Customer Preferences in German Life Insurance Savings Products: A Conjoint Analysis Approach

Guaranteed interest rates and capital guarantees have been standard features in life insurance savings products in German-speaking countries. Life insurers sold products with interest rate guarantees up to 4% in the 1990s and still had an average guaranteed rate of about 3% in their in-force books in 2014. Since savings contracts are long-term contracts, the duration of such policies typically exceeds the duration of the insurers’ assets. Thus, the current low-interest rate environment has increased pressure on the profitability of life insurers. As a consequence, insurers are developing products with alternative return schemes and moving away from fixed interest rate guarantees. This raises the question to what extent guaranteed interest rates and capital guarantees are valued by the customers and if these features can be compensated for by other benefits like higher expected returns or alternative investment profiles. To provide an answer to this question, we analyze data from a unique representative market study of the German population carried out in Germany in 2014. Based on a choice-based conjoint analysis, we estimate individual part-worth utilities through the hierarchical Bayes model. Our main findings include that the guaranteed capital amount is the attribute affecting customer preferences the most. Further, participating life insurance products offering guarantees are always preferred even if alternative products without guarantees offer expected returns that are more than three times higher. Such results are highly relevant for the developing life insurance business

Profitability and Growth in Motor Insurance Business – Empirical Evidence from Germany

Over recent years, the German motor insurance business has faced significant changes, including a growing importance of direct insurance offerings. Motor insurance products are offered by a wide range of insurers, with companies differing in terms of legal status, size, product portfolio, distribution strategy and operational efficiency. Furthermore, one distinguishes between two main products, namely motor third-party liability (MTPL) and motor own damage (OD). In our research, we analyse to what extent the characteristics of the companies can explain the premiums, the total claims costs and the operating expenses per contract in MTPL and OD. For our analysis, we use panel data of insurance companies, offering motor insurance products in Germany, for the years 2002–2014. The panel data provide almost full market coverage. In our study, we apply different statistical tests and multilinear regression models. We show that mutuals relate to lower premiums, lower total claims costs and lower operating expenses per contract when compared to listed companies. In addition, direct insurance companies get along with lower premiums and lower operating expenses per contract compared to traditional companies selling via agents or brokers. Furthermore, we find major differences related to the range of the product portfolio, the size of the motor business, the dominance of the motor business within the non-life business, and the calendar year. Our results are relevant to academics and practitioners alike and help to better understand the German motor insurance business

Balancing growth, profitability and safety in the German insurance market

The contribution of this paper is to provide an improved understanding of the relationship between the three strategic objectives growth, profitability and safety of insurance companies in Germany. Extending on the work by Eling et al. (2017), we introduce measures and provide descriptive statistics for each objective. Our numerical analysis relies on panel data of German insurers for the years from 2001 to 2016 providing almost full market coverage. We apply different statistical tests and multilinear regression models to test how and to what extent the objectives are related. At the same time, we control for the legal status, the size of the insurance business and the calendar year. Regarding the total insurance market, our results suggest a positive and significant relationship between growth and profitability and a negative significant one between the safety level and profitability. Further, mutual and public insurers relate to lower growth and higher safety levels than listed companies. For the business volume, we find that larger companies tend to grow at a lower rate when compared to smaller companies while achieving higher profitability but lower safety levels. The results per business line show that life insurers yield significantly different results from non-life insurers. Thus, we separately analyze and discuss the results for the life and the non-life sectors