Life insurance reform “no consumer, but lobby protection!”

Friday, 04.07.14, written by Anja Schlicht

The Bundestag today decides on the life insurance reform law. It was worked on until the very end. But whether the law is really necessary because of the low-interest phase, Susanna Karawanskij doubts. The politician of DIE LINKE recognizes little consumer protection in the reform. Instead, some regulations serve lobbying.


There are many reasons for, much against the life insurance reform

In a conversation with Karawanskij explains that the life insurance reform law contains some good points, such as the higher participation of the insured in the so-called risk surpluses. Nevertheless, the law has a “taste”. Instead of improvements, the insured may even face deterioration.

Many advocates, such as Federal Finance Minister Schäuble, affirmed that the life insurance reform law is necessary. Finally, it is important to ensure that insurers can continue to fulfill their guaranteed commitments in the future because of the ongoing period of low interest rates. Which opinion do you represent?

Susanna Karawanskij: On the part of the Federal Government, the urgent need for action is explained by the greater risk-bearing capacity of life insurers, and this is based on an analysis from the Bundesbank’s Financial Stability Report 2013. In its first report to the German Bundestag in June 2014, the Financial Stability Committee also reached the same conclusion: Assuming a long-term low interest rate for the next ten years, more than one third of life insurance companies, with a market share of around 43 percent, are present Problems that meet own funds requirements. However, there is always the view that the possible burdens of the current low interest rate environment with regard to financial stability still seem acceptable. It simply lacks meaningful numbers to analyze exactly the consequences. This already showed the answer to my small request (BT-Drs. 18/1678). Consumer-friendly scenarios are also missing, as policyholders are again more involved when interest rates turn around.

A small example of how thin the database is: So far, no one could tell me how many of the high-interest, long-term securities actually had to be sold to service outgoing customers. You have to know that, if, for example, you allow cuts to the valuation reserves!

The fact is: there is a low interest rate environment. However, not only insurance companies are affected by this, but every citizen who would like to invest hard-earned savings in order to at least achieve an inflation compensation.

Of course I want the insurance companies to be able to fulfill the guarantee commitments. And Solvency II also increases the requirements for the industry, which, in my view, are necessary. But at the same time there must be transparency in the companies as to what surpluses and hidden reserves are determined, distributed and paid out in what amount – or how much remains in the company. The complete surplus and reserve system is put to the test. After that you can make sense only for just regulations for both sides.

However, the whole legal process has a taste: The insurance lobby drives the federal government to action by exaggerated whining, which in turn reacts in anticipatory obedience, without having good figures. For example, the CDU / CSU and SPD once again succumbed to the siren sounds of the industry by tipping the disclosure of commissions back.

It must be brought light in the insurance thicket! The Federal Government has missed this opportunity terrific.

It is often argued that the current handling of valuation reserves penalizes insured persons whose life insurance does not expire in a few years. As a result, departing insured persons are currently being given preferential treatment. What suggestions do you have for the entire insurance collective to be treated equally in the future?

Susanna Karawanskij: The trick is easy to see through: policyholders are to be played off against each other. Finally, a reduction in the participation in valuation reserves of fixed income securities means a reduction for each client.

For departing insured it is readable black and white, there it is obvious. But even the existing customer is expressed in simplified terms less credited. And if the withheld money first, for example, in the free RfB (provision for contribution refunds, Note editors) hiked, it can quickly become equity and then simply no longer the insured. Valuation reserves are generally taken from the final surplus share fund as a “base participation” and renamed. This means that valuation reserves are not additionally paid off, but existing surpluses are simply cut back on them. That is dishonest!

Insured persons must not only be treated equally, but equally well and better treated. The profits and earnings generated with their money largely belong to the insured. That is why I also call for an increase of all minimum contribution rates (capital result, risk result, cost result) to a uniform 90 percent. In this regard, I tabled an amendment which the Greens also agreed. We need to bring light into the dark and detoxify the entire surplus system, making it transparent and subsequently fairer. Companies should be able to work solidly and continue to work. It is unacceptable for companies to use the money that customers are entitled to and to be healthy.

In a motion for a resolution (BT-Drs. 18/2027), I summarized our demands in the Bundestag, which will be voted in plenary on Friday as well as the two amendments by the LINKEN (BT-Drs. 18/2025 and 18/2026) ,

What are the disadvantages of the life insurance reform law for insured persons?

Susanna Karawanskij: In capital-linked life and pension insurance, they continue to invest in a black box. You do not know how much the commission is with an intermediary. They do not know what happens to their money during the term. They do not know what they will get in the end. It is a very “religious” investment: one has to believe and hope that in the end something good will come out.

Compared to the status quo even worse.

Because the construct backup needs is not thought through. The decisive euro interest rate * is susceptible to manipulation. This was already evident in LIBOR and Co. The investigation is also intransparent. The representative of the Bundesbank gave a miserable answer to a question in this regard: The determination of the euro interest rate rate was made by surveying certain banks. Further criteria were unknown. Ultimately, the hurdle will be too low and a need for backup will be rapid. And already the customers valuation reserves are deleted. The “compensation” is also just window dressing, because a maximum distribution of payouts is about 10 times lower than the total surplus (about 3.6 billion to about 40 billion euros according to eco-test), which customers are withheld. In addition to the “classic” surplus pots, the additional interest reserve is problematic, not to mention the new collective RfB, which according to consumer protection data will cost the insured about 30 billion euros. The money parked there will never flow back to the customers.

Customers are threatening massive cuts, which are only obscured by new constructs. The products and the work of the insurance companies remain intransparent as ever. The whole hiccup shows clearly: The capital-linked private pension keeps itself only through skillful lobbying over water, and seconded the federal government good. Without this, it would be even clearer that, for example, consumers hardly benefit from endowment policies. Because you can invest money safer and better. Especially when the guarantees are crumbling and the costs are so high, as shown by old, but also many new products. Classical life insurance, like private old-age provision, is an obsolete model because consumers are excessively burdened and pay into “profit-making programs” for companies, not for meaningful old-age provision.

Are there any points in the Life Insurance Reform Act that you agree with? If yes, which?

Susanna Karawanskij: Yes, of course. There are already regulations that we agree with. It is good to increase the allocation from the risk surpluses to 90 percent. But we also demand the same for the cost surpluses. A payout lock is also useful. But they would have to be reworked to be safe from bypassing. Keyword: profit transfer agreements. The addition of variable compensation at the end of the legal consultation is, in our view, to be welcomed.

However, it weighs heavily that the disclosure obligation for commissions has been recovered. Here the lobbying has worked wonders. The indication of effective costs will provide even more concealment, the construct is unfit. Thinking further, the federal government is thus ultimately misjudging the consumer’s court. This is not consumer protection, but lobbying!

The policy approach – including the first failed attempt to change the participation in the valuation reserves in the previous year – and the very hasty implementation of the law from the perspective of the insured – shattered confidence in life insurance. How can this be restored? From your point of view, what alternatives are there for citizens to provide?

Susanna Karawanskij: The trust is badly shaken. First, people are told that there is no way around private retirement provision. To underline this, the statutory pension is being ground more and more. And when the capital market suddenly does not spur and insurance companies make management and strategy mistakes, they are prone to customers’ surpluses. The responsibility is wrongly attributed to the customer. Here greed already shines through the industry, which shakes further confidence. The pig-gallop of the law’s passing reinforces this. But he also shows that critical discussions are not welcome.

Otherwise it would become even clearer that the whole system of funded, private old-age provision is eroding. Especially when the consumers are suffering more and more. First, the statutory pension must be strengthened again so that it ensures the standard of living of the individual and guarantees participation.

Ms. Karawanskij, thank you very much for the interview!

* The interest rate is a fixed interest rate agreed by banks among themselves for a period of one year for funds with a certain maturity.