Lower income is to be expected for life insurance in particular.
(Photo: dpa)
Munich In new business with life insurance, there should be strong losses in the current year. The industry association GDV expects a drop in premiums of 5.5 percent compared to the 97 billion euros from the previous year, as it announced on Tuesday.
As recently as January, around 80 life insurers in the German market had expected a slight increase in premiums. “The real decline in income and the unusually high degree of uncertainty are having a negative impact on life insurance business,” said Jörg Asmussen, General Manager of GDV, explaining this development.
This means that the downward trend in what was once the Germans’ favorite old-age provision product is continuing. Last year, revenue fell by around six percent to 97 billion euros. A key reason is the turnaround in interest rates, which is making fixed-income investment products attractive again. In the years of zero and negative interest rates, many investors used life insurance as a safe investment vehicle that promised at least low interest rates. They often invest high single premiums in this form of investment.
That hardly exists anymore. It is true that the first tendencies towards rising interest rates can also be seen in life insurance. However, the turnaround is slow. The analysis company Morgen & Morgen had recently calculated an average current interest rate of 2.1 percent, after 1.9 percent a year earlier.
The fact that the interest rate hikes by the central banks have not accelerated is due in particular to the life insurers’ investment policies, which are subject to strict legal requirements. The portfolios of life insurers mainly contain long-term government bonds from earlier years, which the providers usually hold until the end of the term. This means that they are immune to the sharp fall in prices recently as a result of interest rate increases. More attractive interest rates, which can now often be found, can usually only be achieved with the funds that are released with maturing bonds.
Slump in business with Riester pensions
It was only at the weekend that Deutsche Vermögensberatung (DVAG), one of the largest financial brokers in the country, reported a significant decline in new life insurance contracts. Business last year was more than 13 percent below the 2021 level.
DVAG board member Andreas Pohl attributed this particularly to the slump in business with Riester pensions. He complained that politicians had failed to reform the Riester pension. For years, the product has been criticized for being too expensive and too complex.
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Industry representatives have also criticized Berlin’s politicians and their impasse when it comes to redesigning private old-age provision. As a result, a number of providers had withdrawn from the Riester pension, for example. According to GDV, new business with Riester pensions fell by around 60 percent last year compared to 2021.
Citizen’s pension to replace Riester pension
In January, the GDV therefore made the proposal for a citizen’s pension. Compared to the frequently criticized Riester pension, the new concept should be “simpler, more understandable, more sustainable and generate higher returns”, as GDV President and R+V boss Norbert Rollinger emphasized. Customer deposits should no longer be 100 percent guaranteed as before, but only 80 percent. There should be more scope for this to also invest part of the money in higher-yield products.
In addition, the industry would like to see a high level of government funding. For every euro paid in, 50 cents are to be added by the state.
However, a lot is still unclear here. A focus group made up of industry representatives, politicians and independent experts will meet until the summer. After that, the process could get underway through the political bodies.
Life insurance has long been considered the favorite old-age provision product of Germans.
(Photo: IMAGO/Westend61)
According to GDV general manager Asmussen, it is realistic that the citizen’s pension project will be completed by the end of the legislative period. However, that would not be until autumn 2025. Until then, the Riester pension will officially continue to exist, even if fewer and fewer houses are offering it in practice.
On the other hand, things are looking much better for German insurers in property insurance. Here, the industry association now expects a premium increase of 5.7 percent this year. Compared to the forecast of 6.1 percent a few months ago, however, there is also a slight decline here. The main reason is the weak start to the year in motor insurance, where customers’ reluctance to buy and material shortages at manufacturers made themselves felt.
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