Expensive life insurers threaten trouble

Criticism of financial supervision
Expensive life insurers threaten trouble

Many contracts of life insurers are so expensive that they are not worth it for customers. The consequence: more than 70 percent of all savers cancel prematurely. Now Bafin's financial supervision is turning on.

Capital -forming life insurance companies are actually intended to increase the money of the customer. You will be sold with this promise. In the official German of the German financial supervision, it is said that they wanted to offer customers an “appropriate customer benefit”, i.e. not only security, but above all also return. It sounds like a matter of course, but “unfortunately it is not,” criticizes BaFin insurance supervisor Julia Vienna now expressly.

Because in the course of a special test, the financial supervision had taken a closer look at 13 life insurers, “which had become particularly noticeable.” That corresponds to around 20 percent of the market, says BaFin itself. It was about their products for pension and especially two aspects: The cost rates of these policies and the question: How often do customers hold out such long -term savings contracts at all?

To do this, the Bafin first looked at the cancellation rates. The blades in the industry cut are not dramatic because they are only specified at the annual basis, there are currently 3.14 percent. However, this number must be extrapolated to the usual total term of 30 or 40 years, because most customers take out such insurance in early years and the policies are only paid regularly to retire.

“Based on a cancellation rate of 3.14 percent”, BaFin chops, “after a savings phase of 40 years, more than 70 percent of customers have decided to terminate the contract.” In plain language: Over two thirds of all customers do not hold out such contracts at all, but terminate them prematurely.

Low interest rate

That alone would be a certificate of poverty for the industry, but it gets worse when you look at what comes out of the contracts. To this end, the supervisory authority asked the cost quotas from the insurance providers and asked them to specify the effective costs for their best -selling products. The standard contract is a policy with a monthly fee of 100 euros, i.e. 1200 euros deposit annually and 30 years of term.

“In the case of products of several companies, the effective cost burden was four percent or even significantly higher at the relevant time,” says Bafin: “In order for the customer to achieve a positive return, these costs must first be earned. In the current market environment that appears very ambitious. ” The effective costs of 4 percent mean: If an insurer with his investment, for example, achieves 5 percent (after deducting his own costs), then there is only one percent interest at 4 percent for the customer.

Now the net interest rate of the investments, i.e. the net profit that the insurers themselves achieved by lying down, was only around 2.2 percent in the industry average. Of course there are some insurers who achieve more return because they are good in the investment. However, the industry has not been coming to average values ​​of well over four percent for at least eight years. You can calculate which return for customers remains if such a maue investment results are still charged by 4 percentage points.

Expensive fund policies

In general, the costs are quite high, especially for fund policies, the Bafin warned after the first survey results. The high costs thus quickly reject the alleged advantage due to the higher capital market returns. In the case of classic insurance contracts, the cost burden is somewhat lower.

On average, the effective costs are 1.28 percent according to the BaFin query for an average classic policy. With fund policies it is an average of 1.9 percent. But with every fourth insurer, they amount to around 3.3 percent on average. There were even many providers who requested gigantic effective costs over 4 percent in all terms. With such cost rates, even from the yield of good equity funds, which drop an average of 6 to 7 percent return, hardly any significant yield.

That makes a lot of things: Suppose that for 30 years it flows the entire 100 euros per month into a fund that will drop a 6 percent return. Then almost 98,000 euros would come out for the customer. Already at the average cost rate of 1.9 percent of fund policies, almost 30 percent less for the customer remained, around 69,950 euros.

However, if the cost rate is 4 percent, just 49,200 euros remain for the insurance customer. At 36,000 euros in your own deposit. This is only about half of what he would have achieved without insurance by saving the fund on his own. Many fund policy customers have already been confronted with such bad process performance. No wonder that in view of such numbers, so many customers prefer to cancel their contracts.

Therefore, the Bafin is now threatening the providers with high odds: “If an appropriate customer benefit is missing, if a product does not meet the needs of the target market, it is a grievance,” says Vienna. And in the event of such grievances, BaFin will also intervene: “For example, we can prohibit the distribution of products or impose measures against individual board members if their professional suitability is in question in view of abuses.” The question of whether such contracts must be improved so that the customer is also helped remains open for the time being.

This text first appeared at Capital.de. Capital belongs to RTL Germany like NTV.