for the insurer, but due to special supervisory provisions (Section 13 VAG ), a portfolio of insurance contracts can be transferred from one insurer to another solely with the consent of the supervisory authority - in deviation from normal contract law ( Section 415 BGB) - without the consent of the policyholder being required ( Section 13 (5) 2nd half-sentence VAG).

Insured person

In the case of personal insurance and some risks assigned directly to persons (such as liability risk ), there are, in addition to the policyholder, one or more insured or co-insured persons to whom the insured risk is based. With other insurances, reference is made in the insurance contract to the insured item or an insured financial interest, whereby the policyholder must always have an interest (insured interest) in this.

The policyholder is generally entitled to receive the benefit, but in life insurance in particular (where the policyholder, e.g. as an insured person, can no longer receive the benefit due in the event of death), another person or, more rarely, the institution, the beneficiary, is often in the Named insurance contract. The eligibility is basically revocable and yet does not claim are the beneficiaries. It was only at maturity of the performance results in a claim. If, on the other hand, the subscription entitlement is irrevocable in the contract, the beneficiary has entitlement rights even before the payment is due, which depend solely on the performance conditions in order to become full right (ownership). In the narrower sense, beneficiaries are not involved in the insurance contract, although they may have information and structuring rights with regard to the insurance contract in the area of ​​company pension schemes. An irrevocable subscription right can only be changed with the consent of the person concerned (reservation of design rights).

In non-life insurance, other people are often involved in the insurance contract, be it as an insured person in the insurance for someone else's account or due to other close relationships with the insured interest. In liability insurance , the injured party is involved in the event of damage, be it through direct claims in the field of motor liability insurance, or through protective regulations of the Insurance Contract Act such as Section 156 (1) or Section 157 VVG.

Indirectly, the valid insurance intermediaries as a participant because it provides as a commercial agent or broker the insurance contract between the parties.

In some cases the contract also provides for a separate contributor. If the latter does not pay the premiums as not directly involved in the contract, the responsibility of the policyholder for the premium payment comes to the fore again (premium liability).

Legal duties and obligations of those involved

The policyholder is liable for the premium obligations that can be enforced by the insurer. He has to pay the insurance premium. The premium obligation, like the insurer’s obligation to provide benefits, is a primary obligation or so-called main contractual obligation within the framework of the agreed coverage.

Obligations , however, are only secondary obligations of the contractual Synallagma . You are not legally enforceable yourself; however, if they are culpably violated by the policyholder, the insurer may not have to pay. The obligations differ considerably depending on the type of insurance. They can consist in the fact that the policyholder must take reasonable measures to avoid consequential damage after the occurrence of the insured event, but they can also be limited to informing the insurer about the insured event within a certain period of time.

The main contractual service of the insurer is to provide the service agreed for the insured event (loss event). The insurer bears the risk or risk for this. Since the insurance contract is a continuing obligation, both contracting parties owe a permanent guarantee for the fulfillment of the contractual purpose. In particular, the insurer is responsible for observing the requirements stipulated by supervisory law to ensure that its contracts can be continuously fulfilled. In the event of an allegation of a pre-contractual breach of duty to disclose against the policyholder, it is the insurer's responsibility to carefully check all submitted documents and to ask questions if necessary. Otherwise he cannot invoke the policyholder's obligation to provide the necessary information.

Duration of the insurance contract

Conclusion, expiration and termination of the insurance contract

As an agreement of mutual rights and obligations, the insurance contract has no specific period of validity. The contract begins when it is concluded by the parties in accordance with the provisions of the German Civil Code (BGB), regardless of when z. B. the insurance period should begin. The contract ends when all rights and obligations from the contract have finally been fulfilled or have expired.

At the beginning of the contract, policyholders have special rights of revocation or withdrawal. The withdrawal period begins upon receipt of the insurance conditions. In the case of property insurance, the withdrawal period is 14 days. In life insurance / pension insurance and private health insurance, the period is 30 days.

After conclusion of the contract, the insurance company will check whether insurance cover can be granted. Within the binding period (usually up to 6 weeks), the policyholder is bound to the contract, subject to the right of withdrawal. If the commitment period expires and the application has not yet been recognized by the insurance company, the insurance purchaser can have the contract terminated.

Both contracting parties have the right to terminate: They can result from default of the policyholder, unjustified refusal of benefits by the insurer and in the event of a benefit; In private health insurance , the insurer waives the extraordinary right of termination in the event of a claim.

After certain deadlines, policyholders have the right to terminate, usually at the end of a premium payment period (i.e. before the next premium is due). Cancellation does not generally expire claims that have already been acquired. The termination only results in the end of the obligation to pay contributions and the end of the insurance cover, i. H. Insured events occurring after the termination has become effective no longer lead to a benefit claim. In life insurance, the acquired claims lead to non-contributory benefits as agreed in the contract, unless the statutory minimum benefits are more favorable in the case of exemption from contributions. In some cases, the law also provides the policyholder with a right that the insurer must buy back the claims acquired by the policyholder. For this purpose, the insurer must pay the contractually agreed surrender value, unless the legally stipulated minimum benefits for surrender are cheaper. The value of the future claims from the contract existing upon termination is not based on the contributions paid previously, but on the ratio of the future services to be provided on the basis of the contract and the contributions still to be paid for them. Since the contributions as a whole have to be calculated in such a way that they also cover the possible benefits in the past, but above all also the actual or possible expenses of the insurer, in particular the acquisition costs, the surrender values ​​are - often even significantly - lower than the total in the beginning the contributions paid up to termination. Therefore, early termination is usually disadvantageous.

Insurance period

Insurance protection means that compensation will be paid for future insured events (in rare cases the insured event exists when a past event becomes known). An insurance relationship exists if there is insurance coverage. In most cases, the period in which events that occur on the basis of the contract lead to a claim for compensation is limited. This period in which the insurance relationship exists is referred to as the insurance period or risk bearing period. The exact determination of insurance beginning and end, so the beginning and end of the insurance period, is an essential agreement in the insurance contract. Another term used in insurance contracts is the duration of benefits . This is important if the benefit does not consist of a one-off payment, but rather, as in the case of pensions, of regular payments. The duration of benefits determines when the payment begins and when it ends. In the case of an annuity , the end depends on an insured event, survival. This means that the duration of the benefit is also the duration of the insurance because there is insurance coverage for survival for the duration of the benefit. Insurance contracts also regulate the duration of the premium payment, i.e. with ongoing premium payments the beginning, end and the respective due dates of the premium payments, in particular whether they are made annually, semi-annually, quarterly or monthly.

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