In the current environment of low interest rates, life insurers first of all need to earn the guaranteed interest for the traditional life insurance products. If the returns on the capital markets are not sufficient, there is a risk that returns from disability and term life products will be used to finance traditional life products. Such cross-financing between different products and sources of profit is permitted under supervisory law and is also fully in line with the insurer’s collective business model. However, in this case risk products will receive less surplus participation and the premiums to be paid increase. This potentially affects term life insurances, and especially disability insurance products.
Measuring Future Stability of Disability Insurance Premiums
We disclose which life insurers are strong enough. Those probably won’t ave to reduce the surplus participation for risk products or increase premiums. To this end, we analyzed the future amount of profit participation after accounting for possible shortfalls in capital market returns. This is measured by the Technical Net Rate. The higher it is, the better. In our analysis we assumed a very tough scenario of permanently low interest rates. As a result, in particular those life insurers perform well having high technical profits on the one hand and having no holes to fill caused by low capital market returns on the other.
The biggest winner in the first ranking of German disability insurers was Deutsche Ärzteversicherung. Targo Leben came a distant second, while Continentale Leben took third place this year.
Disability insurance in Germany is one that essentially replaces part of your monthly income in case a disability arises that means you cannot work.
There are differing types of policies which differ in cost and overall coverage but it’s usually about 1-3% of your annual salary.
Over 8 million people in Germany currently have such a policy.
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