According to industry experts, most life insurance customers cannot expect an increase in interest rates on the classic old-age provision for the time being, despite the change in interest rates in the insurance market. capitals. At the same time, due to high inflation, consumers should be prepared for property and casualty insurance to become more expensive.
“I would not expect an increase in current interest in classic endowment life insurance in the next three to five years,” Herbert Schneidemann, chief executive of the German Actuarial Association, told the dpa and dpa-AFX news agencies. A more rapid rise in interest rates is conceivable for life insurance policies where clients only pay a single contribution.
To secure the high guarantees on old contracts of up to 4 percent, insurers had to set aside money during falling interest rates. This money could not be distributed to customers. Because interest rates on government bonds have risen recently, the capital buffer (in technical jargon, the additional interest reserve) is now sufficiently full on average. “The additional interest reserve is fully funded at around €100 billion at the end of 2021,” Schneidemann said. This means that many insurers no longer have to set aside more money.
Accumulated Hidden Charges
On the other hand, the interest rate swing creates so-called hidden charges on the balance sheet. Schneidemann hopes that many insurance companies will first reduce hidden charges according to the “cautious pay first” principle before increasing their clients’ profit sharing.
The surplus participation, which life insurers set each year based on the economic situation and the success of their investment strategy, is part of the permanent interest in the classic old-age benefit. In addition, there is the guaranteed interest rate, which is set by the Federal Ministry of Finance according to the calculations of the Association of Actuaries and the recommendations of the financial supervisory authority Bafin. This so-called maximum technical interest rate for new contracts that have been concluded since the beginning of the year is currently 0.25 percent. “I think it will be a few more years before the maximum technical interest rate rises again, provided the interest rate level continues to stabilize,” said Schneidemann, chief executive of the Bayerische insurance group.
Current interest for profit sharing and guaranteed interest, which refers only to the portion of savings after deducting costs, is currently averaging just over 2 percent, according to their information.
Inflation and hail boost property and casualty insurance
Property and casualty insurance is likely to become more expensive due to the sharp rise in inflation. For example, construction insurance is affected by the extremely sharp increase in construction costs. “Personally, I assume we will see faster and higher premium adjustments through cancellations of changes in non-mandatory insurance,” said the actuary, Schneidemann. For example, insurers could terminate homeowners insurance contracts, thereby imposing higher premiums on their customers.
In motor vehicle insurance, “another aggravating factor is that, in addition to inflation, hail events are increasing very rapidly,” Schneidemann said. This is why comprehensive insurance policies, in particular, are likely to become more expensive for clients. Unlike life insurance, motor vehicle liability, and private health insurance, insurance companies can cancel insurance that isn’t required, such as home or building insurance. (dpa-AFX)