Section 48b German Insurance Supervision Act (Versicherungsaufsichtsgesetz -VAG)
Prohibition on the passing on of special allowances and commissions

(1) Insurance undertakings and insurance intermediaries within the meaning of section 59 (1) of the Insurance Contract Act are prohibited from granting or promising special allowances to policyholders, insureds or beneficiaries under an insurance contract. This prohibition also applies to the employees of insurance undertakings and insurance intermediaries. Any contractual arrangement to the contrary is ineffective.

(2) A special allowance means any direct or indirect inducement in addition to the benefit agreed in the insurance contract, in particular any

1. passing on of commissions in full or in part,

2. any benefit in kind or service that does not relate to the insurance benefit,

3. rebates granted on goods or services,

to the extent that it is not of low value. Low-value inducements mean rewards or gifts for initiating or concluding a contract, provided that they do not exceed a total value of EUR 15 per insurance relationship and calendar year.

(3) The granting of commissions to policyholders who are also intermediaries of the insurance undertaking concerned does not qualify as a special allowance unless the mediation relationship was only established to provide such inducements to them for the undertaking’s own insurance products.

(4) Subsection (1) does not apply if the special allowance is used to permanently increase the benefits or reduce the premiums for the contract concerned. This is without prejudice to section 138 (2), section 146 (2) sentence 1, section 161 (1) and section 177 (1).

Section 48c VAG
Pass-through provision

(1) As soon as the insurance consultant informs the insurance undertaking in accordance with section 34d (2) sentence 6 of the Trade Regulation Code that the consultant has mediated to the policyholder an insurance product containing inducements that do not benefit the insurance contract (gross premium rate), the insurance undertaking is required to disburse that inducement to the policyholder without undue delay. The disbursement must be made in the form of a credit to a premium account to be maintained for the contract for the policyholder. The credit amount is a maximum of 80 per cent of the relevant inducement up to the equivalent of 80 per cent of the premiums payable in the first five years after the contract was concluded. The credit balance on the premium account must be used exclusively to settle the policyholder’s obligation to pay the premiums and must be credited in the amount of 80 per cent of the premium payable for the relevant insurance period. By way of derogation from sentences 2 to 4, the disbursement may also be made by reducing the premiums for the mediated contract in accordance with section 48b (4). Sentences 1 to 5 apply, with the necessary modifications, if, in the case of the provision of advice within the meaning of section 34d (2) sentence 2 number 1 of the Trade Regulation Code, the policyholder submits to the insurance undertaking before the contract is concluded a certificate issued by the insurance consultant concerning the provision of advice on the insurance policy. The certificate must state the date on which the advice was provided. There must be no more than six months between the date on which the advice was provided and the date of the application to conclude the insurance contract.

(2) The insurance undertaking must document the disbursement of the inducement appropriately and notify the policyholder of the disbursement, in the case of subsection (1) sentence 2 by providing a premium account statement at least once a year until its balance has been reduced to zero in accordance with subsection (1) sentence 4.

(3) Inducements within the meaning of this provision mean the cost of insurance mediation, in particular commissions, fees or other cash payments and any non-cash benefits, regardless of when they become due. The inducements must be estimated by applying prudent commercial judgement. To the extent that statutory provisions contain requirements governing the calculation of distribution costs for an insurance product, these may be applied instead of the requirements of sentences 1 and 2.

Section 7a of the Insurance Contract Act (Versicherungsvertragsgesetz - VVG)
Cross-selling

(5) If payment protection insurance (PPI) is offered as an ancillary product or as part of a package or the same agreement, the policyholder must be informed again in text form of their right of revocation, within one week of submission of their contractual agreement for the insurance product. The product information sheet must be provided to the policyholder again with this information. The revocation period does not commence before receipt of these documents.

Section 7d of the VVG
Advice, information and revocation regarding certain group insurance policies

The policyholder of a group insurance policy for payment protection insurance has an insurer's advisory and information obligations towards the insured party. The insured person has the rights of a policyholder, in particular the right of revocation. Information on this right of revocation is to be sent again in text form one week after submission of the contractual agreement. The product information sheet must be provided again with this information. The revocation period does not commence before receipt of these documents.

Regulation on Information Obligations for Insurance Contracts (Verordnung über Informationspflichten bei Versicherungsverträgen VVG-InfoV)

Section 1 Information obligations for all insurance classes

(1) Pursuant to section 7 (1) sentence 1 of the VVG, the insurer shall provide policyholders with the following information:

1. the identity of the insurer and any branch office through which the contract is to be concluded; the commercial register in which the legal entity is registered together with its registration number shall also be provided;
2. the identity of the insurer’s representative in the Member State of the European Union in which the policyholder is resident if such a representative exists, or the identity of any party other than the supplier if this party acts as a counterparty to the policyholder, and the capacity in which such party does business with the policyholder;
3. the insurer’s contact address and any other address that is relevant to the commercial relationship between the insurer, its representative, or another party pursuant to no. 2 above and the policyholder, including the name of an authorised representative in the case of legal entities, bodies of persons or groups of persons;
4. the insurer’s principal business activity;
5. information on the existence of a guarantee fund or other compensation schemes that do not fall within the scope of Directive 94/19/EC of the European Parliament and of the Council of 30 May 1994 on deposit-guarantee schemes (OJ L 135 p. 5) and Directive 97/9/EC of the European Parliament and of the Council of 3 March 1997 on investor compensation schemes (OJ L 84 p. 22); the name and address of the guarantee fund are to be provided;
6.
a) the general policy conditions, including the premium rate conditions, applicable to the relationship between insurer and policyholder;
b) the main features of the insurance benefits, in particular details on the nature, scope and due dates of benefits payable by the insurer;
7. the total cost of the insurance, including all taxes and other cost components; premiums shall be stated individually if the insurance relationship comprises several independent insurance contracts, or, if the exact cost cannot be provided, information on its basis of calculation to enable the policyholder to verify the cost;
8. any additional costs, if applicable, stating the total amount payable and any possible additional taxes, fees and costs not levied via or charged by the insurer; as well as any costs incurred by the policyholder for the use of communication methods if such additional costs are chargeable; 9. details on the payment and compliance, in particular the method by which premiums are to be paid;
10. the period of validity of the information provided, for example the duration of time-limited offers, particularly with respect to the cost of the insurance;
11. where appropriate, a warning that the financial service being provided involves financial instruments that are associated with heightened risks due to their particular features or the processes involved, or whose price is subject to fluctuations on the financial markets that are beyond the insurer’s control, and that past performance is not an indication of future performance; the circumstances and risks to be outlined in each case;
12. information on how the contract is established, in particular as regards inception of the policy and commencement of cover and the period during which the applicant is bound by the application;
13. whether or not the policyholder has a right of cancellation and the conditions and details concerning the exercise of such right, particularly the name and address of the parties who must be informed of the cancellation and the legal consequences of cancellation, including information on amounts, if any, payable by the policyholder in the event of cancellation;
14. information on the duration of the contract and any minimum contract period;
15. details on the termination of the contract, particularly concerning the contractual conditions for termination including any contractual penalties;
16. the EU Member States on whose law the insurer bases the establishment of relations with the applicant prior to conclusion of the insurance contract;
17. the law applicable to the contract, a clause in the contract regarding the applicable law or the court with jurisdiction;
18. the languages in which the contract terms and the preliminary information referred to in these provisions are provided and the languages in which the insurer undertakes to conduct communication during the lifetime of this contract, subject to the policyholder’s consent;
19. any access the policyholder may have to extrajudicial appeal proceedings and legal remedies and, where appropriate, the conditions of such access, indicating expressly that the policyholder’s option to instigate legal proceedings shall not be thereby affected;
20. the name and address of the competent supervisory authority and the option to make a complaint to such authority.

(2) Where disclosure is made via communication of the contract terms, including the general policy conditions, the information under subsection (1) no. 3, no. 13 and no. 15 must be clearly and distinctively highlighted.

Section 2 Information obligations for life insurance, occupational disability insurance and accident insurance with premium refund

(1) Pursuant to section 7 (1) sentence 1 of the VVG, the insurer shall provide the policyholder with the following information in addition to the information referred to in section 1 (1) above in the case of life insurance:

1. details on costs included in the premium, showing the acquisition costs as a single amount and the other costs as a proportion of the annual premium, stating the period for which they apply in each case; as regards the other costs included, the calculated administrative costs must also be shown separately as a proportion of the annual premium, stating the period for which they apply in each case;
2. details of other potential costs, particularly non-recurring or exceptional costs;
3. details on the calculation principles and criteria applicable to the determination of surplus and to surplus participation (bonuses);
4. details on the surrender values;
5. details on the minimum sum insured for transformation into paid-up insurance or insurance with discounted premiums and on the benefits payable under such an insurance;
6. the extent to which the benefits under nos. 4 and 5 are guaranteed;
7. in the case of unit-linked insurance, details on the underlying fund and the type of assets it holds;
8. general information on the tax regulations applicable to this class of insurance.
9. in the case of life insurance policies covering a risk where the insurer is certain to incur an obligation to reduce the value of the policy by percentage points (effective costs) until the payout period commences.

(2) The information under subsection (1) nos. 1, 2, 4 and 5 shall be expressed in euro. The foregoing sentence shall apply to subsection (1) no. 6 subject to the proviso that the guaranteed amount is stated in euro.

(3) Pursuant to section 154 (1) of the VVG, the model calculation to be provided by the insurer shall be based on the following interest rates:

1. the maximum technical interest rate, multiplied by 1.67,
2. the interest rate under no. 1 plus one percentage point, and
3. the interest rate under no. 1 less one percentage point.

(4) Subsections (1) and (2) shall apply mutatis mutandis to occupational disability insurance. In addition, policyholders shall be informed of the fact that the definition of occupational disability in insurance terms is not the same as the definition of incapacity or reduced earning capacity for social security purposes or the term as defined in the policy conditions of daily benefits insurance.

(5) Subsection (1) nos. 3 to 8 and subsection (2) shall apply mutatis mutandis to accident insurance with premium refund.

Section 3 Information obligations for health insurance

(1) Pursuant to section 7 (1) sentence 1 of the VVG, the insurer shall provide the policyholder with the following information in addition to the information referred to in section 1 (1) in the case of substitutive health insurance (section 146 (1) of the German Insurance Supervision Act (Versicherungsaufsichtsgesetz – VAG)):

1. details on costs included in the premium, showing the acquisition costs as a single amount and the other costs as a proportion of the annual premium, stating the period for which they apply in each case; as regards the other costs included, the calculated administrative costs must also be shown separately as a proportion of the annual premium, stating the period for which they apply in each case;
2. details of other potential costs, particularly non-recurring or exceptional costs;
3. information on the impact of rising medical expenses on future premiums;
4. information on the options available for limiting premiums in old age, particularly as regards a switch to the standard or basic rate or to other rates pursuant to section 204 of the VVG and on options for agreeing exclusions, as well as on the possibility of a premium reduction pursuant to section 152 (3) and (4) VAG
5. an indication that a switch from private to statutory health insurance is usually precluded at an advanced age;
6. an indication that a switch within a private health insurance scheme in old age may be associated with higher premiums and that switches may be restricted to a changeover to the standard or basic rate;
7. a summary of the premium history in the 10 years prior to the offer, stating the monthly premium that would have been payable in each of the 10 years prior to the offer if the insurance contract had been concluded at the time by a person of the same sex as the applicant and aged 35 at inception; if the premium rate on offer has not existed for 10 years, the comparison shall be made from the date of introduction of the rate, with a note to the effect that the relevance of the comparison is limited due to the shorter period since the introduction of the rate; in addition, the premium history of a comparable premium rate that has existed for 10 years shall be presented.

(2) The information under subsection (1) nos. 1, 2 and 7 shall be expressed in euro.

Section 4 Product information sheet

(1) If the policyholder is a consumer, the insurer shall provide him with a product information sheet containing information that is of particular significance to the conclusion or performance of the insurance contract.

(2) The product information sheet shall be drawn up in accordance with Commission implementing Regulation (EU) 2017/1469 of 11 August 2017 laying down a standardised presentation format for the insurance product information document (OJ L 209 of 12 August 2017, p. 19) as amended; the relevant information is to be stated under the headings to be used pursuant to Article 4 (1) in conjunction with the Annex or pursuant to Article 4 of the implementing regulation. In addition, for non-life insurance products as listed in Annex I to Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 relating to the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) (OJ L 335, 30 December 17 2009, p. 1), the premium, the acquisition and distribution costs, the administrative costs (section 2 (1) no. 1) and the other costs (section 2 (1) no. 2) are to be shown separately in euro; the information is to be stated as the final information under the heading “Premium; costs”.

(3) This rule does not apply to insurance-based investment products as defined by Regulation (EU) No 1286/2014 of the European Parliament and of the Council of 26 November 2014 on key information documents for packaged retail and insurance-based investment products (PRIIPs) (OJ L 352 of 9 December 2014, p. 1; L 358 of 13 December 2014, p. 50), as amended by Regulation (EU) 2016/2340 (OJ L 354 of 23 December 2016, p. 35).

Section 5 Information obligations during telephone conversations

(1) If the insurer contacts the policyholder by telephone, it must expressly disclose its identity and the purpose of the telephone call at the very beginning of each conversation.

(2) During telephone calls, the insurer is only obliged to disclose the information under section 1 (1) nos. 1 to 3, no. 6b, nos. 7 to 10 and nos. 12 to 14 to the policyholder. The foregoing sentence shall apply only if the insurer has informed the policyholder that further information is available on request and of the nature of such information, and the policyholder expressly forgoes the communication of further information at that time.

(3) The information obligations set out in sections 1 to 4 shall remain unaffected.

Section 6 Information obligations during the lifetime of the contract

(1) The insurer shall provide the policyholder with the following information during the lifetime of the insurance contract:

1. any change in the insurer’s identity or contact address and in that of any branch office through which the contract was concluded;
2. changes in the information under section 1 (1) no. 6b, nos. 7 to 9 and no. 14, and under section 2 (1) nos. 3 to 7 arising from amendments to legislation;
3. where surplus participation is provided for under the contract, annual information on the surplus status, in addition to information on the extent to which such surplus participation is guaranteed; however, this shall not apply to health insurance.

(2) In the case of substitutive health insurance pursuant to section 146 (1) VAG, the insurer shall, whenever premiums are increased, notify policyholders of their option to switch rates in accordance with section 204 of the VVG, providing a copy of the text of the relevant statutory provision. In the case of insured persons who have reached the age of 60, the policyholder shall be made aware of premium rates that offer insurance cover similar to the existing rate and where a tariff switch would result in a reduction in premium. The information must include rates that represent suitable switches in the light of an informed assessment of the policyholder’s interests. The premium rates referred to in sentence 2 of this subsection shall in any case include those rates, with the exception of the basic rate, that saw the highest uptake in the previous financial year in terms of the number of new insured persons. No more than 10 rates may be listed. In each case an indication must be given of the premiums that would be payable for the insured persons if a switch were made into that rate. In addition, the policyholder shall be informed of the option of switching to the standard or basic rate. The conditions for switching to the standard or basic rate, the premium payable in that case and the possibility of a premium reduction under the basic rate pursuant to section 152 (4) VAG shall be set out. Upon request, the policyholder shall be provided with the transfer value pursuant to section 146 (1) no. 5 VAG; from 1 January 2013 onwards the transfer value shall be notified annually.

Section 7 Transitional provision

For insurance products that are not defined as insurance-based investment products by Regulation (EU) No 1286/2014 nor as insurance products in Annex 1 to Directive 2009/138/EC, the insurer is entitled to formulate the product information sheet in accordance with section 4 in the version applicable until 13 March 2018, up to and including 31 December 2018.
All provisions mentioned are to be observed in their current version including subsequent amendments.

Additional information:

The “Circular 11/2018 Insurance Distribution”” provides an overview of general supervisory rules to be observed by insurance undertakings and pension funds in distribution in Germany.

In the guidance notice “General Good Requirements in Germany”, BaFin publishes legal requirements that insurance undertakings domiciled in other states of the EU/EEA must observe when they carry on business via a branch or under the freedom to provide cross-border services (activities pursuant to section 61 (1) VAG) and compliance with which is monitored by BaFin with the exception of financial supervision.