Why life insurance production is declining – New trends

By Leonidas Stergiou

The production of insurance premiums recorded a marginal decrease of 0.7% in the first four months of the year, compared to the corresponding period last year, according to data published by the Association of Insurance Companies. Although the total amount of production, which amounted to 1.4 billion euros, is very close to the corresponding last year, market trends show large differences, according to insurance executives.

The total production of insurance premiums is slowing down this year, due to the decline in the life sector, where only the insurance contracts related to investment products show an increase, which in the four months amounted to 14.2%. The fatigue, according to bank and insurance executives, is due to both the redesign of products and the uncertainty of the war that has affected the markets.

New Products

In this environment, insurance companies are adjusting their products in view of rising interest rates, while until now they were focused on creating alternatives in a period of low interest rates. Therefore, rapid redesign and adaptation is required in order to make new bancassurance products available, where banks and insurance companies forecast growth rates of around 50%, ie in production of about 1.5-2 billion euros in 2022.

Trend change

However, there are also implications for the production of premiums and the trends created by the pandemic. With the opening of the economy, the need for risk-taking coverage returned to the forefront, while the narrowness that gradually began to be created due to increased liabilities (lifting of suspension of payments, end of moratoriums, increased energy costs from autumn 2021 onwards, etc.) , negatively affected the production of new life insurance policies. Only those related to investments maintained a positive percentage.

Life branch

Thus, in the four months of 2022, the production of the life sector as a whole showed a decrease of 8.5%, compared to the corresponding period last year, as it amounted to 632 million euros. An exception was the production of investment insurance products which continued its upward trend with 14.2% (195 million euros).

Contrary to the course of the life sector, insurance against losses moved. In the first four months, production amounted to 787 million euros, showing an increase of 6.5%. The vehicle industry moved up 2.3%, following the car market, which despite the slowdown, continued to show high demand until April.

Damage sector

In addition, the other categories of the loss sector moved upwards by 8.6%, which is related to the economic activity, but also to the relatively low level of start-up. According to insurance executives, the life sector is compared this year with a higher level of 2021 which was formed due to a pandemic (annual increase of more than 10% last year), while the life sector with a much lower one.

For example, the guarantee industry shows an increase in production by 667%, on an annual basis, with a total amount of 8.4 million euros. In the first four months of 2021 the corresponding amount was only 1 million euros. The big increase is related to the fact that guarantees with a closed economy until mid-2021 were limited. Production for aircraft insurance premiums for the four months shows an increase of 10.4%, but this is a production amount of only 156.82 euros.

Sickness coverage

However, the disease sector, which gained significant ground during the pandemic, is moving steadily upwards, with a percentage of 10%. Covid made people aware and liquidity due to forced savings helped increase production. At the same time, this production was also emphasized by the insurance companies, because the protection measures (mask, lockdown, postponement of operations, etc.) significantly reduced the cost (compensation) from diseases. Similarly, the pandemic had helped the vehicle damage industry to make a profit for the first time, due to the sharp decline in road traffic.