Balance Between Insurer, State & Individual

Jennifer Thielen

In the last couple of years, insurance companies are thriving not only in the developed countries but also in the developing countries like Nepal. However, the development of insurance company alone is not enough. There must be a good modus operandi so that people can also benefit from it. In this context, here, the author would like to bring into discussion the German insurance laws and provisions which might help Nepal to learn from it. It is important primarily because the German insurance law establish right balance between the insurer, the state, and the individual. The protection of citizens against risk, through the provision of insurance, is fundamental to social and legal life in Germany in the 21st century. In the last few decades, the insurance industry has seen enormous growth. Nowadays, there is virtually nothing and no-one that cannot be protected with some kind of insurance: whether it is insurance against liability claims, health insurance, legal insurance or property insurance. As a result, the field of insurance law has also grown in importance.

Insurance law
In Germany, insurance law is separated into private and social insurance law. The field of social insurance belongs to the public legal field and covers the existence of risks to the person irrespective of their financial situation or individual risk. A social security system is operated by the Government to ensure that all people are covered by social insurance, even those with very limited income. By mentioning a solidarity system, this social security system is fixed in Article 20 I of the Basic Law for the Federal Republic of Germany.
The system of the social insurance covers existential needs, represents a safe and strong network and is written down in the SGB, the status book of social law. There are five classes of social insurance: health insurance (which provides protection against the financial impact of disease, maternity and non-work related accidents), accident insurance (which provides protection against the result of an accident at work, occupational diseases and work-related health hazards), pension insurance (which provides insurance against ageing in the form of an allowance to be paid when members reach a specified retirement age), disability insurance (provides security against the risk of being and becoming disabled and in need of professional care) and finally unemployment insurance (which provides continued remuneration, as a percentage of income, in case of unemployment and offers labor promotions like career counseling or vocational training). With just a few exceptions, most people are legally required to take out social insurance either by paying regular social security contributions or through tax credits. Contributions are assessed according to gross wages.
Unlike social insurance, the field of private insurance belongs to the private legal field. It is subject to civil law principles. Of particular importance here is contractual freedom, and the related legal principle known as autonomy of the individual. It says that you have the freedom to form as many legal relations as you like, as long as this does not contravene the law. That means, concretely, that anyone can choose to close a contract, with whomever and with whichever conditions they choose. It means that insurers have to offer good conditions be recognised as a safe option in order to get customers. That fuels the market by creating large competition among insurance companies.
There is almost nothing you cannot insure against using private insurance; as well as classical insurance products such as private life, health, or occupational disability insurance, you can also insure your house against damage, your car against fire, theft and accident, or even close a body part insurance contract. Ten years ago, private insurance law was revised to adapt to the actual social and political situation, the person`s need and the changes due to digitalisation and automatisation. Since 2008 and after almost 100 years of practicing the German insurance Act 1908, there is an actual, precise and insuree-orientated law trying to find an equilibrium between each of the contracting party’s needs. The new code does not cover every possible class of insurance, but it gives very precise guidelines for how to handle each of the contracting party’ interests depending on the class of insurance.
To further ensure that the law is not violated, and to create a fair balance between the interests of the insurer and the insured, a state-controlled inspectorate has been created. To make supervision by the inspectorate as effective as possible, a variety of instruments have been developed to monitor industry activity and ensure legal compliance. These instruments, written down in the German Insurance Supervision Act, range from claiming information to retracting the permission over the removal of persons with key tasks, warning or punishment due to violation of the law.

Combination
The insurance system in Germany is very comprehensive. It attempts to cover the insurance needs of all its citizens through a combination of social and private insurance. It is very well thought-out and has a strong written law that binds the insurer, the state and the individual person and creates a balance between their different and conflicting interests in an exemplary way. All said here about the German Insurance law, it would be worthwhile for those in Nepal who are involved in developing insurance related policies. Because in today’s interconnected world, we can learn from each other.

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