Is taking out life insurance still worth it?

“Only” 6.5 billion euros in net inflows in 2020: hit hard by the restrictions of the health crisis, which distanced savers from their financial advisers, life insurance experienced one of its worst years in several years in 2020, since savers took almost as much out of it as they invested.

“Net” inflows correspond to the difference between the sums invested (116 billion euros in 2020, compared to 144 billion in 2019, according to the French Insurance Federation) and those which have been withdrawn, either through “redemptions”, i.e. following the death of the policyholder (122 billion euros in 2019 and 2020).

This result is not surprising, because life insurance has lost its main attraction for several years: its guaranteed funds in euros. For thirty years, this compartment, sometimes described as “magical”, has made it possible to offer savers a solution combining performance, security and availability. This is no longer the case, since funds in euros have ended up being overtaken by the fall in financial market rates, and their yields have continued to decline, to the point that they are practically no longer worth protecting against inflation.

Take risks

It’s not over: major groups such as Generali are already announcing a fall in revaluations for 2021 (the return for one year is always known at the start of the following year, after the closing of the accounts of the insurer). A fall which could be particularly brutal, since the leaders of Generali evoke a possible rate of 0.5%, but which could not be general, since companies like MACSF (Mutuelle d’assurance du corps sanitaire français) give hope for a maintenance of performance, or even a slight increase in yield.

Explanation: the reduction in the sums allocated to it has stopped it putting new bonds in its fund (debt securities issued by States and companies, the only ones capable of allowing insurers to guarantee the value of the capital that they bring to fruition) currently not very commendable.

Read also Does the retirement savings plan overshadow life insurance?

That’s not all… While these funds in euros force insurers to mobilize significant capital to have a sufficient “solvency margin”, many of them have chosen to close their doors to savers wishing to place their entire assets in this risk-free compartment.

Many companies now make access to this guaranteed fund conditional on the obligation to pay a significant part of the payments in “unit-linked” media. These investments, in direct contact with the financial or real estate markets, do not benefit from any protection, but they require less capital for insurance companies.

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