What about Value for Money of life and non-life insurances in current consumer trends?

Overly complex products and ongoing high distribution costs continue to reduce value for money of life insurances despite increased interest rates. In the non-life sector raising premiums and a recent intricated case of the insolvency of an insurtech troubled policyholders in Germany. BdV presents its updated contributions to EIOPA’s next Consumer Trends Report.

EIOPA Report of January 2025 on Consumer Trends

In January 2025 EIOPA published its Consumer Trends Report for 2024.¹ For the life insurance sector the overall assessment by EIOPA paints a mixed picture: on the one hand “returns have significantly improved in line with overall market performance (from -10% in 2022 to 9% in 2023).” But this positive development is mainly due to the fact that global financial markets achieved much better results in 2023 than in the very difficult year of 2022, and therefore – from our perspective –it seems not to be justified to conclude that the life products themselves improved.

This conclusion is approved by EIOPA’s statement that “the continued presence of products with low Value for Money can diminish consumer trust and hinders consumers’ willingness to invest through insurance and pension products.” Additionally EIOPA stresses: “While not a direct measure of costs, commission rates may indicate higher costs for consumers as well as higher risk of possible mis-selling, as it may lead distributors to offer an unsuitable product with the intention of generating commissions.” While EIOPA points out that in some EU member states commissions even declined in 2023, this is unfortunately not the case for Germany where commissions remained at least stable, as the figures of the Association of German Insurers (GDV) clearly elucidate.²

In the non-life sector following to EIOPA “NCAs continue to report that high commissions and poor value offered by some cross-sold and ancillary products remain significant concerns.” And it adds: “Solvency II data shows that the lines of business where possible consumer detriment is at higher risk of materialising are income protection, miscellaneous financial loss, and legal expenses. To tackle instances of poor value for money and to build on the observed improvements, NCAs carried out supervisory activities based on, or closely related to EIOPA’s methodology.”

In Germany since 2022 there is at least a legal cap of commissions related to Payment Protection Insurances (“Restschuldversicherung”), but which from the perspective of consumer protectors still remains much too high (2,5% of total sum of requested credit).³ Below we will outline other examples from the non-life sector which raise strong concerns of actual and possible consumer detriments.

New inputs by BdV for next EIOPA report

As part of its IRSG activities in May 2025 BdV transmitted its comments for the next consumer trends report to EIOPA.⁴

Life insurance sector

The issue of value for money continues to be one of the major concerns for German life insurance policyholders. As already stated, the commissions paid for distributors did not decrease neither in absolute nor in percentage figures. But there is even more concern: the German NCA BaFin published its critical analysis focussed on unit-linked products already in August 2024, but it is strongly questionable, if this analysis will lead to any substantial improvements. This pessimistic conclusion has to be drawn, because the NCA does not publish who is responsible for these breaches of value for money.⁵ How shall consumers be enabled to take well-informed decisions, if explicit information on the detrimental conduct of business by some product manufacturers is not made accessible for the general public?

With regard to overly complex life products and their strongly reduced value for money – if any – several rating agencies shed some light: this is mainly the case for so-called index-linked life insurances which in contrast to unit-linked products do not invest a part of the premium, but only the surplus of the policy into a share index. Additionally profit participation is often limited by caps and high volatility of capital markets. In 2022 and 2023 there were critical reports that only half of all contracts had any profit participation at all. In 2024 the situation improved somewhat, but still the fundamental requirement of real return of these products is strongly endangered.⁶

This is just another example for EIOPA’s crucial statement: “Further, product complexity can contribute to consumers not understanding their products and result in the non-purchase and/or non-renewal of such products. Consumers face challenges in understanding various aspects of life insurance and/or pension products, particularly the investment component.”

This lack of understandability related to contract clauses fixing the payouts of annuities even lead to new court decisions. In January 2025 the Higher Regional Court (OLG) of Stuttgart decided against a life-insurer that a clause permitting the unilateral reduction of the annuity rate must not be used anymore. Such a clause allowing for the reduction of the monthly payouts (due to decreasing bonus, interest rates, etc.) shall only be appropriate, if it includes an additional stipulation, under which conditions this possible reduction of the annuity rate shall be cancelled as well, if economic conditions improve. Actions are taken against such clauses included in annuity insurances offered by German life-insurers in several cases.⁷

Non-life insurance sector

The issue of missing understandability of contract clauses is relevant in the non-life sector as well and lead to several court decisions as well.

In June 2024 the Federal Court of Justice (BGH) decided that the telematics tariffs included in the coverage of "professional disability" by one insurer were not sufficiently transparent and therefore discriminating consumers in a "non-appropriate" way. The telematic tariffs were linked to the use of a fitness trackers by the policyholder aiming at a "health-conscious" behaviour. But in the small print too many risk exclusions and information duties were not fixed in an understandable and precise way. Therefore BdV had taken action against these contract clauses.⁸

Unfortunately sometimes court decisions do not support consumer’s perspective, as this example shows: The new report of the insurance ombudswoman, published in March 2025, states that related to travel insurances many policyholders complained on the non-transparency of the definition of an "unexpected and severe illness" which is exclusively covered by many insurers (in contrast to a sudden aggravation of an already existing illness). This conclusion contrasts with the decision of the Federal Court of Justice in October 2022 outlining that the understandability of this definition usually used by the insurers is safeguarded.⁹

Last but not least, there was a troubling case of insolvency of an insurtech which happened for the first time in Germany. It was focussed on non-life business lines with more than 400.000 concluded contracts. The first public information was spread around the turn of the year 2024/25, the official insolvency was stipulated in March 2025. There was a strong public debate on the necessary information to be given by the NCA and the company itself to policyholders from January 2025 on, and equally on the financial stability of insurtechs in general strongly dependent on external venture capital and reinsurers.

Therefore a comment which was published by one of the financial journals seems to be highly relevant: the current business models of insurtechs which give priority to growth instead of properly calculated loss ratios and sufficiently large technical reserves must definitely be questioned. Additionally the German NCA stresses that it applies the rule “same business, same risk, same rules”, i.e. there are no “regulatory sandboxes” for insurtechs. But this is probably different in other EU member states, where the NCA allows for “regulatory sandboxes”. In consequence this new case of an insolvency sets an example how things can go wrong and should be taken as a severe alert.¹⁰

Conclusion

By outlining these exemplary cases of distribution practices, product innovations and court decisions, we want to stress our ambition to give precise input to EIOPA on current insurance market developments which may have or actually had detrimental effects on individual policyholders. Therefore we strongly regret EIOPA’s decision to publish the Consumer Trends Report from now on only every two years.

[1] EIOPA Consumer Trends Report 2024, Publication date: 15 January 2025

[2] vgl. GDV: Die deutsche Lebensversicherung in Zahlen 2024 (page 29): Kostenquoten der Lebensversicherung - Tabelle („cost ratios of life insurance, table“)

[3] Comment of German Association of Insured (BdV) of April 2021 on legislative amendment of cap of commissions for PPI (on “RSV”, pages 7 – 14)

On current distribution practices and cases of questioned indemnisations related to PPI, cf. Annual Report 2024 of Insurance Ombudswoman in Berlin (pages 38-40)

[4] Cf. Questionnaire to the IRSG to gather input for the EIOPA 2025 Consumer trends process: BdV comments of May 2025

[5] Cf. BaFin-Website: Kundennutzen im Fokus („focus on value for money“), 27 August 2024:

[6] cf.  article on low real return of index-linked life-insurances by magazine FONDS PROFESSIONELL of 25 June 2024

https://www.fondsprofessionell.de/versicherungen/news/headline/indexpolicen-mehr-sonne-in-sicht-233654/

[7] cf. website of regional consumer institution (Verbraucherzentrale):

https://www.verbraucherzentrale.de/wissen/geld-versicherungen/altersvorsorge/klagen-gegen-versicherer-wegen-rentenkuerzungen-82207

[8] Cf. for more details BdV press release of 13 June 2024

[9] cf. Annual report on 2024 of insurance ombudswoman in Berlin (on travel insurances, page 61) 

[10] cf. BdV-Website: ELEMENT-Insolvenzverfahren: Eine Chronologie aus Verbrauchersicht ("insolvency proceeding of ELEMENT: a chronology from consumer's perpective")

cf. BaFin-Website: Digital versichern: Darum sollten Sie wissen, was White-Label-Policen sind ("digital insurance: therefore you should know, what are white label policies"):