In its 2021 Annual Report, the Prudential Supervisory and Decision Authority reports generally stable practice in the insurance sector. On the other hand, the insurance policeman criticizes the attitude of insurance companies that do not always honor their contractual obligations on the issue of savings and life insurance benefits.
Life and savings insurance overall had a satisfactory fiscal year 2021 in all respects. The record flows in life insurance attest to the still-healthy appeal of this investment, which benefits from favorable tax terms. On the other hand, very long-term support is still attractive.
Private Retirement Savings Plan Status: Although relatively unknown, this product exceeded the cap of 3.2 million subscribers at the end of April, to which 2 million group accounts should be added. Despite these positive signs, the ACPR identifies some potentially harmful problems for holders of life insurance and retirement savings. The insurance policeman called on insurance companies to respond.
Wrong references in calculating life expectancy
Life expectancy is a key component of a life and PER insurance policy. It serves as the basis for the life annuity account that the insurance company undertakes to pay to the account holder. The value of the pension depends on the life expectancy of the insured person at the time he applies for a payment in the form of a pension.
ImportantLogically, the amount of the allowance is inversely proportional to the life expectancy of the insured at that particular moment.
To calculate the latter, insurance companies use the INSEE mortality table. Every year, this table is updated by the National Institute of Statistics, which refers to the table of a man and a woman residing in France. For example, a 60-year-old woman could still live 27.5 years in 2021, according to the life table. This value was 26.4 years in 2005 and 25.6 years in 2000.
These numbers show an increase in the life expectancy of French women over the years. Insurers undertake in their contracts to use the mortality schedule in effect at the time the annuity is paid. Other companies take the opening date as a reference. According to ACPR,
ImportantInsurance companies do not honor this obligation and use the mortality schedule to date the conversion into an annual salary.
This violation reduces the pension paid to the insured.
Defects that mainly affect old contracts
The ACPR’s annual report highlights other major shortcomings, the consequences of which can be detrimental to policyholders. The organization particularly insists on Profit Sharing Calculation Errors. Compensating money in euros for a life insurance or retirement plan usually increases the insured’s savings each year.
Even if the return on euro money has fallen in recent years, the old contracts offered a rather high reward. Some insurance companies “forget” to account for these returns in their profit-sharing accounts. For ACPR, this practice conflicts with the contractual obligations of the insurance company and the savings manager.
ImportantThe ACPR reports other irregularities related to guaranteed technical rates and compliance with contractual and regulatory cantons.
The insurance cop reminds us that these errors affect the policyholders’ savings performance if they are repeated over a long period. For these reasons, it calls on banks and insurance companies to:
- better Respect contractual obligations ;
- better inform customers ;
- to improve Old savings contracts are easy to read and clear.