Germans loved no other investment product more than life insurance. Today this once so popular old-age provision has come to an end, but why did it come to this at all? It wasn’t that long ago that everyone in the family had wealth-building life insurance. It was considered the safest and the best recommendation for private retirement provision. If the grandfather and father in the family had life insurance, then it was clear that the grandson would also take out this insurance.
No risk please
If there is something that the Germans shy away from like the devil the holy water, then it is a risk with the private investment . This is one of the reasons why capital-forming life insurance has been such a great success for several decades. The friendly insurance agent (Hello Mr. Kaiser!) Came into the house and he promised his customers a respectable return. The prospect of a good return and the argument that life insurance is much safer than a block of shares, i.e. without risk, were convincing across the board. The main thing is return and no risk, most people didn’t want to hear more in order to sign the contract. To this day, life insurance is a very important component in private pension provision in people’s minds. Especially in times when the statutory pension is no longer sufficient, life insurance serves as a security deposit for loans and helps to finance property, for example. But now the once so secure old-age provision is in acute danger.
What happened to life insurance ? The much vaunted returns are gradually disappearing into thin air, most insurance companies simply can no longer generate them. For a long time now, customers no longer get what insurance companies once promised them so full-bodied. This is a very heavy blow for anyone who has based their life planning and, above all, their time in retirement on life insurance. The question is why the crisis in life insurance and its customers is worsening so dramatically now of all times. The answer is quite simple, because now several factors come together, each of which is very dangerous in itself. In combination, however, they can hardly be managed.
What exactly broke the neck of life insurance?
- An important date was January 1, 2005, when the tax privileges for the endowment insurance were largely canceled. All payments from contracts concluded prior to December 31, 2004 had become taxable overnight. When word of this regulation got around, customers overran the insurance companies.
- Many of the policies of that time are now gradually due, which puts the insurance companies under enormous pressure. You have to take austerity measures and lay off many employees in order to remain solvent. This problem will worsen in the coming years because the policies of the so-called baby boomer generation are still in the disbursement phase.
- The persistently low interest are for the Insurance is a huge problem. They now only achieve a return on their investments that is less than the amount they have to pay out to the customers.
- Some insurance companies are forced to sell their investments and their securities, for which there is still a little interest. to sell so that they can even meet the current need for capital. But without the interest income, the business is as good as dead.
Each of these factors is a real stress test for the insurer. If they occur together, however, then it is clear even to the insurance risk managers that the crash of some is only a matter of time.
Is it the life insurer’s own fault?
The life insurer never tire of complaining about the low interest rates that are supposed to be the cause of the current misery. Mario Draghi, the head of the European Central Bank, comes under particularly heavy fire. His dubious zero interest rate policy may help prevent entire states from going bankrupt, but all at the expense of savers. That is not entirely true, because the low interest rates are a so-called powerful factor. In addition, the insurance companies have no reasonable explanation for the current crisis in the industry. Unexpectedly, the collapse does not hit the insurance companies because, according to experts, they themselves contributed to it. Over the years they have failed to put in place an efficient management system for their costs. If income came into the house, it was thrown back out of the window for extremely high commissions. The well-known dubious trips of a group are only the small tip of an iceberg.
It’s not about the customers
Due to the increasing pressure to sell insurance, the quality of the counseling sessions to suffer. That was a gross mistake, the next was to oversleep digitization and not use it. What is perhaps even worse, the actual principle of insurance as a protection and solidarity community has become a sales machine and customers no longer play a role. Even when concluding a contract, it is not about the customer, it is always about the insurance. In recent years, insurance companies have distanced themselves more and more from the expectations and needs of their customers, insurance companies have destroyed trust and that ultimately led to fewer and fewer new deals. Life insurance is therefore acutely threatened, and with it old-age provision for many people.
When does the crash come?
At the latest when one of the large or several small companies can no longer be saved overturns the entire system. In this case, all customers have to suffer. Today the question is no longer whether the crash will come, the question is rather when it will come. When the time comes, it hits the normal policyholders first, who at the end of the contractual term can hardly get what they have paid in over many years. In the worst case, however, there is a risk of total loss of all savings, which means the direct path to old-age poverty .
There is still a way out if the insurance companies together with politics finally draw the right conclusions. The whole industry urgently needs to be reformed from the ground up and insurance companies need to start taking their customers seriously again.
Image: @ depositphotos.com / Jirsak