Anyone who wants to take out an installment loan from Targobank will receive a special offer during the conversation: they can insure themselves and their family in the event that they die, become unable to work or become unemployed. In this case, he does not have to repay the loan. This is called residual debt insurance, it is also referred to as residual credit insurance or credit life insurance. Almost all banks offer such contracts.
At Targobank, the borrower concludes such a contract with Targo Lebensversicherung, which despite its name does not belong to the bank, but is a subsidiary of the Hanover insurance group Talanx/HDI.
The business is very lucrative for the insurer and the intermediary bank. During an investigation into residual debt insurance at some banks and insurers, the financial regulator Bafin found commissions of 50 percent or more. This means that half of every euro in the customer’s bonus goes to the bank for brokerage. There is also enough left with the insurer.
But Talanx will soon lose its Düsseldorf partner Targo. The bank, which is majority owned by the French cooperative bank Crédit Mutuel, has terminated the contract. It will end at the end of 2025.
From 2026, Crédit Mutuel’s own insurer will do the business. The French are active in France, Belgium and Luxembourg with the insurer Assurances du Crédit Mutuel (ACM). They have now founded an insurance holding company and two operating companies in Düsseldorf, one for property insurance and the other for life insurance.
This is a serious blow for Talanx. Because Targobank brings in annual premium income of around one billion euros, which will no longer apply from 2026. However, the Hanover-based group still has a number of collaborations, including with Deutsche Bank, Postbank and many savings banks.
The best time for the residual debt business may be over anyway. Consumer advocates and politicians criticize the fact that the banks are pushing their customers to take out contracts because, after all, they earn good money from the commissions. Some customers sign the contract out of fear of not getting a loan otherwise. The federal government plans to put a stop to this. From 2025, a week must have passed between the loan agreement and the conclusion of the insurance, the Bundestag and Bundesrat have decided, unless it is a construction financing issue.
Several insurers and the industry association General Association of Insurers are considering whether to take legal action because they consider the regulation to be contrary to European law. The new regulation is scheduled to come into force at the beginning of 2025. The amount of commission for residual debt insurance is already limited to 2.5 percent of the loan amount.
If the waiting period of one week remains, the business will be dead, the insurers fear – probably rightly so. The insurer Talanx would then actually have to accept significant business losses, similar to R+V, which is close to the cooperative banks, or the Versicherungskammer Bayern, Provinzial and other insurers from the savings bank camp. This does not change the fact that Targo will in future cooperate with the group’s own insurer ACM and no longer with Talanx.
By the way, the one-week deadline was invented by the British supervisory authority in 2011. At the same time, it has stipulated that no pressure may be exerted on credit customers. The authority also found that millions of Payment Protection Insurance (PPI) policies were sold following false advice and under pressure. The PPI corresponds to the German residual debt insurance.
The “PPI misselling scandal” sparked a heated public debate. British banks and insurers had to reverse contracts dating back several decades. This cost them more than 66 billion pounds by 2019, then 79 billion euros, which they had to pay back to customers.