Secondary market for life insurance
The secondary market for life insurance is a market in which claims from existing life insurance contracts are traded during the term of the contract. Depending on the legal situation, this is done through contracts in which the claims of the policyholder are contractually assigned to investors or, preferably, where the investors themselves assume the claims by entering into the insurance contract as the policyholder. The transfer of the right is regulated against payment by a contract. In Germany, it is currently only possible to transfer capital-forming life insurance policies . Colloquially, the term “used contracts” ( second hand policies ) is also used to distinguish it from the conclusion of new contracts.
Basics
If a policyholder wishes to terminate a capital-forming life insurance policy before the end of the contract term, in particular because he needs cash, there is in most cases the contractual option of premature termination of the insurance relationship. Most contracts provide the option for the insurer to buy back the policyholder's existing but not yet due claims. For this purpose, the insurer pays the policyholder the contractually determined surrender value . According to Section 169 of the Insurance Contract Act in Germany, the policyholder has a legal right to this and the surrender value must correspond to a certain minimum value on the basis of the claim against the insurer, unless a higher surrender value is contractually agreed, as is customary in most cases. In other countries, e.g. B. in Great Britain, there may be no claim to repurchase by the insurer, but at least the amount of the surrender value is largely at the discretion of the insurer. As a result, the surrender value can also be significantly lower than the actual value of the claim of the terminating policyholder. In addition, in the case of policyholders who are taxed in Germany, part of the arithmetical interest included in the surrender value may have to be taxed, which worsens the result of the termination for the policyholder.
The value of the policyholder's claims that are not yet due can only be estimated for contracts that run for decades and this estimate is subject to great uncertainty. In particular, the surplus participation , which makes up a significant proportion of the insurer's overall performance, can only be predicted to a very limited extent. Especially abroad, e.g. B. in Great Britain, the profit participation is very fluctuating and can lead to significant differences depending on the contractual expiry year. In Germany, the surplus participation is more reliable in an international comparison.
Investors in the secondary market for life insurance are usually much more willing to take risks than consumers. In addition, they have the option of reducing the risk through diversification by mixing and spreading their investments across different contracts, in particular different insurers , which the individual consumer cannot. Therefore, they may be willing to pay an amount higher than the surrender value for the policyholder's claims, even if it is higher than the generally estimated value. In particular, if the surrender value - for whatever reason - is very low compared to the contributions previously paid for the contract, there is a great interest among consumers in "improving" the surrender value which they perceive as disappointing. The secondary market for life insurance offers an opportunity for this.
However, as with all markets, it should be noted that suppliers and buyers must be brought together. This results in transaction costs , mostly agency commissions, which further reduce the often small difference between the surrender value and the price that the investor is willing to pay, so that the business may not be lucrative for both parties. However, z. In Great Britain, for example, the surrender values are often so low that the transaction nevertheless satisfies all three parties involved, the previous policyholder, the investor and the intermediary. In Germany, this is much less the case because of the relatively high surrender values.
history
The idea of selling life insurance claims was first drafted in 1844. This year, policyholders in the UK were able to sell their mixed life insurance to interested investors via the London-based finance broker Foster & Cranfield.
In Germany, on the other hand, some buyers have only been active since 1998 and were able to establish a secondary market for “used” life insurance.
Properties for the seller
If a policyholder with claims from a life insurance contract that is due in the future does not need money early, he may have the advantage when selling on the secondary market for life insurance that the purchaser pays him one to three percent more than the surrender value. Depending on the structure of the transfer agreement, the insurance cover for the original policyholder is partially retained. In the event of death, the difference between the sum insured and the purchase price with approximately nine percent interest is deducted.
However, by far not everyone who wants to sell gets an offer at all. And only if the repurchase would be taxable - for example because the contract has not yet run for twelve years - will the additional proceeds from the sale be greater because of the deduction of capital gains tax by the insurer. Then it can also be 7 to 15 percent. According to the Federal Ministry of Finance , the proceeds from the transfer of claims for the seller are only tax-free until December 31, 2008 in these cases.
Properties for the insurer
For the insurer, the size and stability of the insurance collective is of great value. An essential part of the activity of an insurer is to enlarge the collective in order to make it more efficient. The secondary market for life insurance reduces premature termination of insurance contracts and thus stabilizes the collective without additional costs for the insurer. Reductions in the cancellation rate make capital investments and risk coverage more profitable for insurers. In return, the calculated expenses for the high terminal profit shares for life insurance do not apply. So these amounts increase the return of the other policyholders (and the insurance company).
On the other hand, because of the significantly higher entry price, investors are much more affected by the fluctuations in insurance benefits that can never be ruled out, in particular from profit sharing. In addition, the investments in life insurance are largely financed with loans, so that rising interest rates represent a further risk. In fact, investing in used policies involves a considerable risk.
In the UK, insufficiently informed investors who have suffered losses from the secondary market organizers may have then blamed the insurers. This potential difficulty makes insurers hesitant to support such speculative approaches in the secondary insurance market. In addition, it is not clear how high the efficiency of the secondary market for insurance is. Because of the rather high risk, capital is not unlimitedly available for this market, taking into account the volume of the buybacks concerned. Comparisons with the past in Great Britain are not transferable, as investors there were not always sufficiently aware of the risk they were taking.
Tax treatment
There is currently no tax liability for the seller of life insurance when selling life insurance. With the introduction of the final withholding tax on January 1, 2009, the increase in value achieved on the day of sale is subject to this tax.
The market in Germany
According to the Federal Association for Asset Investments in the Secondary Life Insurance Market (BVZL), the purchase volume in 2006 was EUR 1.1 billion. As a result of the financial crisis, sales initially fell significantly to as low as EUR 100 million in 2009. The market has been slowly recovering since 2009. In 2012 the purchase volume was back at 200 million euros, and the trend is rising. These companies are mainly active as institutional buyers and traders on the secondary market:
| providers | Member of BVZL | Purchase volume 2011 | Purchase volume 2012 | Acquisition volume 2013 | Purchase volume 2014 |
|---|---|---|---|---|---|
| Policen Direkt Group | Yes | 138 million euros | 123 million euros | 108 million euros | 100 million euros |
| Partner in Life SA | Yes | 107 million euros | 58 million euros | 85.7 million euros | No information |
| Cash.life AG | Yes | 26.8 million euros | 5.1 million euros | No information | No information |
| Mercurius AG | Yes | No information | No information | No information | No information |
| Life Bond GmbH | Yes | No information | No information | No information | No information |
| BVZL total volume | Yes | 200 million euros | 200 million euros | 200 million euros | 150 million euros |
Membership in the Federal Association of Investments in Secondary Life Insurance (BVZL) eV is a quality criterion for secondary market companies. Since it was founded in May 2004, the association has acted as a uniform interest group in economic, legal and political issues and is in constant dialogue with politics, opinion leaders, the public and other interest groups in order to further support the development of the industry. One of the concerns of the BVZL is, among other things, to install industry standards with regard to transparency and comparability of the different investment segments and thus to improve the prerequisites for a successful investment in these very differentiated asset classes. Due to numerous dubious providers, the BVZL published quality criteria for the policy purchase.
There are also numerous intermediaries. In addition to special secondary market brokers, banks, financial advisors, insolvency administrators and tax advisors are also involved in the secondary market.
There are also many dubious offers on the market. The managing director of the company Dr. Mayer & Cie. GmbH arrested in autumn 2011. This company had only paid its customers part of the purchase price. The other part should bear interest and be paid in annual installments. But after a short time, the company stopped paying the installments. The managing director had canceled the policies with the respective insurance company, collected the surrender value and went into hiding with the money. There are also companies that do not pay the purchase price in one sum, but in installments. The Federal Financial Supervisory Authority , among others, warns of the latter , while buyers who pay the purchase price immediately are not subject to BaFin control. In addition, there are buyers who buy policies below the surrender value or for a fee. In addition to buyers who promise to pay in installments, Stiftung Warentest also warns, among other things, of companies that buy contracts for high fees and then promise additional payments via legal action against the insurance companies.
supporting documents
- ↑ BVZL press release on January 23, 2007
- ^ Financial Times Deutschland - Life Insurance - Secondary Market Collapses ( Memento of April 8, 2009 in the Internet Archive ) of April 5, 2009
- ↑ BVZL press release of March 6, 2013 ( Memento of November 4, 2013 in the Internet Archive ) (PDF; 777 kB) Retrieved on July 24, 2013
- ↑ Press release Policen Direkt dated April 7, 2014 (PDF; 120 kB). Accessed April 10, 2015
- ↑ Press release Policen Direkt of March 5, 2015 (PDF; 118 kB) Retrieved on April 29, 2015
- ↑ BVZL press release of April 2, 2014 ( Memento of April 14, 2015 in the Internet Archive ) (PDF; 394 kB) Retrieved on April 10, 2015
- ↑ BVZL press release of April 23, 2015 Accessed on April 29, 2015
- ↑ Quality criteria for the sale of German endowment insurance policies ( Memento from January 27, 2012 in the Internet Archive ) (PDF; 326 kB) Retrieved on February 22, 2012.
- ↑ wdr.de: Könnes fights !: Dieter Könnes presents fraudsters with millions ( memento from January 24th 2012 in the Internet Archive ), accessed on October 2nd, 2012
- ↑ BaFin: Supervision of Secondary Market Companies ( memento of August 2, 2013 in the Internet Archive ), accessed on October 15, 2013
- ↑ Selling life insurance: Seldom a good deal, Stiftung Warentest, March 20, 2012