Customers with life or pension insurance are also gradually benefiting from rising interest rates on the capital market. The market leader Allianz Leben has now announced a slight increase in surplus participation for 2023. Current interest increases by 0.2 percentage points, the total interest including final bonus and customer participation in the valuation reserves by as much as 0.3 percentage points. Insured persons who keep their contract to the end receive this value.
The provider credits customers with classic life insurance with 2.5 percent of the savings portion of their contributions. This is the portion that remains after deducting the costs and expenses of a death benefit. The total return increases to 3.2 percent.
Insured persons with a new guarantee policy of the “Perspective” type receive a little more at 2.6 percent or a total return of 3.5 percent. In the case of the capital market-related products “Komfort Dynamic” and “Invest Flex”, in which some of the customer money flows into shares, the savings portion that goes into Allianz’s security assets also bears interest at 3.5 percent.
Only customers whose guaranteed interest rate is below these values will benefit from the increased surplus participation. In earlier years it was up to four percent. Insurers are now only allowed to promise their customers a maximum of 0.25 percent for new contracts. Because the interest rate situation is still uncertain – some experts do not rule out that interest rates will fall again – the actuaries from the German Association of Actuaries advise the Federal Ministry of Finance to leave the upper limit for the guaranteed interest rate at 0.25 percent in 2024 as well.
Versicherungskammer and Bayerische are also increasing their profit participation
Although Allianz’s policyholder participation is seen as a key benchmark for its fellow life insurers, it seems questionable whether many will follow the market leader’s example and increase customer participation for 2023. Most life insurers who have already announced their profit sharing for 2023 are keeping it constant. These include Ideal, Axa, Alte Leipziger, Nürnberger, Swiss Life and the life insurance processor Athora. Apart from Allianz, only the Versicherungskammer has increased – there the current interest rate rose significantly by 0.75 percentage points to 2.25 percent – and the Bavarian by 0.2 percentage points to 2.7 percent.
The rating agency Assekurata believes that the trend towards declining bonuses, which has persisted for years, has come to an end. However, she expects that the majority of life insurers will wait and see and keep customer participation stable for 2023 instead of increasing it.
The problem: Apart from the uncertainty as to whether the rising interest rates will last, life insurers only benefit from them with a time lag. First of all, they have to contend with burdens because the existing capital investments are worth less when market interest rates rise. Only with new investments do they benefit from the higher interest rate.
Even Allianz cannot shift its capital investments from one day to the next. “But we have enough incoming funds to take advantage of the opportunities,” said Allianz board member Volker Priebe. “We have translated that into the current rate hike.” In addition, the insurer has expanded the investment portfolio of its security assets in recent years. Fixed-interest government bonds and Pfandbriefe make up less than 50 percent. “We have a broad mix of asset classes and we use that,” explained Priebe.
Insurers are more likely to rely on new types of contracts with slimmed-down guarantees
Profit sharing is nowhere near as important as it used to be. Because of the long phase of low interest rates and because the providers of the classic policies have to hold a lot of additional equity, more and more companies are instead opting for new types of contracts with greatly reduced guarantees. Allianz had said goodbye to the 100% premium guarantee at the beginning of 2021. Instead, customers can choose between a protection level of 60 percent and 90 percent of the deposited funds. This should give the insurer more freedom in investing and the insured a higher return.
In view of rising interest rates, insurers could actually soon afford to offer more classic policies again. But Volker Priebe thinks that is unlikely. “I don’t see a renaissance of classical music,” he said. In addition to the uncertainty regarding the further development of interest rates, people’s attitudes towards guaranteed products have also changed. “Over the past five to ten years, there has been a growing awareness of the need for a mix of return opportunities and stability.”