Commission System Satisfaction: Why German Consumers Prefer Current Insurance Advisory Models

How is the insurance intermediary industry developing during times of record inflation and rising interest rates? Versicherungsbote asked Michael H. Heinz—President of the Bundesverbands Deutscher Versicherungskaufleute (BVK). In the interview, Heinz also addressed the threatened commission ban and spoke out against such prohibition. His insights reveal why the current system works for German consumers and what challenges lie ahead for insurance professionals.

Market Resilience During Economic Challenges

When asked about the impact of Germany's crisis atmosphere—record inflation, energy shortages, and paralyzing bureaucracy—on insurance and financial advisory businesses, Heinz reports: "So far, we have no numbers or reports indicating that intermediaries are strongly affected by the crisis." The BVK is currently conducting its 2022/2023 structural analysis, and after evaluating the data, they can make a valid statement about whether the crisis has already affected intermediary income.

Importantly, Heinz notes: "Large waves of insurance customer cancellations have not been reported to us so far. Generally, intermediaries fulfill their socio-political task of advising their customers about alternatives to cancellation (e.g., through higher deductibles) during possible liquidity shortages and pointing out the necessity of private provision."

The Commission Ban Debate: What Market Reality Reveals

The industry can breathe easier as EU Financial Commissioner Mairead McGuinness announced at the 'Eurofi High Level Seminar' in Stockholm that an EU-wide commission prohibition is off the table for now. But domestic debates continue.

Responding to Dorothea Mohn of the Federation of German Consumer Organizations, who argued that Germany has too many financial intermediaries and that small savers shouldn't subsidize this oversupply, Heinz offers a market-based perspective: "These allegations from so-called consumer advocates have been known for a long time. Small savers have long been free to use fee-based advisory services. However, the market shows that consumers are satisfied with the prevailing commission system."

He continues with a crucial warning: "Many intermediaries would exit the market if their income were no longer sufficient due to a commission ban. However, this would particularly do small savers a disservice. Experiences from the Netherlands and Great Britain have shown that especially small savers in the low-wage sector forgo advice for cost reasons."

Market Consolidation vs. Quality Standards

When asked whether market consolidation might benefit insurance and financial investment intermediaries, Heinz distinguishes between different issues: "A market consolidation of commission outliers would be in the interest of intermediaries. Because these bring the entire industry into disrepute."

He identifies specific problematic practices: "Incentives, bonuses, and distribution controls that violate § 48a VAG are counterproductive and no longer permissible. The BVK has maintained this position since the introduction of the IDD. Insurers and distribution channels should finally respect this."

Opportunities Amid Regulatory Challenges

While bureaucracy and overregulation remain concerns, Heinz identifies positive developments: "Although the sustainability topic is regulatorily very complex and certainly requires clearer improvement here, the topic offers great opportunities for intermediaries. Intermediaries are well advised to open up to the topic not just due to regulatory requirements."

He adds: "Moreover, I'm cautiously optimistic that a reform of private retirement provision will finally be tackled now. Qualified provision and security advisory services are and remain more important than ever. Intermediaries fulfill an important socio-political mandate as guides and are an important component of the medium-sized economy. All intermediaries should confidently represent this awareness toward politics and society."

Investor Influence and Broker Independence

Regarding increased foreign investor activity in broker pools—sometimes from non-EU countries—Heinz observes: "We're observing this development very closely. After investors' high InsurTech investments apparently haven't paid off much so far, returns should finally be generated through broker pool participations. The pools are probably also more attractive because they already have functioning business models."

On potential conflicts with pool independence: "The independence of broker pools depends on the participation share of profit-oriented investors. What concerns us much more, however, is the independence of insurance brokers in cooperation with pools and service providers. We also presented a study on this, which caused some irritation among pools. The BVK wanted to create awareness about the fluid transitions to economic dependence of brokers with this study."

Comparative Perspective: German vs. American Commission Debates

For American insurance professionals, this German debate parallels discussions about fiduciary standards and commission structures in the U.S. market:

• German System: Commission-based advice dominates, with consumers showing satisfaction
• American System: Mix of commission and fee-based models with ongoing fiduciary debates
• Common Finding: Both markets show that commission-based advice remains accessible to middle-income consumers
• Regulatory Trend: Both systems face pressure for greater transparency and consumer protection

Just as U.S. Medicare agents must navigate commission rules while serving beneficiaries, German brokers balance regulatory expectations with practical service delivery to diverse consumer segments.

Future Trends for Insurance Professionals

Heinz identifies several key developments intermediaries should monitor:

1. Sustainability: Continuing significant influence on intermediary work
2. Demographic Development: Succession planning and next-generation recruitment
3. Entrepreneurial Development: Business model evolution for future viability
4. Digitalization: Essential for future market success

The BVK addresses these challenges through initiatives like BVK Juniors for next-generation development and support services for reviewing commission agreements and pool contracts.

As Heinz concludes, the independent fiduciary position of the broker remains a valuable asset that should be preserved—a principle equally relevant in both German and American insurance markets as professionals navigate evolving business models and regulatory expectations.