Life insurance, in terms of premiums, is the largest insurance line in the UNIQA Group. It includes savings products such as classic and unit-linked life insurance. There are also biometric products to secure against risks such as occupational disability, nursing or death. In life insurance, we cleared €2.7 billion in premiums written across the Group in 2015; this was about 42 per cent of total premium volume.
Life insurance – the basics
Life insurance covers economic risks that stem from the uncertainty as to how long a customer will live. The insured event is the attainment of a certain point in time, or the death of the insured during the insurance period. The customer or another authorised beneficiary then receives a capital sum or an annuity. The premium is calculated on the basis of the principle of equivalence: its amount conforms to the type of insurance, age at the time the contract was signed, the policy term and the duration of premium payments.
Long-term investment with rising demand
The life insurance business model is oriented towards the long term: policy terms are around 25 years on average. For our investors, this means stable income over a longer period of time. Life insurance is showing great growth potential in the CEE region because the constantly improving standard of living is leading to an increase in demand for additional insurance products here as well. While the focus early on in many of these markets was on the motor vehicle insurance business, now more and more savings and investment products are being offered in the form of life insurance.
In Central Europe, the conventional life insurance model is currently facing major challenges. Historically low yield levels are adversely affecting all long-term forms of saving and investment, including life insurance. To meet the requirements of Solvency II, policies with guaranteed interest rates will require relatively high levels of equity. In addition, the conventional life insurance model is increasingly coming under criticism from consumer protection agencies.
We were the first insurance company in Austria to respond to these developments. In December 2014, UNIQA Austria and Raiffeisen Versicherung AG introduced a new model for classic life insurance to the market. It is flexible and transparent, and the costs are distributed fairly. The product does away with the discount rate but offers a 100-per-cent capital guarantee on net premiums and high repurchase values from the beginning.
This new life insurance brings customer needs, the requirements of the capital market and of the regulatory environment, down to one common denominator. From the beginning, customers receive a significantly higher savings premium because costs and fees are taken from earnings. This means that the full premium flows into the investment. For UNIQA, this new model requires lower capital backing, and capital requirements decrease, depending on the policy term and interest level.