Life insurance: regulator warns insurers – economy

Eight billion euros. Each year. German savers who make provisions for old age with life insurance pay this sum to so-called acquisition costs. These are mainly commissions for agents, brokers and banks. And these costs come at the expense of the already meager returns. So it’s no wonder that there were repeated attempts in Germany to at least limit this amount. So far, however, the lobby of large distributors such as DVAG, MLP or Swiss Life Select, together with insurers and banks, has been able to politically prevent any restrictions.

But now it’s getting too colorful for the financial regulator Bafin. Frank Grund, the chief supervisor for the insurance industry, is more known for his diplomatic tones. But at the insurance day of the SZ in Bergisch-Gladbach, he now found clear words: “If we don’t even manage to curb excesses in the commission structure appropriately, then in my view the industry can no longer be helped,” Grund said angrily. What upsets him: While the industry in Germany is still largely opposed to any cap on commissions, a full ban is becoming increasingly likely at the EU level.

The supervisor wants to fight at least the worst commission slogs. To this end, she has published a document with the unwieldy name “Instructions on aspects of good conduct supervision in capital-forming life insurance products”. The industry was able to comment on this by mid-January, and Bafin plans to officially announce its measures soon.

The authority plans to keep a close eye on life insurers if their effective costs or selling costs for insurance contracts are in the upper quarter of the industry values. The initiative was not well received by the mediators’ associations. They try by all means to prevent even this comparatively gentle intervention. On the other hand, supervisor Grund regards the Bafin plan as the last chance to prevent a ban on commissions. After all, there is hope that there will be no ban if excesses are stopped. “If that doesn’t work now, then you can hardly counter European arguments,” he said.

EU Commissioner Mairead McGuinness finds that pension contracts in countries such as the Netherlands or Great Britain, which have already introduced a commission ban, offer customers better value for money. In addition, many do not even understand what commissions are and how they affect returns.

“Clear indications” from the EU Commission

In Germany, the subject of “commission caps” has been the subject of debate for years about restrictions on commissions, which consumer advocates believe are far too high. However, little has happened: In the past legislative period, the introduction of such a commission cap, advocated by the SPD, among others, failed, mainly due to resistance from the Union. The only thing that came about was a cap for residual debt policies, which banks like to sell in combination with loans. The actuary Axel Kleinlein, for many years spokesman for the consumer protection organization Bund der Versicherte, believes that a number of players in the industry have not yet heard the shot. “McGuinness gives clear indications of where the journey is going,” he said in Bergisch-Gladbach.

According to Kleinlein, there are also many insurance managers who would secretly be very happy if there were a commission limit – and the billions in payments to the intermediaries would be reduced as a result. In public, however, managers often say something different. “There are board members who say to me in the background: hopefully there will be a commission cap, then we have solved a whole series of problems with our sales department,” reported Kleinlein. However, they should never say such a thing out loud. Even Michael Heinz, the pugnacious President of the Federal Association of German Insurance Merchants and for many years a vehement opponent of a commission cap, is not at all averse to the Bafin’s most recent measures, Kleinlein noted. After all, they represent the clearly milder means compared to the threatening strict ban on commissions by the EU.

A ban, on the other hand, would mean the end of their business model for the tens of thousands of insurance brokers in Germany. Advice would then only be permitted for a fee, which consumers pay directly to the consultant regardless of taking out insurance – and not hidden via the insurance premiums. In the current federal government, however, a commission ban in life insurance is not high on the agenda. The FDP-led Federal Ministry of Finance only spoke out against a ban in June 2022 in response to a small question from the Union on behalf of the federal government.

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