Life insurers still see potential for growth in company pension schemes.
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Frankfurt High inflation and sharp rises in interest rates are putting life insurers under increasing pressure. People can save less for old age, and banks are once again offering better investment alternatives. Life insurance and annuity insurance are therefore currently selling poorly. The providers see a way out in company pension schemes (bAV). They are hoping for further growth potential here, according to a current publication by the GDV insurance association.
Insurers argue that company pension schemes are a good tool for recruiting and retaining employees in times of a shortage of skilled workers. It is still underused, especially in small and medium-sized companies.
The importance of bAV for insurers is increasing: “Within life insurance, almost every fifth contract and even almost a quarter of the contributions are for company pension schemes,” says GDV General Manager Jörg Asmussen. Overall, life insurers, pension funds and pension funds in Germany had 85.9 million policies in their portfolios at the end of last year. Company pension schemes accounted for almost 16.6 million contracts.
The company pension scheme’s share of contracts thus rose from 18.9 to 19.3 percent compared to the previous year. In the case of contributions, which recently totaled 97.1 billion euros, the company pension share even climbed from 24.0 to 24.3 percent.
Company pension schemes include direct insurance, pension funds, pension funds, provident funds and direct commitments. Of all these implementation methods, direct insurance developed best. In this case, the employer takes out life or pension insurance in favor of the employee and regularly transfers part of the salary directly to the insurer.
While life insurers still had 8.1 million direct insurance contracts at the end of 2017, the portfolio had increased to 8.8 million policies by the end of 2022. According to Asmussen, this is a new high. At the same time, he emphasized that low-income earners in particular should be given even more support in company pension schemes.
Banks drum for overnight or time deposit accounts
However, the good development in direct insurance can only partially compensate for the setbacks that life insurers have had to accept in other areas. Overall, the premium income of life insurers, pension funds and pension funds fell last year by 5.9 percent.
According to the GDV forecast, providers are expecting a further drop in premiums of 5.5 percent in 2023. The rating agency Assekurata was a little more positive recently, forecasting a drop of just 3.2 percent.
The single-premium life insurance business even collapsed by 17.7 percent in 2022. In the prolonged environment of low interest rates, which was also characterized in part by negative interest rates, life insurance policies still offered investors a comparatively decent return.
However, many banks are currently offering better investment opportunities, such as overnight or time deposit accounts. This is also a challenge for many life insurers because the banks were an important sales channel for them – according to a study by the consulting firm WTW in 2021, the most important even ahead of brokers and multiple agents. That might now change again.
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