Insurance premiums up slightly in 2023; cautious optimism for 2024
GDV reviews the 2023 financial year. Other topics at the association's annual media conference: The future of private pension provision and protection against extreme weather events.
The German insurance industry performed well in the 2023 financial year and insurers are cautiously optimistic about 2024. Premiums were up slightly across all insurance lines, climbing by 0.6 percent to EUR 224.7 billion. The industry expects premium growth to reach 3.8 percent this year due to growth in nominal wages and declining inflation.
"Considering the difficult conditions, such as the global uncertainty, we are completely satisfied with our results in 2023," said GDV President Norbert Rollinger at the Association's annual media conference. "We are actually somewhat more optimistic about the current financial year."
Better environment for life assurance expected
The life assurance business was weighed down in 2023 by the difficult economic situation, as well as by weak growth in real wages and the associated reluctance of consumers to spend. The single-premium business was affected most of all, while recurring premiums proved robust. Premium revenues in life assurance were down by 5.2 percent, to EUR 92.0 billion.
GDV expects to see a better environment for life assurance this year. "Rising interest rates are improving companies' earning power, the higher profit share is making their products more attractive and real income should continue to rise, while inflation subsides," said GDV's CEO Jörg Asmussen. At the same time, the central banks are expected to leave interest rates where they are at least through the middle of the year, so that short-term investments will remain attractive relative to longer-term investments like annuity insurance policies.
"The bottom line is that we expect the slump to end, with premium growth at the level we've seen in previous years," said Asmussen. Premium income is expected to total 91.8 billion euros. This represents a very slight decrease of 0.2 per cent.
Pent-up demand in motor insurance
In casualty and accident insurance, results in the past year were shaped by downstream adjustments to claims expenditures such as e.g., construction expenses and the higher cost of car repairs. While premiums in this insurance line were up by 6.7 percent, to EUR 84.5 billion, claims expenditures climbed much faster than premiums, by 12.7 percent. In motor insurance alone, the rising costs produced a net actuarial loss of around EUR 2.9 billion. "For each Euro we took in, there were EUR 1.10 in expenditures," said Rollinger. Net actuarial profit for casualty and property insurance as a whole was cut in half, to around EUR 1.5 billion.
GDV expects casualty and property insurance premiums to grow by 7.7 percent this year. "The trend in motor insurance especially will likely be shaped by pent-up demand," said Rollinger. "There is also reason to fear that repair costs will continue to rise. As a result, we expect premiums in this area to grow by ten percent in 2024." The specific way in which the current situation will affect premiums will be determined by each insurer on its own.
Premium revenues in private health insurance were up 2.3 percent in 2023, to EUR 48.2 billion. Premiums in health insurance came to EUR 42.6 billion (up 1.3 percent), while premiums in long-term care insurance were up 10.3 percent, to EUR 5.6 billion, primarily as a result of the extension of benefits in statutory long-term care insurance.
Political demands of the insurance industry
GDV is focusing on two main issues: the proposed reforms to private and occupational pensions and protections against extreme weather events.
With the focus group established by Germany's Ministry of Finance, progress was made in 2023 in the debate concerning the reform of subsidized private pensions, and legislation is expected to be introduced this summer. "True pensions afford lifelong protection: that should be the focus of the reform," said Asmussen. "Pensions are much more than just accumulating assets. It would be counterproductive to abandon lifelong pensions," said GDV's CEO.
GDV also sees a need for action when it comes to occupational pensions. "The Act to Strengthen Occupational Pensions had a big impact six years ago. Now we need to build on it strategically," said Asmussen, e.g. by opening social partner models for additional companies. But there are also general ways to make occupational pensions more attractive, he said. "Employees can be automatically enrolled in occupational pension plans unless they expressly object. Even better would be for employers to share the cost of the occupational pension scheme in addition to deferred compensation," said Asmussen.
Christmas floods cause EUR 200 million in losses
With respect to the recent flood events, Asmussen said as follows: "The states and municipalities have major deficiencies when it comes to prevention and adapting to climate change. Many of our problems, especially when it comes to flood prevention, are homemade and entirely preventable." Asmussen first mentioned the losses relating to the flooding in Northern and Central Germany around Christmas time: "according to our estimates, the insured losses come to around EUR 200 million."
GDV rejects a compulsory insurance solution, which is advocated by many policymakers at the moment. Rather, GDV supports the implementation of a well-thought-out master plan which includes a variety of coordinated actions.
There are three measures which GDV considers to be urgently necessary right now. First: no new construction in designated at-risk zones. Second: prevention and adaptation to climate change should be incorporated into state building codes. "And third: the public sector should clearly specify the risks at each location through a nationwide natural risks portal," said Rollinger. "Only if the risks are transparent will the responsible persons implement preventive measures. Other countries, like Austria and Switzerland, are years ahead of us in this regard."