07/2020: Stability of Prices for Disability Insurance
This special research deals with the expected stability of your premiums for disability insurance products.
In the current environment of low interest rates, life insurers must first and foremost earn the guaranteed interest for life insurance products. If the returns on the capital market are not sufficient, there is a risk that returns from the term life products will be used to finance life products.
Such cross-financing between different products and sources of profit is permissible under supervisory law and is also fully in line with the insurer’s collective approach. However, in this case the term life products receive less surplus and the premiums to be paid increase. This potentially affects term life insurances, and especially disability insurance products.
We want to inform which life insurers are strong enough.
These probably do not have to reduce the surplus participation for risk products or increase their premium payments. To this end, we have looked at what return remains from profit participation of technical returs after insufficient capital market returns have been financed from these funds. 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 no holes to plug caused by low capital market returns for traditional products on the other.
Deutsche Ärzteversicherung and Neue Bayerische Beamten Leben have the strongest starting position for high and stable premiums in the future for term and disability insurance. Both insurers have a very strong technical net interest rate of over 3%. Strong insurers follow in 3rd to 10th place with a technical net interest rate of 1% to 2%. The strong insurers in particular have enough potential to pass on risk profits to customers undiminished – even in times of very low investment income.
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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