In the US, flexible life insurance policies that allow customers to change or suspend or reclaim premium payments have been a standard product for decades.
That’s not the case in Germany, where life insurers have been chronically inflexible, stuck in a bygone era where clients had jobs for life and could plan ahead for decades.
But market research shows that conventional products are too rigid and no longer fit the realities of life for younger generations. Younger people in Germany now expect to have to change jobs and even professions, something often unthinkable for their parents.
Dying to buy a policy
In recent months, Allianz and fellow Munich-based insurer LV 1871 have launched simple insurance policies that allow buyers to raise, cut or suspend premiums and even choose what type of funds their money is invested in.
The trail was blazed by Berlin-based insurer Ideal Lebensversicherung, which caused a stir in 2015 with a new flexible policy called Universal Life.
More insurers are expected to follow. “With life insurance, the customer trend is that they want it to be simple,” said Hermann Schrögenauer, head of distribution at LV 1871. Younger people were tough to reach with life insurance, he said. “They don’t have much money or much time, and they have other interests.”
The switch to simpler, more user-friendly products will become evident at the DKM finance and insurance industry trade fair in Dortmund next week, industry insiders said.
New life insurance
The changes are driven not just by a slowdown in new business but also by digital innovation. “We’re reaching a target group we haven’t been systematically reaching so far,” said Allianz Leben board member Volker Priebe.
But many German insurers are struggling to update their IT systems to accommodate the new flexibility. Offering new products is relatively simple. The hard part is adjusting the back-end systems to handle changes in premium payments or customers switching from policy to another.
And the new flexibility doesn’t come cheap. LV 1871’s new Startklar policy charges a premium fee of 8 percent and an annual 0.2 percent fee on assets. With its even more flexible Mein Plan, customers face a premium fee of 10 percent and 0.22 percent commission on assets.
Allianz’s new product Fourmore charges a 4 percent fee at the start plus an annual 0.8 percent for managing the policy and 0.18 percent for managing the capital.
Christian Schnell is a correspondent with Handelsblatt, usually covering the automotive industry. To contact the author: email@example.com