A. Personal scope
1 This Circular is addressed to all primary insurance undertakings that conclude genuine group insurance contracts within the meaning of this Circular, where the insured persons are consumers. Pensionskassen, Pensionsfonds and direct insurance are excluded.
2 This Circular does not apply for EU/EEA insurance undertakings operating cross-border in Germany, to the extent that it concerns information relating to the requirements placed on the system of governance.
B. Material scope
3 I. A genuine group insurance contract is a standardised insurance contract covering a group of persons. An individual group member can automatically be enrolled in this group insurance contract – i.e. without declaring their enrolment – or by means of a declaration of enrolment that may, in certain situations, require acceptance, whereby supplementary declarations such as data protection statements or health declarations do not constitute a declaration of enrolment. The criterion for the inclusion of the group member is their group membership.
The group insurance contract provides insurance cover for group members or for the policyholder against a uniform risk that materialises among the group members, subject to the proviso that the insurance benefit is to be provided separately for each group member (Herdter, Der Gruppenversicherungsvertrag – Grundlagen und ausgewählte Problemfelder [Group insurance contracts – basics and selected problem areas], 2010, p. 34).
4 The most important characteristic for differentiating between genuine group insurance contracts and similar contractual constellations is the standardisation of the contract. Standardisation means that the group insurance contract is a single insurance contract with only one policyholder for the entire group.
5 Genuine group insurance contracts are of considerable economic importance due to the frequency with which they are used. However, the tripartite relationship inherent in the genuine group insurance contract with its legal consequences is often not transparent enough for the insured persons. In addition, many statutory protection provisions only apply to certain industries or only to the policyholder, but not to the insured person, even though the latter is generally in a similar need of protection as the policyholder in light of collective consumer protection.
The material scope therefore covers genuine group insurance contracts where the policyholder is not a consumer, but the insured person is a consumer, and the genuine group insurance contract at a minimum also serves to protect the insured person.
6 II. The following are excluded from the material scope of this Circular:
- life insurance contracts held by Pensionsfonds as investments (see section 17 (1) no. 5 of the German Regulation on the Supervision of Pensionsfonds (Pensionsfonds-Aufsichtsverordnung – PFAV)) and life insurance contracts held by Pensionskassen and life insurance undertakings as investments as part of a scheme based purely on defined contributions (see section 34 of the PFAV);
- pension liability insurance taken out by employers to secure labour law commitments made to their employees, as well as pension liability insurance taken out by support relief funds (Unterstützungskassen);
- motor vehicle group insurance contracts;
- operating liability group insurance contracts, cyber group insurance contracts and D&O group insurance contracts;
- group insurance contracts in the area of proband insurance;
- company group accident insurance contracts.
C. General guidance on all types of genuine group insurance contracts
7 In order to achieve a standardised level of collective consumer protection for genuine group insurance contracts, the general principles hereafter referred to should be observed in accordance with Circular 3/90 (Official Bulletin of the BAV (VerBAV) 1990, 339 and 1994, 359):
8 I. Unless special class-specific legal requirements apply, in the future all genuine group insurance contracts should contain a provision according to which the insured persons have the right to assert their own claims from the insurance contract against the insurance undertaking without the consent of the policyholder. In derogation from section 44 (2) of the German Insurance Contract Act (Versicherungsvertragsgesetz – VVG), the insured persons of a group insurance contract should receive a direct right of action vis-à-vis the insurance undertaking in the event of an insured event. The provision of section 44 (2) of the VVG should be waived in all genuine group insurance contracts.
9 This expectation arises from the predecessor Circular 3/90 (under 2.a), which still refers to the predecessor standards in sections 74 et seq. of the VVG (old version), and still appears appropriate for the protection of the insured persons, as the need of the insured person of a genuine group insurance contract to be able to enforce cover claims and benefit entitlements without the involvement of the policyholder is worthy of protection.
10 II. In the case of genuine group insurance contracts, any offsetting by the insurance undertaking against a claim of an insured person – a claim arising out of the insurance contract vis-à-vis the policyholder – should be excluded if the insured person can prove that they have fulfilled their obligation to pay, to the extent that such an obligation exists. The exclusion of offsetting should apply in particular when the policyholder is in arrears with the premiums.
11 The provision of section 35 of the VVG should therefore be waived in genuine group insurance contracts.
12 This expectation also results from the predecessor Circular 3/90 (under 2.a), which still refers to the predecessor standard in section 35b of the VVG (old version). Waiving the option to offset serves to protect the insured persons, who will have fulfilled their payment obligation to the policyholder on a regular basis.
13 III. If there is a declaration of enrolment by the insured person with regard to the inclusion of the insured person in the group insurance contract, and it is therefore not an automatic enrolment, the group insurance contract should provide that the information that must be communicated to the policyholder by the insurance undertaking due to legal requirements (in particular the product information sheet (Produktinformationsblatt – PIB) and the key information document (Basisinformationsblatt – BIB)) is also communicated to the insured person in connection with their enrolment to the group insurance contract – either by the insurance undertaking or, at the instigation of the insurance undertaking, by the policyholder.
14 The insurance undertaking must ensure that policyholders fulfil their contractual obligation to disclose the information.
15 This is a considerable simplification compared to the Circular from 3/90, which stipulates under 3. that the insurance undertaking must issue an insurance certificate with certain contents to the insured client.
16 In addition, the insured person should be informed by the insurance undertaking or, at the instigation of the insurance undertaking, by the policyholder that
- in derogation from section 44 (2) of the VVG, the policyholder has a direct right of action vis-à-vis the insurance undertaking in the event of an insured event, provided that this has been agreed in the group insurance contract; and
- in derogation of section 35 of the VVG, the insurance undertaking has no right to offset against the insured person if the insured person can prove that they have fulfilled their obligation to pay – to the extent that such an obligation exists – vis-à-vis the policyholder; and
- the knowledge and conduct of the insured person can also be taken into account, provided that the knowledge and conduct of the policyholder is of legal significance according to the insurance terms and conditions or the statutory provisions, section 47 of the VVG.
17 This latter expectation already results from the predecessor Circular 3/90 (under 3.) which referred to the predecessor standard in section 79 of the VVG (old version), and merely represents a reference to the legal situation.
18 For the purpose of communicating the information referred to above, it is considered sufficient for that information to be available to the insured person in an appropriate place (e.g. on the website of the insurance undertaking or of the policyholder) and the insured person to be informed of this either by the insurance undertaking or by the policyholder at the instigation of the insurance undertaking.
19 This is a considerable simplification compared to Circular 3/90, which did consider mere retrievability to be sufficient, and takes into account today’s technical possibilities and practices.
20 IV. Compulsory insurance should not be a part of a group insurance contract unless the law provides for this possibility, so that the insured person can arrange and maintain the statutory insurance cover independently of the conduct of the policyholder. This applies in particular to group insurance contracts where goods or services are bundled with insurance cover.
21 This expectation regarding group insurance contracts in which goods or services are bundled with insurance cover was formulated in the predecessor Circular 3/90 (under 2.b) at the end) and continues to be appropriate for the protection of the insured persons.
22 V. Even if several types of insurance are bundled, the insurance premium should at least meet the necessary requirements in terms of claims and costs.
23 This expectation was formulated in the predecessor Circular 3/90 (under 4.) and continues to be appropriate.
24 VI. If a declaration of enrolment exists with regard to the inclusion of the insured persons in the group insurance contract and this is therefore not an automatic enrolment, the insured persons should be informed by the insurance undertaking, in accordance with section 44 (1) of the VVG, of any changes that occur during the term of the contract that are significant for them pursuant to section 7 (3) of the VVG in conjunction with section 6 of the German Regulation on Information Obligations for Insurance Contracts (VVG-Informationspflichtenverordnung – VVG-InfoV), insofar as they result in a change in the insurance cover for the insured persons.
25 In constellations in which the insured persons are not known to the insurance undertaking, such as the automatic inclusion of association members in a group insurance contract, this expectation can be met by the policyholder’s contractual obligation to disseminate information during the term of the contract.
26 The insurance undertaking must ensure that policyholders fulfil their contractual obligation to disclose information.
27 For the purpose of communicating the information referred to above, here too it is considered sufficient for that information to be available to the insured person in an appropriate place (e.g. on the website of the insurance undertaking or of the policyholder) and the insured person to be informed of this either by the insurance undertaking or by the policyholder at the instigation of the insurance undertaking.
28 VII. In the event of termination of the group insurance contract by the insurance undertaking or the policyholder, the insured persons should, as a general rule, be informed of the termination by the insurance undertaking in text form. If the insurance undertaking offers corresponding individual insurance tariffs, the insured persons should also be informed of their options to continue in the form of individual insurance.
29 If the insurance undertaking cancels the group insurance contract due to a default in payment by the policyholder, the information should specify individually and precisely the amounts in arrears of the premium, interest and the costs. In addition, the insurance undertaking should grant the insured persons a time limit for payment of at least two months to enable them to maintain the original insurance cover by paying the premiums, interest and costs attributable to them from their own funds. The option to continue should end no earlier than two months after the point in time at which the insured person became aware of this option.
30 The insured persons should also receive information in text form from the insurance undertaking in the event of a mutually agreed cancellation of the group insurance contract. They should be given the option to continue if the insurance undertaking offers corresponding individual insurance tariffs. The option to continue should end no earlier than two months after the point in time at which the insured person became aware of this right.
In the case of group insurance contracts where the insurance undertaking does not know the names of the insured persons, a provision should be included in the group insurance contract according to which the policyholder undertakes to inform the insured persons of the termination or cancellation of the group insurance contract. The insurance undertaking must ensure that policyholders fulfil their contractual obligation to disclose the information.
31 In addition, an appropriate secondary liability period should be agreed in the event of cancellation or termination of the group insurance contract. In determining whether the secondary liability period is appropriate, the circ*mstances of the individual case need to be considered.
If the insured persons pay a regularly recurring fee (e.g. through an annual credit card fee), the insurance cover should continue at least until the end of the period covered by the last fee.
The insured persons should be informed of the imminent discontinuation of insurance cover in a timely manner before the secondary liability period ends. To ensure this, it should be agreed in the group insurance contract that the policyholder must inform the insured persons in good time of the impending discontinuation of the insurance cover.
32 This expectation also arises in part from the predecessor Circular 3/90 (under 2.a. at the end). Its purpose is to ensure that the insured persons receive insurance cover for the period for which they have fulfilled their payment obligation.
33 VIII. If inclusion is effected by the insured persons submitting their own declaration of enrolment, group insurance contracts should contain an agreement whereby the insured persons are granted the possibility of revoking the declaration of enrolment in text form vis-à-vis the policyholder or the insurance undertaking.
The insured persons should be informed of this right when they submit their declaration of enrolment.
The information to be forwarded by the policyholder to the insured persons (see above under C. III.) should be made available at the same time.
The period for withdrawing the declaration of enrolment should not begin before the point in time at which the insured persons receive the above-mentioned information and the instructions on the option of withdrawing their declaration of enrolment. The deadline should at least correspond to the withdrawal period granted to the policyholder, whereby it suffices to send it off before the deadline.
34 IX. Genuine group insurance contracts should include a provision that the wording of all advertising material, printed information or other publications referring to or mentioning the insurance cover must be agreed with the insurance undertaking before they are announced. The insurance undertaking should ensure that these do not contain any incorrect statements about the insurance cover and do not lead to ambiguities.
35 This expectation already results from the predecessor Circular 3/90 (under 3.) and continues to be appropriate for the protection of the insured persons with regard to section 1a (3) of the VVG, which was added to the VVG due to the implementation of the European Insurance Distribution Directive (Versicherungsvertriebsrichtline – IDD).
36 X. In the event that BaFin requires amendments to the group insurance contract, the group insurance contract should contain a provision stating that the contracting parties must work together on the amendment by mutual agreement.
If no agreement is reached between the insurance undertaking and the policyholder, the insurance undertaking or, if applicable, the policyholder should have the right to terminate the genuine group insurance contract within an appropriate period of time.
37 This expectation already results from the predecessor Circular 3/90 (under 5.) and continues to be appropriate for the protection of the insured persons.
38 XI. The principles of equal treatment must be observed (section 138 (2) of the VAG for life insurance, section 146 (2) sentence 1 of the VAG for substitutive health insurance, section 161 (1) of the VAG for accident insurance with premium refunds and section 177 (1) of the VAG for mutual insurance societies).
39 XII. Derogations from the guidance notes under C. of the Circular may be considered in particular if this can be justified by special tax or labour law characteristics.
D. Specific guidance on group insurance contracts where the premium is paid directly or indirectly by the insured person
40 I. Bilateral policy alterations (e.g. changes to the premium, benefits or contractual terms and conditions) to the group insurance contract between the insurance undertaking and the policyholder should only be agreed for the future concerning their effect the insured persons.
41 II. The interests of the insured persons must be given appropriate consideration in the event of bilateral policy alterations.
42 III. The insured persons should be informed of this policy alteration and of material changes to the group insurance contract with a deadline of at least one month before these changes enter into force and should be given the right to withdraw from the group insurance contract at least one month after receiving this information.
43 IV. Group insurance contracts should include an obligation for the policyholder to disclose separately the charges for any benefits provided by the policyholder in excess of the insurance cover. These are primarily services provided by the policyholder in emergencies or when travelling, and which do not constitute insurance business.
E. Specific guidance on bundling insurance cover with a goods or service transaction and on bundling compulsory insurance with other insurance policies
44 As a rule, a mandatory bundling of insurance cover with the conclusion of a contract for goods and/or services should be avoided. This should also apply to the mandatory bundling of a statutory compulsory insurance with other types of insurance.
45 However, there should be no objections to a mandatory bundling if the insured person itself has an interest in the bundling that goes beyond the simplified conclusion of an insurance policy and any premium advantages. This is the case in particular if the conclusion of an insurance policy enables the insured person to provide the consideration for the goods or service transaction (e.g. provisional funeral contract /industrial life insurance).
46 These expectations arise from the predecessor Circular 3/90 and are not covered by the regulation on cross-selling (section 7a of the VVG). They still appear to make sense for the protection of the insured person.
F. Specific guidance on group insurance contracts in life insurance and accident insurance with premium refunds
47 The premium advantages granted as part of a genuine group insurance policy must, as a general rule, arise from the collective and must not involve any subsidisation at the expense of the other community of policyholders of the insurance undertaking.
48 In particular, more favourable conditions with regard to
- costs must be compensated by corresponding cost savings;
- risk by a correspondingly more favourable risk experience;
- admission procedures through measures that prevent negative risk selection.
49 This expectation arises for the life insurance sector from the predecessor Circular 3/94 (under II. 2.2) and continues to be appropriate to protect the insured persons.
G. Specific guidance on group insurance contracts in health insurance
50 I. The special conditions granted as part of a genuine group insurance policy must be self-supporting from within the collective and must not result in any subsidisation at the expense of the insurance undertaking’s remaining policyholder population. In particular, more favourable conditions with regard to
- costs must be compensated by corresponding cost savings;
- risk by a correspondingly more favourable risk experience;
- admission procedures through measures that prevent negative risk selection.
51 This expectation results from the predecessor Circular 2/97 (under B. II. 2.) and continues to be appropriate to protect the insured persons.
52 II. For group insurance contracts in health insurance, in derogation from Part C. I., the regulation of section 194 (3) of the VVG applies.
53 III. With regard to the expected action formulated under C. II., section 35 of the VVG should only be waived in the context of non-substitutive health insurance.
54 IV. C. IV. does not apply to genuine group insurance contracts in the area of substitutive health insurance.
55 The risks associated with the continuation in the form of an individual insurance contract following the termination of the group insurance contract, for persons already insured in the relevant individual insurance policies or, due to the right to change tariffs, in tariffs with similar insurance cover, must be appropriately taken into account when designing the product, in particular in light of the actuarial criteria.
56 V. The expectations formulated under D. III. do not apply to genuine group insurance contracts in health insurance.
57 VI. In accordance with the spirit of section 206 (4) of the VVG, the insured persons should be credited with the rights acquired under the contract and the ageing provision in the event of continuation as individual insurance, even if the group insurance contract is cancelled by mutual consent.
H. Concluding remarks
58 Compliance with the above principles should be taken into account after a transitional period of six months when the insurance undertakings involved design genuine group insurance contracts. Insurance undertakings should endeavour to amend existing group insurance contracts within one year of the publication of this Circular on BaFin’s website.
59 BaFin will supervise the extent to which the expectations formulated in this Circular are taken into account in the design of genuine group insurance contracts and, if necessary, draw attention to the supervisory expectations in an appropriate manner.
I. Circulars to be rescinded/formally completed circulars
60 Circulars 3/90, 3/94 and 2/97 are being rescinded.
