Customers save on insurance due to inflation

Hanover. Above-average losses from natural catastrophes, double-digit inflation rates, and interest rate hikes by central banks – there are plenty of unknowns for the insurance industry today. The CEO of the Hannover-based VHV Group, Thomas Voigt, explains in an interview how his company reacts to challenges and why customers cannot insure all cars there. He also reports that the strength of a company is often more important to applicants than salary.

Read more after the announcement

Read more after the announcement

In economically uncertain times, people keep their money together. At the same time, the need for protection is increasing. How is the current crisis affecting the VHV Group’s business, Mr. Voigt?

That is very different. Until recently, we did not perceive any reluctance from our business customers. The construction industry is now reluctant to buy private real estate, which is due to rising mortgage interest rates. The drop in demand in this area is also causing less demand for term life insurance policies, which builders use to protect themselves. Apart from that, we have noticed for some time that, due to the rising cost of living, customers are considering very carefully whether and how much they want to invest in risk prevention, for example. We are preparing to write fewer new term life and disability insurance policies if inflation remains high.

Your industry has made a lot of money on gifted life insurance for decades. The VHV Group has not offered these policies since the beginning of the year, “since the combination of capital accumulation and provisions for dependent family members in a single product is no longer worth it for clients”, as it now openly admits. Why this belated change of heart? Consumer advocates have been saying this for a long time due to high acquisition costs and low returns.

Read more after the announcement

Read more after the announcement

With Hannoversche Leben, the VHV Group moved away from manning insurance long before. We have been offering primarily term life and disability insurance for a decade and a half. In this sense, this is not a “late change of heart”, but a direction that we have been following for a long time.

Headquarters of the VHV Group on the List in Hannover: employees can work from home four days a week.

Headquarters of the VHV Group on the List in Hannover: employees can work from home four days a week.

However, they still offer private and unit-linked pension insurance. These are also considered relatively expensive. Interest in cheap ETF savings plans has increased significantly in recent years. How big is this competition?

Our unit-linked pension insurance is one of the most profitable in the market. And yes, you’re right: low-cost ETFs are becoming more and more popular. We offer a variety of these ETF funds.

Established banks and savings banks have had to experience young discount brokers like Trade Republic or N26 stealing a lot of customers from them in the securities business. Fintech calls have a harder time with insurance companies. Will it stay like this?

From a fintech point of view, there are two main challenges in the insurance industry: on the one hand, our market is heavily regulated: by law, we must have large capital reserves to be able to deliver our promised services for decades, even in extreme scenarios. That’s good, because this financial strength is one of our greatest assets and a guarantee of our trustworthiness towards our clients and claimants. On the other hand, fintechs aim to digitize as many business processes as possible. However, this requires very high investments in technology. Of course, that also applies to us. However, due to the size of our company, this is easier for us.

Read more after the announcement

Read more after the announcement

to person

Thomas Voigt He has headed the VHV insurance group since June. The 61-year-old has remained faithful to the group since he came to Hannover in 1988 after studying economics. He has been a member of the board of directors since 2003. As of 2009, the manager was spokesman for the board of directors of VHV Allgemeine Versicherung AG, which includes auto insurance, construction business, and property and liability products.

Industry association GDV forecasts slower growth for insurers. Next year, premium income is expected to rise just 1.9 percent, after the current 2.5 percent. What does that mean deep down?

We are preparing for the so-called technical results to be under pressure. GDV expects combined ratios of more than 100 percent, in other words: if we spend more money settling claims than we collect from our customers’ contributions, we earn nothing in our core business. Consequently, a greater contribution to the overall result must come from the results of the investments. Now we are benefiting from rising interest rates here. However, the question is whether these revenues are enough to offset the technical losses.

“The strength of the company is often more important to candidates than salary”: VHV boss Thomas Voigt.

If insurers don’t get their money’s worth, it usually becomes more expensive for customers. Does VHV want to increase your premiums, for example, for motor vehicle policies?

Yes, this will need to result in premium adjustments, but this will vary by line of business.

Read more after the announcement

Read more after the announcement

Its industry particularly complains about increased losses from natural disasters such as severe storms and floods. What can an individual insurer like VHV do to reduce its risks?

First of all, we are not a regional insurer, but active nationally and internationally. So if, for example, hail causes severe damage in the southwest of the republic, that doesn’t lead us astray. Y: We are insurers, so we are there for those cases. For example, if we look at car insurance, we can decide which cars to insure with us. VHV is traditionally stronger in the used car segment. Here the damage is usually less than with new cars.

That means: if you want to insure a new Porsche Cayenne or Ferrari, would you be headed in the wrong direction with VHV?

With certain models it can be difficult, yes.

“Telematic rates are still a niche, but demand is growing”

In auto insurance, your industry advertises telematic rates. If you pass on data about your driving style to the insurer, you will be rewarded with premium discounts for being careful on the road. How interested are customers?

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Read more after the announcement

It is still a niche, but the demand is growing. Overall, about one in ten customers is currently using it, with new contracts approaching 15 percent. This is particularly attractive to young drivers. You can get a discount of up to 30 percent.

For years, VHV has had somewhat raucous celebrities advertising. After Dieter Bohlen and Til Schweiger, Barbara Schöneberger is now acting for you. Is solidity alone not enough of a selling point?

It is about making our good brand even more known. We’ve had a lot of success doing this over the last couple of years with these pointed ad messages. And there is another important side effect: this awareness also makes us more attractive as an employer.

Building of the insurance company VHV in Hannover: employees receive a bonus if the insurer generates good results.

Building of the insurance company VHV in Hannover: employees receive a bonus if the insurer generates good results.

Is it no longer enough to pay 2.5 monthly salaries as a success bonus on top of the usual 13.3 salaries, as was the case recently?

When we fill vacancies, the salary usually ranks third for applicants. More important to them is solidity, that is, the financial strength of the company and flexibility at work. Our employees can work from home up to four days a week. However, our bonus scheme is an important tool. The criterion for this is operating profit, and this criterion applies to all employees of the VHV Group, including bonuses from the board of directors. That shows everyone that we really are in the same boat here.

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