Frankfurt In the low interest rate environment, classic life insurance policies, some of which still have high interest guarantees, are a burden for many insurers. Again and again there are reports that providers are discontinuing new business and want to process their portfolio.
Well-known examples: After Generali Leben ceased new business in July 2018, the subsidiary of the Italian group was sold to the Viridium Group in April 2019 and now operates under the name Proxalto. Ergo Leben also gave up the classic life insurance business and only manages the portfolio.
The Association of Insureds (BdV) recently warned that the Allianz set the course for run-off and settlement of life insurance policies. The consumer advocates see it as a signal that the press pension fund, which is part of the Allianz pension fund, is discontinuing new business and Allianz in Belgium wants to sell 95,000 policies to the reinsurer Monument Re.
A company spokesman emphasizes, however, that the sale of Allianz’s German life insurance portfolios is “not up for discussion”. It is paying off that Allianz Leben started developing products with new guarantee concepts more than ten years ago.
He admits, however, that there are market participants who could come to different conclusions for themselves against the background of the current situation: “There may also be consolidation platforms here that – if they are properly operated – offer added value for customers.” The following overview therefore shows consumers who can expect a run-off:
What exactly is a run-off?
In the event of a run-off, the insurer stops new business and only processes the portfolio. In some cases he transfers the insurance to a third party.
In such an external run-off, the previous insurer either sells the entire company to a new owner or the portfolio is transferred to another insurer.
In this case, the customer receives another contractual partner. This also has to adhere to the agreed rights and obligations – and for example pay the promised guarantees and let the customers share in the surpluses.
What advantages can a run-off have for consumers?
One argument is that run-off insurers could save costs by bundling many contracts. Their customers would then have to share in the surplus costs.
According to a study by the German Institute for Pensions (DIA) presented in spring 2020, run-off insurers in Germany have not yet been able to achieve the desired reduction in the administrative cost ratio. However, the efficiency advantages may only become apparent in the coming years, the authors admit.
Is the run-off criticism justified?
Many consumers see the sale of stocks as a breach of trust and wonder to what extent the new society has an interest in generating surpluses for the insured. Critics expect that, in the longer term, run-off insurers will only distribute to insured parties what is required by law, but no more.
According to the DIA study, the participation of customers in the surpluses in 2018 for non-run-off insurers was actually significantly higher at 96 percent than for run-off insurers at 89 percent.
At the same time, however, the run-off insurers stand out due to a higher allocation to the provisions for premium refunds (RfB). This reflects the future claims of policyholders on the surpluses. According to the analysis, the effects balanced each other out. However, it remains to be seen whether the insured in the run-off will participate in the long-term surplus in a similar amount as with non-run-off insurers.
It is also feared that customer service will deteriorate during run-off and that dissatisfied customers will terminate their contracts prematurely. The high cancellation rates at individual run-off insurers are therefore criticized by consumer advocates. For a long-term product that is supposed to secure retirement, these numbers are an indictment, says BdV board spokesman Axel Kleinlein.
In general, run-off insurers cannot afford high cancellation rates. For one thing, they live off long-term insurance management. On the other hand, they depend on a good image in order to be able to acquire further holdings.
What should the insured do if they are affected by a run-off?
As a rule, there is no acute need for action. Instead of hastily terminating contracts with good interest rates, consumers should first seek independent advice.
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