Recent pronouncements by the Federal Financial Supervisory Authority have raised further questions about the handling of insurance claims in Germany.
The story begins in early 2016 when the German Supreme Court delivered a judgment with far reaching consequences for insurers and brokers operating in Germany. Prior to this decision, it had been normal for brokers to be instructed by insureds and at the same time handle claims on behalf of the insurers. In its judgment, however, the Supreme Court ruled this to create a conflict of interests detrimental to the insured.
Under German law, legal services may not be provided if it may potentially cause conflicts of interest with any other activities or services carried out by the same service provider. Claims work is considered to be legal work.
According to German statutory law, the business of an insurance broker is characterised by pursuing the interests of the insured person, for example providing expert advice and the negotiation of contracts and renewals on behalf of the insured are typical duties of brokers. They act as “trustees” of the insured. Insurance agents on the other hand are expected to act exclusively for the insurers. This strict differentiation between insurance agents and insurance brokers, which is set out in the statutory law, is often overlooked in practice. There are many brokers which do pursue claims or underwriting work on behalf of insurers and at the same time undertake instructions for insureds.