Bafin warns: These insurance policies cost customers too much return

High costs

Financial supervision: These insurances are often too expensive

The costs of many fund policies have become cheaper in recent years, praises Bafin. But it quickly becomes costly for the insured, especially when it comes to cancellations.

Fund policies are a real bestseller for insurers. They promise customers that they will combine the return opportunities of the stock markets with the security of insurance – many people are happy to take advantage of this. But high costs often eat up a large part of the costs Return back up.

However, many insurers have been able to reduce the so-called effective costs in recent years. This is reported by the financial regulator Bafin, which asked a total of 54 life insurers the actual costs last year.

However, there is no general all-clear: “In the most expensive quarter of the market, however, they are still high,” complains Bafin. At their peak, the effective costs for individual products were still over three percent. There was also little movement in classic life insurance policies – however, the effective costs here tend to be lower than for fund policies anyway.

It becomes particularly expensive when customers terminate their life insurance contract prematurely. For many products with a 30-year term, half of all customers have already canceled the insurance contract after 15 years. This has financial consequences: With life insurance contracts, there are usually acquisition costs at the beginning of the term, which the insurer uses to pay for sales.

The insurer often covers the acquisition costs from the customer’s contributions. A premature cancellation is therefore particularly serious and can no longer be compensated for by a positive return in the following years. For the most expensive 25 percent of life insurers, the effective costs are on average 3.2 percent.

The financial regulator had already warned insurers in the past that customer benefits must be guaranteed even if the contract is terminated early. Bafin wants to take a closer look here in the future too.

However, the effective costs of the contracts were reduced and savings were made until the end. For the most expensive 25 percent of the insurers examined, the effective costs for a contract term of 30 years were 1.9 percent – that is 0.4 percentage points less than in the last Bafin study five years ago.

One reason for this: Many insurers are now relying on their investments low-cost ETFs instead of on significantly more expensive active funds. At the same time, Bafin had increased the pressure on life insurers in recent years to force them to make adjustments. Some particularly expensive products have been taken off the market in the past, while other providers have reduced their costs. Nevertheless, many providers still have a lot to do when it comes to costs.