Article by Adriano Bonafede published on 08/28/2023 in Affari e Finanza, the Repubblica insert
The returns of the first branch, the one with the capital guarantee, did not stand up to the competition of the BTPs. And now companies are studying more profitable products.
There is a simulation that circulates more or less clandestinely among insurance companies and that keeps them on the edge of their seats. This is the data on the net collection of life premiums (premiums less payments for surrenders, maturities, annuities and claims). This has been constantly decreasing in recent years, going from 43.7 billion euros in 2014 to 15.4 billion in 2022. This trend alone would be a cause for concern, but it is the simulation on an “inertial” scenario of the following three years , from 2023 to 2026 – carried out by Excellence Consulting on Ivass data – to cause a shiver to run: if no new factors intervene and the trend remains the same, in 2026 net collections could become permanently negative (in the first quarter of 2023 this has already happened ).
This means that the stock of life insurance policies could begin to decline, and this has never been seen before. Obviously this is a simulation that is very unlikely to come true, given that companies are already moving to create new and more attractive life products for savers, as demonstrated by the activism of the last year. While the scenario of rates and markets could soon change, both of which have negatively influenced the sale of life insurance policies. But there is no doubt that 2022 and also this first half of 2023 have put companies to the test in the sale of savings products. The total collection of life premiums (also including class IV sickness and open pension funds) went from 105.9 billion euros in 2021 to 94.2 in 2022, according to Ivass data. And in the first five months of 2023 there was a further decline: Ania, the association of companies in the sector, reported a minus 7.7% on the same period of 2022. The illness in the Life sector seems to largely coincide starts with the sudden surge in rates, which has made the vast majority of “revaluable” policies (Class I) clearly obsolete. These offered a guaranteed return of zero or sometimes little more, the legacy of a long period in which rates were at zero or below zero. Even the returns actually paid remained at extremely low levels. It should be remembered that Class I policies mostly have government bonds or corporate bonds of leading companies as their underlying assets.
After the rapid rise in rates, BTPs can offer even 4%. So many customers have thought about making a switch between old policies and simple BTPs. This step is made easier by the lack of penalties for leaving early. It is true that as they incorporate the new high-yield BTPs, the old Class I policies also tend to increase the effective returns (the guaranteed ones remain unchanged), but it takes a long time. Going out is therefore an irresistible temptation. The increase in rates was also accompanied by a crisis in the financial markets. This has also affected the other life policies, those of Class III, whose underlying assets are investment funds and which in recent years had had a boom culminating in 2021 with 39, with a lower gross collection (without therefore counting redemptions). .8 billion in collections compared to 63.5 in Class I. In 2022 new collections fell to 28.9 billion, against the slight drop in Class I to 61.9 billion. Bottom line: life insurance ended up in a perfect storm.
The life insurance crisis did not only affect companies but also affected banks and networks of financial advisors who found themselves managing many redemption requests. Banks and networks (almost all bank-linked) account for three-quarters of sales and have seen a strong outflow. Additionally, new contracts have dropped dramatically. Fewer escapes of savers, experts show, however occurred when the banks and promoters were part of an “integrated system” where the insurance company is also present. For example in Intesa Sanpaolo, Banca Mediolanum or Poste, where the outflow from life insurance policies was less marked.
Initially, it was the insurance agents who best resisted the ransom requests. «But in 2023 – notes Maurizio Primanni, CEO of Excellence Consulting – agents also had to endure a drop in collections: in the first five months – 15.3% less than in 2022 according to Ania». Companies are used to changes in the markets. And confidence in the future has also been accompanied by the creation of new, more profitable products. Ania has recently seen many questions on regulatory issues. For example, new separate Class I schemes have been created with higher rates, some with guaranteed returns of 2.7% for some years. On the other hand, the possibility of leaving whenever you want without penalties is eliminated. In general, companies are trying to convince themselves to stay on the old policies, which over time will incorporate the new 4% BTPs. And in any case, not everyone focuses on Class I management. For example, foreign companies in Italy prefer Class III management. «We also prefer them – explains Edoardo Fontana Rava, director of Investment and Insurance Services at Mediolanum – we haven’t had Class I for years».
