Code of Conduct
„As a sign of their high sense of responsibility, members of the BDVM commit to compliance with mandatory rules of conduct“.
The following guidelines and rules constitute the general framework for consolidated VDVM members firms in the area of clearing and collection. The following rules and guidelines apply in the absence of a divergent member agreement with the insurance policy holder and/or insurer. They represent an orientation and valuation framework for individual arrangements involving both association members and policy holders (hereinafter PH) and/or insurers.
The duties of the insurance broker (hereinafter IB) include examining and monitoring payment transactions between the PH and insurer, particularly premium payments, and, inversely, between the insurer and the PH, particularly claims settlements, and handling these on behalf of the PH in compliance with his/her/its brokerage contract/commission. Effective control is enabled through the handling of respective payments through the IB and his/her/its accounts (normal case). Direct handling is also possible in account transactions between the PH and insurer, whereby the IB must also track the regularity of payment transactions on the basis of documents made accessible to him/her/it in these cases.
The IB must, against the background of Paragraph 1, reach a decision to this effect as to whether and how he/she/it will do justice to his/her/its function in the area of clearing. It can, in particular, be practical in so-called bulk business and typical private client business to handle payment transactions directly between the PH and insurer. The PH should give the IB his/her/its express permission for direct handling.
Insofar as the IB handles premium collection and, where applicable, claims are also handled through his/her/its accounts, he/she/it must ensure that the respective legal framework exists for this. A minimum requirement here is that handling of payment transactions or all business transactions through the IB is agreed in the brokerage contract/commission between the PH and IB. An agreement of this nature can also be reached through the so-called extended broker clause.
A written agreement should be reached between the IB and insurer which regulates the content and scope of payment and clearing transactions or supplements it if an extended broker clause exists. Insurers and IB’s can, in particular, agree on payment and clearing transactions with reference to these regulations.
Premium collection with discharging effect is the normal situation for VDVM Association members if premium payment transactions are handled through the IB and his/her/its accounts.
The PH must be expressly informed if, in deviation from the normal case, collection by the IB does not have a discharging effect.
Clearing in the case of premium collection is directly linked to insurance contract and regulatory requirements and conditions, particularly with regard to the relationship between the PH and insurer. The IB, as the fiduciary custodian of the interests of the PH, is therefore obliged to give precedence to his/her/its interests against the background of statutory regulations and assessments. Agreements or procedures of insurers which amount to the insurer already attempting to collect the premium without an orderly contractual text, e.g. solely on the basis of a confirmation of coverage and/or a premium statement drafted by him/her/it, should be fundamentally rejected, unless the PH declares his/her/its express agreement in an individual case.
A differentiation between two phases to which responsibilities and duties are linked is necessary in this context:
Phase one continues until the presentation of an orderly policy and premium statement for which the insurer fundamentally bears responsibility (exception: policy issuing by the IB). Even where the insurer is already in a risk situation due to a coverage pledge, this does not in principle justify the demand of the complete premium or a marginally lower instalment payment.
Phase two should be differentiated from this, i.e. collecting of the premium by and through the IB after presentation of an orderly policy and premium statement. The IB enters a commitment in this phase to cooperate with the insurer to ensure the realisation of an orderly process that adequately takes the role and function of the IB into consideration.
The IB is then empowered to receive PH premium payments with both legal and discharging effect. Premium payments collected are – with the exception of the brokerage commission contained therein – so-called borrowed funds, which should be administered accordingly. They should be forwarded to the insurer in the context of orderly clearing.
Where the IB does not, or no longer wishes to avail of the power to collect, or only wishes to avail of it with regard to certain insurance contracts, he/she/it should inform the insurer and, insofar as necessary, the PH as well of this decision.
The responsibility of the IB with regard to the insurer during premium collection (with discharging effect) prohibits the complete or partial transfer of the power to collect to a third party without the permission of the insurer.
The duration of the power to collect and collecting action in the context of business transactions between the IB and PH demand that, insofar as it is not already anchored in the insurance contract, the power to collect cannot be revoked at any time by the insurer unless important and understandable reasons exist for such a course of action. A termination of the collecting agreement ahead of schedule should therefore only be possible if an important reason exists. An important reason for termination of the power to collect ahead of schedule is the sustained and serious breach of these rules.
A fundamental prerequisite for premium collection by the IB is the orderly completion of Phase one (compare IV.), i.e. possession of the correct policy with appropriate contractual conditions and the correct premium statement. The IB will examine the premium statement provided by the insurer within an appropriate time period, but within four weeks after receipt at the latest, and, if found to be orderly, immediately forward an appropriate payment request to the PH.
Where the IB ascertains during examination of the premium statement that the conditions for request of the premium have not yet been met, or (for whatever reasons) the premium statement is not correct, he/she/it will inform the insurer of this within the previously-mentioned time period, generally in writing. The insurer will then clarify the situation and/or arrange for the necessary correction. Only after orderly documents conforming to Paragraph 1 have been submitted does the time period commence within which the IB should process the payment procedure and forward an appropriate payment request to the PH.
In the absence of permission from the insurer, the IB is not entitled to reach agreement with the PH on instalment payments or deferrals.
Where the PH expressly informs the IB of his/her/its insolvency, or if the IB is aware of the application for insolvency proceedings concerning the assets of the PH, the IB must inform the insurer immediately of this state of affairs.
The IB and insurer must agree on a procedure for the initiation of a dunning procedure. The deadlines chosen in this respect should be assessed so that the IB has the opportunity prior to initiation of the dunning procedure to remind the PH of the payment, and the latter is granted a further appropriate period for payment.
The deadlines selected should generally be assessed in the case of the subsequent premium so that the PH is granted a period of at least one month to make payment after the first payment request from the IB and can avail of a period of the same length for the outstanding premium after a reminder from the IB. It follows from this that the IB should indicate all premiums which are not paid within the existing total time period – at least two months since the forwarding of the insurer’s payment request and/or dispatch of an IB premium statement – in writing 14 days at the latest after the expiration of the period following the reminder to assist the decision on initiating the qualified dunning procedure in compliance with § 39 of the Insurance Contract Act (Versicherungsvertragsgesetz – VVG).
In the case of initial and/or non-recurring premiums, the IB should indicate unpaid premiums to the insurer after one month – since the forwarding of the insurer’s payment request and/or dispatch of the IB premium statement – and within 7 days in writing to assist the decision on initiating the dunning procedure or contribution lawsuit in compliance with § 38 of the Insurance Contract Act (Versicherungsvertragsgesetz – VVG).
Dunning procedures and contribution lawsuits are conducted/initiated exclusively by the insurer, provided nothing deviating from this has been expressly agreed. The insurer will examine the situation and legal position together with the insurance broker prior to initiating a dunning procedure.
Funds collected by the broker in the context of premium collection and also in the course of claims settlements are, with the exception of his/her/its brokerage commission, borrowed funds and should therefore not only be separated clearly in the accounts from the IB firm’s funds, but also in bank account transactions, as the VDVM articles demand. Premiums demanded should therefore only be requested for payment to an IB premium collection account. It is expressly prohibited to finance the operating costs of the IB firm from this premium collection account. The premium collection account should be opened in a recognised German bank and/or savings bank under the auspices of the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BAFin). The financial institute should be clearly informed of the purpose of the premium collection account.
The premium collection account set up by the IB is intended for the collection and administration of premiums for all insurers for which premiums are demanded by the IB. The administration of separate premium collection accounts for each insurer is not a standard VDVM procedure and could also not be arranged for the policy holder who wishes to have an interface for his/her/its premium payment.
Amounts lodged in the premium collection account which should be settled with the insurer at fixed intervals should be held available for this purpose to ensure orderly settlement. Orderly settlement is not ensured if funds collected can be accessed in a manner up to the time of settlement with the insurer that renders them available to the financial cycle of controlling parent, subsidiary and sister companies or other associated companies.
The IB premium collection account is administered by the IB at his/her/its own responsibility. Insurers have, to this extent, no fundamental rights to information or inspection relating to this account.
The IB is entitled to any interest resulting from the administration of collected premiums up to the next settlement. A separate remuneration of the IB for the realisation of premium collection can also be individually agreed with the insurer.
Settlements are realised on the basis of the clearance procedure agreed between the insurer and insurance broker. Where such is not agreed, the IB should realise settlement on the basis of his/her/its clearance documents. Regardless of whether the parties agree to a clearance procedure or not, all involved must organise their settlement relationship in the in a spirit of partnership and a manner that offers the other party involved the opportunity to record the clearance procedure, including on the basis of key data, etc. Settlement should therefore be clearly and coherently structured and, insofar as the IB also administers claims settlements, compiled with premiums and claims separated from each other.
The IB is entitled to withdraw the brokerage commission due to him/her/it in advance from the contributions collected.
Should variances occur between the IB and insurer with regard to settlement, the parties shall endeavour to reconcile this variance during the normal course of business. Experience shows that reconcilement is furthered where the parties inform the respective other parties in writing of the detection of variances and the reasons for such to ensure traceability in the context of an organisation with an orderly division of tasks.
In the case of a clear division of listings of items in the premium account and claims account, the IB is entitled to balance premiums and claims clearly recorded in an orderly accounting manner to promote efficiency in payment transactions and in the interest of speedy handling.
The IB should realise regular settlement of the premium payments collected on behalf of the insurer. The amounts collected by the insurance broker up to the settlement date are decisive for settlement.
Settlement should be realised within a period of one to three months to achieve a practical bundling of settlement cases which pays efficiency dividends for both parties. The IB must forward the settlement to the insurer within a further period of two weeks after the settlement date and immediately transfer the amount detailed therein.
Where an individual arrangement between the IB and insurer concerning a settlement rhythm is not fulfilled, the IB must clear the premiums collected in the previous quarter by the 14th calendar day of a given quarter and transfer the amount calculated immediately to the insurer.
Insofar as the parties wish to communicate electronically during clearing and collecting, an agreement must be reached in this respect. It should be noted that a large number of insurers and IB’s support the exchange of insurance inventory and claims data and the exchange of clearing data from individual branches to the IB and back on the basis of the standardised data records of the German Insurance Association (Gesamtverband der Deutschen Versicherungswirtschaft e. V. – GDV). The transmission and reception of this data should be agreed individually between the parties.
Insofar as the IB handles claims for the insurer and, consequently, he/she/it has claims against the insurer, the previous arrangements shall apply accordingly. It should be noted that the IB is entitled to balance claims against the insurer for claims payments advanced by him/her/it with collected premiums, provided clear accounting divisions and traceability are ensured.
Insofar as insurer claims payments are to be made to the IB, arrangement shall be reached on whether the insurer pays the IB with discharging effect. The insurer pays without discharging effect in the absence of an arrangement of this nature. The previous arrangements apply analogously in remaining cases, with the stipulation that, in the absence of an appropriate agreement between the PH and IB, claims payments received by the IB are to be forwarded to the recipient within one week.
It is in the interest of the Association and member firms to promote acceptance of these guidelines through an information exchange.
Insurers are entitled, particularly against the background of the provisions of Article V Subparagraph 4, to point out sustained and serious breaches of these rules by member firms to the Association.