The insurance business used to be pretty lucrative in Germany, perhaps too lucrative. Companies like Allianz, the country’s biggest insurer and one of the world’s largest too, could always count on handsomely invested returns and the loyalty of security-conscious Germans as a steady source of sales and profit.
But no more. Interest rates are near zero, and there’s little chance of them rising soon. German consumers unimpressed with interest rate-linked insurance policies are turning to other options, such as real estate. They’re also starting to shop around for insurance – and many are finding cheaper alternatives from a host of lower-cost, online competitors.
So it wasn’t exactly unexpected on Tuesday when Oliver Bäte, the chief executive of Allianz, pledged to cut costs, woo new customers, introduce new performance benchmarks and get tougher with subsidiaries that fail to meet new, tougher profit goals.
In the new, more cut-throat German insurance sector, Allianz no longer has time on its side.