The quicker, the better: this is particularly true for policyholders waiting for a contractually agreed insurance payout. However, things do not always go as quickly as consumers would like – as experience shows that insurers need time to review claims.

The amount of time that is considered reasonable for reviewing claims depends on the circumstances. In the case of life insurance or pension insurance policies that are expiring or that have been terminated, it is usually not necessary to perform an extensive claims review. In such cases, the insurer must make a payment by the agreed date. However, claims reviews often take a lot of time in the case of losses or damage covered under motor vehicle or income protection insurance. For instance, it may be necessary for insurers to obtain an experts' report before reviewing a claim after a car accident or when a policyholder becomes disabled or sick and this stops them from being able to work.

Insurers have the right to review the reasons for and the amount of claims that are filed. They are even required to do so in their own interest and in the interest of all insured persons. Insurers may therefore take the necessary steps to clarify the matter when reviewing claims, but they are not allowed to draw out this process unnecessarily. Delays in the payment of compensation are not acceptable and are not tolerated by BaFin either.

What BaFin does – and what it does not do

Time and again, BaFin becomes aware of insurance payout delays, and it investigates consumer complaints and any other information it receives when such issues arise. For instance, BaFin takes a close look at how claims are processed in practice if it finds out that an insurer is not paying benefits on time. When doing so, BaFin’s main objective is to protect insurance policyholders and the beneficiaries of insurance policies. However, BaFin cannot make a legally binding assessment of individual claims or enforce such claims, as this is not part of its legal mandate.

Insurers must organise their business operations well and comply with legal requirements (effective and proper system of governance). If delays arise, BaFin focuses on clarifying the reasons behind this. Is the delay because of a short-term issue, such as staffing shortages caused by a flu epidemic? Or is the delay due to a problem that takes longer to resolve, e.g. following a switch to new software? BaFin follows up with insurers in order to obtain sufficient information about the situation – as this is crucial to ensure that the right countermeasures are taken. For instance, the insurer may be required to list all the measures that will help reduce processing backlogs – e.g. recruiting more staff. In the case of problems that take longer to solve, BaFin supports insurers and closely monitors the process in place in order to resolve the issues in question.

Remedying shortcomings quickly

BaFin expects insurers to remedy shortcomings quickly as a top priority. For this reason, BaFin also verifies whether the planned measures to reduce backlogs seem promising. If necessary, BaFin discusses these measures directly with the individuals that are responsible at the insurance undertaking. BaFin may also express its disapproval if an insurer does not take adequate measures. As a general rule, this is a final warning for insurers before action is taken under German administrative law. BaFin can then order the insurer to remedy the issue. If the insurer does not remedy the issue despite having received such an order, BaFin may take enforcement measures under administrative law, such as a fine.

How consumers can take action

Consumers can take action in different ways if their insurer does not make a payment on time.

• Partial payments: Policyholders may request a partial payment from their insurer, e.g. if the insurer has not taken all the necessary steps in time in order to determine the amount of an insurance payout. “In time” means up to a month from the moment the insurer is notified of the insured event. Policyholders may claim a partial payment up to the minimum amount that the insurer is expected to pay.

  Policyholders may request a partial payment on the condition that it has first been established that the insurer is required to make a payment and that only the amount of the payment still needs to be determined. However, it is important to note that consumers must provide their insurer with the necessary information and documentation.

• Interest for late payments: In certain circumstances, policyholders are entitled to interest for late payments and can claim the costs for legal advice. The amount of the interest rate is set out by law. For consumers, this amount is five percentage points above the basic rate of interest. The current basic rate of interest is announced by the Deutsche Bundesbank.

  But when exactly can consumers claim interest for late payments? First of all, an insurance payout must be due. This means that the insurer has established within a reasonable amount of time that it is required to make an insurance payout as well as the amount of this payout. In order to be able to do so, the insurer must receive all the necessary information and documentation from the policyholder. If the insurer draws out the process to establish its liability to pay, the insurance payout is considered due on the date on which the process to clarify the matter would have been completed if this were done promptly and appropriately.

  Another condition is that the policyholder requests that the insurer pay the amount after it is due. In other words, the policyholder must issue a payment reminder to the insurer.

  Such a payment reminder is not always necessary, however. This is the case, for example, if a life insurance contract sets out that it will end on 31 December, and the insurer is required to pay the agreed benefits by this date. If the insurer does not make the payment by this point in time, the insurer is deemed to be in arrears even if it has not received a payment reminder.

• Procedure for complaints: Customers should always contact their insurer first if an insurance payout is not made on time. A solution can often be reached directly with the insurer.
  In the event that claims processing issues remain unresolved, consumers can contact the German Insurance Ombudsman Association (Versicherungsombudsmann) or send a complaint to BaFin.