Life Insurance Really In The End? Life insurances have been the subject of criticism at the Federation of Insured for years. Now the BdV is forecasting the end of the business model.
For decades, life insurance has been popular with policyholders and insurance companies. The Germans valued endowment insurance as a good combination of provision and wealth accumulation. The insurers generated solid returns. Now the end threatens because in view of the persistently low-interest rates it is becoming increasingly difficult to meet the existing guarantee obligations. Axel Kleinlein, the spokesman for the Association of Insured Persons (BdV), pointed this out a few days ago.
Statements by the Association of Insureds on the occasion of a press conference:
-It is to be feared that life insurers will not be able to meet their guarantee obligations in the future.
-A threatening imbalance is expected as early as 2021.
-In order to avoid the collapse of the insurers, the BaFin will be forced to cut the guarantees.
-The BdV expects that up to 50 insurers could get into trouble.
How can countermeasures be taken?
The BdV sees insurance companies as responsible. The low-interest rates would not be to blame for the increasingly looming problem. Although the situation has been worsening for a long time, the costs in the area of life insurance have remained at a high level of better times. In Kleinlein’s opinion, it would be overdue to limit acquisition commissions for life insurance legally. However, there is no political will to take this urgently needed step.
With-profits system exacerbates problems
Customers who cancel their life insurance have to accept significant financial losses. The retained funds enable the insurers to pay the guaranteed interest rate despite the tense situation. A more extensive payment, as is occasionally required in the interests of customers, would, however, exacerbate the existing problems.
Insurers use the leeway
There are legal requirements to what extent the insured are to share in the profits generated.
For example, it is stipulated that at least 90 percent of the so-called excess interest is to be paid out to customers when hidden reserves are released.
There is a comparable regulation for the so-called risk gains. These are incurred when customers die earlier than the calculation of the premiums.
The insurers would benefit more from a reduction in costs because customers only have to share half of these profits.