The significance of personal retirement plans is on the rise.
In the face of the global COVID-19 pandemic, German life insurers and pension funds have shown resilience, with total premium income remaining steady at 103.2 billion euros in 2021. This stability is largely attributed to the economic and social measures implemented by the German government, which provided a more stable financial outlook for many policyholders.
One of the key factors contributing to this resilience is the extensive financial aid programmes, including subsidies, loans, and Kurzarbeit (short-time work compensation), that helped stabilise incomes and employment during the pandemic. As a result, policyholders experienced reduced financial pressure to cancel insurance contracts.
Another significant factor is the increased awareness of health risks due to the pandemic. This heightened awareness might have encouraged more people to retain or even increase their insurance coverage, resulting in a slight uptick in premium income.
Regarding pension insurance, the positive effect of decreased cancellations and increased premiums is significant. With fewer contract cancellations, pension insurance funds retained more capital, supporting their long-term sustainability. Maintaining a stable inflow of premiums amid the crisis allows pension insurers to continue investing and managing funds effectively, which is essential given the long-term nature of pension products.
The crisis also underscored the importance of reliable pension schemes. As people experienced the vulnerability of health and employment, pension insurance may have been viewed as an important component of financial security in retirement.
Life insurers in Germany recorded the fewest contract cancellations since reunification last year. Life insurance premium income saw a slight increase of 0.4 percent to 99.9 billion euros in 2021. The cancellation rate of life insurance contracts decreased from 2.7 percent in the previous year to 2.55 percent in 2021.
In 2020, the share of pension insurance in ongoing insurance premiums increased to 58.4 percent, compared to 57.3 percent in 2019. The total number of pension contracts exceeded 44 million in 2020, representing a decrease of 2.7 billion euros compared to 2019, but an increase of 3.7 billion euros compared to 2018.
Occupational pension provision (bAV) still has growth potential, as employment has grown significantly more than the number of people with bAV. In the area of occupational pension provision, the number of contracts increased by 0.8 percent to over 16.4 million.
Capital life insurance saw a decrease in its share of ongoing premiums, accounting for around 25 percent in 2020. Life insurance is important for protection against existential risks such as disability.
Looking ahead, the next federal government is encouraged to adjust the legal framework for subsidized old-age provision overall to enable more flexible guarantees and a more opportunity-rich capital investment. This adjustment could further support the stability and resilience of the life insurance and pension sector in uncertain times.
In summary, the German government’s pandemic relief efforts enabled policyholders to keep their life insurance contracts, contributing to steady premium income during the crisis. This, in turn, supported the stability and resilience of pension insurance funds amid uncertain times.
Other businesses, such as personal-finance advisors, might have benefited from the financial aid programmes implemented by the German government during the COVID-19 pandemic, as the measures helped stabilise incomes and employment, reducing the need for policyholders to seek financial advice.
Given the long-term nature of pension products, the resilience displayed by German life insurers and pension funds could potentially lead to an increase in demand for professional guidance in managing personal finances, especially from individuals nearing retirement age who value the importance of reliable pension schemes.
