The Summer 2007 edition of Worldwide Compliance Newsletter contained an
article by Burkard von Siegfried, Lloyd’s General Representative in Germany, about this reform. At that time, the new law had not been passed by all legislative bodies. This has now taken place, and the new Versicherungsvertragsgesetz (VVG) is in
force. Lloyd’s provided details in Market Bulletin Y4100, issued 19 December 2007.
The old VVG originated in 1908 and, although amended over the years, was
probably due an overhaul. Implementing the new VVG has created a great deal of
work for the German insurance industry, which was particularly unhappy about the
late roll-out of mandatory information rules (VVG-InfoV), set out in a regulation
made under the VVG. This late roll-out placed serious time pressure on the market, which had to modify its methods and activities. It is estimated that the
implementation process cost the German insurance industry around €1 billion.
Effect of the new VVG
The new VVG focuses on improved transparency and consumer rights and
protection. It has therefore sought to ‘rebalance’ the rights and obligations between
insurers and insureds. Some of the new provisions that it has introduced include:
• A requirement on insurers to meet ‘contract certainty’ disclosure requirements
when insurance contracts are concluded.
• Commission disclosure requirements.
• Replacement of the old VVG’s ‘all or nothing’ principle with a grading of fault, so
that breaches of contractual duty are now more flexibly penalised.
Like the old law, new VVG does not apply to reinsurance and ocean marine
insurance. Large risks are exempt from the ‘contract certainty’ pre-bind
information requirements.
Timings and transition rules
Insurance contracts incepting before 1 January 2008 continue to be governed by
the old VVG until 31 December 2008. Insurers can update their general conditions
of insurance for these policies in 2008, to take effect as of 1 January 2009.
The next phase of the implementation process will be the introduction by July 2008 at the latest of a mandatory ‘Product Information Sheet’, to be handed to the
prospective insured for every insurance product. This could be a sizeable
administrative burden for Lloyd’s underwriters, and those acting on their behalf, in
view of their tailor-made products.
Lloyd’s information
As well as Market Bulletin Y4100, mentioned earlier, Lloyd’s has updated Crystal, its global trading information system, with detailed information on compliance with
new VVG, including guidance, examples of compliant pre-bind wordings, and a table setting out the new wordings, their purpose and use.
Lloyd’s will continue to monitor developments and will keep the market updated.
