Individual retirement provisions
The concept of individual retirement provisions is an attempt to enable competition for existing customers in the market for insurance with a lifelong term and capital coverage , for example in private health insurance or private long-term care insurance in Germany. Scientists who advocate this concept are Johann Eekhoff from the University of Cologne and Peter Oberender from the University of Bayreuth .
calculation
The individual retirement provisions (IAR) are calculated on the basis of the future costs that an insured person is expected to cause, minus the future premium income expected by the insurance company from the insured person. Alternatively, the IAR can also be referred to as the maximum price that an insurance company is willing to pay to another insurance company so that it can accept the insured person.
Since expected values are included in the calculation of the level of the IAR, they cannot be determined objectively. However, despite uncertainties, the desired competition can occur as long as there is uncertainty in all insurance companies on the market and there is no asymmetrical distribution of information .
Difference to average retirement provisions
Average retirement provisions or arithmetical retirement provisions are not calculated based on the future like the IAR, but based on the past. The accrued reserves are distributed equally among the insured in an age cohort, regardless of the individual risk.
In a market in which average retirement provisions are transferred, there can be massive risk selection because it can be profitable for insurance companies to poach low risks which, in the event of a change, result in excessively high retirement provisions in relation to the expected future costs. It can therefore happen that in such a market there is competition for the best or lowest risks instead of the best and most cost-efficient care for the insured.
Prevention of risk selection by IAR
According to the calculation method described, higher IARs are credited to high risks than to low risks, in contrast to the case of average retirement provisions. It is therefore not profitable for any insurance company to poach low risks from other insurance companies, as these only have a correspondingly lower IAR and thus no profit can be achieved with the same efficiency from the issuing and receiving insurance. In a market designed in this way, insurance companies can only increase profits if they can attract insured persons due to cheaper care with the same quality or due to an equally expensive care with higher quality.
Sum rule
The so-called sum rule states that the total of the IAR must be equal to the total of the collective old-age provisions or the total of the average old-age provisions.
This rule is necessary because it can prevent an insurance company from lowering the IAR to be transferred for the same premiums by lowering the quality of care and thus lower expected costs in order to achieve a profit in the event of a change of insured person.
In addition, without the sum rule, a situation is conceivable in which it would be more profitable for an insurance company not to transfer any old-age provisions at all. This is the case, for example, if the profit from the retirement provisions left behind by autonomous changers who switch despite the financial loss by leaving the retirement provision behind is higher than the profit to be achieved when transferring the correct IAR, which results from the sharing of the financial benefit more efficient care between the issuing and receiving insurance.
Political feasibility
In the key points for the health reform agreed on July 3, 2006, the transfer of individual retirement provisions for private health insurance (PKV) was provided. In the course of the legislative process, which resulted in the GKV-WSG, which came into force on April 1, 2007, this was changed so that in the end the transfer of average retirement provisions was decided.
literature
- Johan Eekhoff, Vera Bünnagel, Susanna Kochskämper, Kai Menzel: Citizen Private Insurance . Mohr Siebeck, 2008, ISBN 3-16-149636-1