Versicherungsverein auf Gegenseitigkeit (VVaG): mutual insurer

What is a Versicherungsverein auf Gegenseitigkeit?

A Versicherungsverein auf Gegenseitigkeit (VVaG, mutual insurer) is an insurance company that belongs to the people it insures. You become a member by taking out a policy, and your membership normally ends when the policy ends. There are no shareholders.

The legal basis is §§ 171 ff. of the Insurance Supervision Act (Versicherungsaufsichtsgesetz, VAG). A mutual becomes a legal entity only once BaFin, the financial supervisor, allows it to do business as a VVaG (§ 171). Membership is tied to an insurance contract (§ 176), and members in the same situation must be treated by the same rules (§ 177).

Who owns and controls a mutual insurer?

The members do. Instead of a shareholders' meeting, a mutual has a highest body made up of its members or of elected member representatives (§ 184 VAG), alongside a management board (Vorstand) and a supervisory board (Aufsichtsrat). The articles of association (Satzung) decide which of the two it is and how it is elected.

How does a mutual differ from a stock corporation?

An Aktiengesellschaft (AG, stock corporation) belongs to its shareholders, who can receive dividends and sell their shares. A mutual has no shareholders: what remains of a surplus after reserves goes to the members, by the rules in its articles of association (§ 194 VAG). A mutual also cannot issue shares to raise capital. Both forms are licensed and supervised by BaFin.

What does the legal form mean for your private health insurance?

Less than the difference in ownership suggests, because the key rules on surpluses in private health insurance apply to both forms. Every insurer must credit 90% of its excess interest to the policyholders' ageing provisions and put at least 80% of its surplus into the reserve for premium refunds (§§ 150, 151 VAG, § 22 KVAV), the pot used for premium refunds and to soften premium increases. Premiums follow the same actuarial rules, and an independent trustee checks every increase, whichever the legal form. The difference lies mainly in who owns the company and who has a say in it.

Your Altersrückstellung (ageing provisions) is built and credited by the same rules in both forms, and your rights as a policyholder, such as the right to switch tariffs within your insurer, come from the Insurance Contract Act and do not depend on the legal form.

Which insurers are mutuals?

Among the insurers we profile, Hallesche (Hallesche Krankenversicherung auf Gegenseitigkeit) and LKH (Landeskrankenhilfe V.V.a.G.) are mutuals. Hallesche forms a group with Alte Leipziger Lebensversicherung a.G., another mutual, with no parent company above them. HanseMerkur is a special case: its full-cover tariffs run through HanseMerkur Krankenversicherung AG, a stock corporation that HanseMerkur Krankenversicherung auf Gegenseitigkeit, the mutual founded in 1875, owns through a holding company. Allianz, AXA, ARAG and ottonova offer private health insurance through stock corporations.