Presentation of the concept of "Bürgerrente" and business development
22 years after the introduction of the Riester Pension, insurers have presented proposals for a reform of the private subsidised pension scheme. In addition, the 2022 business figures were presented at the GDV annual media conference.
The Citizens' Pension is designed as a standardised old-age provision product for broad sections of the population with unbureaucratic subsidies and downstream taxation. GDV President Norbert Rollinger presented the concept on Thursday at the association's annual media conference. "Compared to the Riester Pension, the Citizens' Pension is simpler, easier to understand, more sustainable and offers higher returns", Rollinger said.
At its core, the GDV concept envisages that for every euro paid into the Citizens' Pension scheme, there will be an additional subsidy of 50 cents. Eligible contributions are to be limited to four percent of the income threshold for the statutory pension insurance scheme. To keep consulting costs low, the pension product is to be highly standardised and can also be sold digitally.
According to the insurers' proposals, a higher return compared to the Riester Pension is to be achieved by lowering the guarantee level. In this way, the contributions could be invested more profitably on the capital market, mainly according to sustainable criteria. And to put the Citizens' Pension on a broad footing, self-employed persons, civil servants and unemployed people are also to be included.
"For a private pension that reaches people even better"
"After more than two decades without fundamental changes, private pension plans need a fresh start", Rollinger said. "The Riester Pension is too complex and bureaucratic to allow further dissemination of subsidised pension products. We insurers are therefore contributing our idea of a Citizens' Pension to the discussion that has now begun... for a private pension that reaches people even better."
The GDV President also looked back at financial year 2022. Premium income of German insurers declined across all lines by 0.7 percent to EUR 224 billion. While life insurance recorded a 6 percent drop in premiums to EUR 97.1 billion, revenues in property and casualty insurance (+4 percent to EUR 80.4 billion) and private health insurance (+3.1 percent to EUR 46.8 billion) increased. "We did very well in 2022 under difficult conditions", Rollinger said.
The business performance of life insurers, Pensionskassen and pension funds was characterised last year by the large difference between single premium (-18 percent) and regular premium (+0.6 percent) contracts. Single premium business is usually subject to greater fluctuations. In 2019, life insurers still recorded a 37 percent increase here.
Interest rate level and inflation as reasons for development at life insurers
There were two main reasons for the development of business in life insurance: The normalisation of interest rates means that customers now have more investment alternatives. "Meanwhile, the increased cost of living due to inflation means that many people are putting less money into their retirement savings", Rollinger said.
In 2022, company pension plans, especially direct insurance policies, performed better than private pension plans. Their new business increased by 13 percent to a solid 650,000 contracts. On balance, contributions to company pension plans climbed by 3.7 percent to EUR 20.3 billion. In light of unfavourable conditions, such as the statutory 100-percent guarantee and the renewed reduction in the maximum actuarial interest rate of 0.25 percent, the situation was different for the Riester Pension. The resulting decline in the number of providers led to a 60-percent drop in new business.
Property and casualty insurance in the black
Property and casualty insurance was in the black in 2022. Revenues increased by 4 percent, while expenditures decreased by 5.6 percent. The bottom line was an underwriting profit of five percent. Rollinger cited the high inflation of almost 8 percent, which was reflected in almost all lines of property and casualty insurers, such as rising costs for replacement car parts and higher prices for building materials, as the reason for the merely moderate decrease in expenses compared to the record claims year of 2021.
In private health insurance, insurance benefits paid reached a level of around EUR 33 billion (+3.8 percent). The portfolio of comprehensive and supplementary insurance policies increased by almost 600,000 to a total of 37.8 million (+1.6 percent).
Insurance industry expects three percent premium growth for 2023
For the current financial year 2023, German insurers again expect premium growth of around three percent. Developments in the various business areas are likely to vary:
In life insurance, GDV expects premiums to remain stable in an uncertain environment. The development of interest rates is likely to boost business here, while the overall economic trend will put the brakes on it.
In property and casualty insurance, the Association also expects two opposing effects in 2023. On the one hand, inflation is likely to continue to be reflected in insurance sums and premiums. On the other, strong competition and the tough financial situation of many households are likely to dampen the development of contributions. Overall, composite insurers expect premium growth of six percent.
Private health insurers expect premiums to rise by 3.5 percent in the current financial year.
"If you consider the difficult general conditions - the war in the Ukraine with all its dramatic consequences for the global economy, especially the continuing inflation - then this is a realistic forecast for 2023", GDV President Rollinger said.