Falling yields for life insurance policies blamed on ecb!?

German life insurers would also suffer from falling yields, Erdland added.

"Nevertheless, as an industry, we need to prepare for a continued period of rock-bottom interest rates. Life insurers are doing everything they can to ensure that this burden is well absorbed by their customers."

Erdland cites efforts by life insurers to u.a. Are intended to address the problem of declining sales of life insurance and annuities with new products. The GDV president also sees the danger of falling savings for old age.

"It is an illusion to believe that there is an alternative to life insurance for private pensions. No savings product can promise a lifetime annuity. … Life insurance policies still produced a current interest rate of 3.6 percent and a total return of 4.2 percent in 2013. That can really be seen. But clearly, because of the continuing low interest rate policy, returns will be lower in the future."

The whole truth presents itself differently

For years, there has been a persistent decline in returns on traditional life and pension insurance policies. Blaming the ECB for a persistently low interest rate seems to me to be an attempt to divert attention from the systemic errors made by insurers. The consumer is to be held in such a way with the "rod. The old-age provision product of classical construction as "cash cow" of the insurers must be preserved. The reason why conventional endowment policies hardly generate net premium yields above the inflation rate is often concealed. The facts to the wrong age precaution product "classical life insurance" and the actual cause of the sinking net yields Finanzblog already explained in detail.

Erdland assumes that the guaranteed interest rate will be lowered further in the near future.

"If interest rates in general continue to fall, all savings products lose out. Of course, you then also have to keep an eye on the guaranteed interest rate. If a reduction is inevitable, however, it should not happen as early as 2015, but rather in early 2016."

Between the lines naked fear is to be read for me. And the hope that by 2016 an upward trend in interest rates can be expected again, so that consumers can then be sold an end to falling yields. Otherwise, the business basis of further insurers would be destroyed so quickly that another wave of companies withdrawing from the life business will have to be reported.

Home-made problems of classic pension products

Erdland announces that the yields of the life insurers will continue to fall in the future. When he talks about a current interest rate of 3.6% for 2013, he is referring to those classic policies for which insurers are pursuing an overly cautious investment policy and are falling far short of what is legally permissible.

Returns on investments arise from the choice of investment instruments. Anyone who has invested more than 90% of their capital in interest-bearing securities (bonds, debentures, mortgages a.a.) should not be surprised if this investment generates a steadily declining return in the event of a long-term decline in interest rates.

German insurers fail to take advantage of investment opportunities

The legislator has given the life insurers possibilities to invest up to 30% of the capital investments in shares. It is well known that a mixed ratio of 70:30 (bonds:equities) alone significantly beats the returns of German life insurance policies over the long term. On average, German life insurers invest less than 10% of investments on the stock market. Anglo-Saxon life insurers have always invested a drastically higher proportion in high-opportunity investment instruments. For this you were highly praised until a few years ago. When the annual returns no longer had a 10 in front of the decimal point, you were punished and scorned. Today, however, these Anglo-Saxon policies still beat every classic policy offered by German insurers.

Yield products already exist

Erdland speaks only of classic policies. It is not mentioned that a growing number of German insurers since the 70s also offer pension products in the form of unit-linked policies. Here the capital investment takes place apart from the insurer, i.e. in fund investments, whose composition can determine the policyholder. Depending on risk appetite and market assessment, the saver can increase or decrease return opportunities; even over the life of the investment.

The author has fund policies in his customer portfolio, which over the last 22 years have generated net contract returns of around 7.5% p.a. feature. Even policies where customers were not so "brave" and chose predominantly less risky funds, there are policies with a net return of around 6% p.a. This was possible with well-known equity funds such as the Fidelity European Growth Fund, a Fondak or similar funds from the same sectors. At the same time, these funds have taken the full negative brunt of correction phases due to stock market crashes (z.B. 1997, 2000 and 2008) have to go along. With savings plans by the way a welcome scenario, because in these phases monthly ever more favorably one purchases.

How will the yields turn out in the future only, since there are meanwhile asset-managing and multi-asset funds for unit-linked pension insurances ? With the top funds of this type, strong downward phases are clearly avoided, without having to give up too much price opportunity for it.

If such unit-linked policies are then provided with an active system that swaps and changes funds within the policy depending on market events, these policies will lose a lot of the supposed risk. FRF Finanzmakler is currently working on such a "fund policy airbag" for fund policy customers. (We will report on this as soon as the system is ready and the test run has been completed.)

Fondspolicen – unloved age precaution product ?

So there is definitely the alternative to life insurance denied by Erdland. And it is much better suited for retirement planning. Why however the fund policies still fristen a "shadow existence" in Germany ?

  • Could it be that with an increased turning of the insurers to the fund policy an admission of the own inadequacy in things capital investment management can be suspected ?
  • Could it be that the legions of insurance agents were intentionally insufficiently trained for fund policies and investment funds, so as not to endanger the sales of the money-printing machine "classic policy"? ?

The first insurers have already withdrawn from the life insurance business. Others are suddenly pushing the unit-linked policy business drastically and building more and more new policy constructions. And nevertheless insurers and Lobbiesten defend vehemently the classical products – a relic of German age precaution.


German life insurers are embarrassing themselves more and more often. They publicly complain about the diminishing returns of their classic products. Many of their problems are home-made "system errors. The mouthpiece of life insurers (GDV) makes desperate attempts to hide the incompetence of its member companies by accusing third parties (ECB and politicians) of alleged misconduct.