ECB rate hike hits mortgage-linked life insurance
The four interest rate hikes who has attacked the European Central Bank (ECB) so far this year has caused a tightening of access to creditfundamentally for the purchase of housing, and, by extension, has hit linked risk life insurance. According to the data compiled by Mapfre Economics, in the first five months of the year, the volume of premiums reflected negative growth, after years with increases.
So, the volume of Life Risk premiumsWhat are the death protection insurance by the policyholder, they grew by 3.4% in 2022, the same increase that was registered in 2021. The report explains that in the development of demand for the Multi-risk and Life Risk insurance lines are crucial real estate transactionswhich include both sale transactions and mortgage loans. And remember that total home sales experienced an improvement of 6.45% in 2022, although well below that registered in 2021, which was 38.3%, the latter favored by a recovery after the pandemic.
Instead, at the start of 2023 the trend has been reversed and decreases of 2.2% have been recorded. For Ricardo García, director of Analysis, Sectoral Studies and Regulation of Mapfre’s research service, the explanation is related to the change in the ECB’s monetary policy. In his opinion, the rise in the price of money It has made access to credit to buy housing more expensive. Not only because of the rise in the Euribor, which has already broken the psychological barrier of 4% in the monthly rate in June, but also because it has also raised the price of both variable and fixed rate mortgages. And this implies a drop in operations and, therefore, affects this type of insurance and the bancassurance business of the entities. “It is a business that maintains a close relationship with the evolution of credit,” González reiterates.
And it is necessary to take into account that this branch brings together life insurance linked to the contracting of a mortgage in house purchase operations. In this regard, data from the National Institute of Statistics (INE) shows that the sale of homes recorded an accumulated fall of 4.1% up to May.
Instead, from 2019 the issuance of this type of premium had grown by 6.5%. In 2020, in the year of the pandemic, but for other reasons not related to real estate, but as a measure of protection against the disease, It was a modality that had a great penetration in the market, although the high mortality caused a drop in profitability.
rest of branches
As for the life insurance savings, this has experienced a growth of 71.6% in the volume of premiums due to the refusal of banks to remunerate deposits despite the rise in interest rates. This resignation, on the part of the bank, has meant that insurance companies have captured savings through different formulas, but especially through savings insurance. This has allowed the Balance for the life branch for the first five months of the year has been positive closing with an improvement of 53.4%.
As for the Car insurancewhich has been affected by the rise in inflation and the increase in the accident rate, until May the volume of premiums has maintained an upward trendwith an increase of 5.4%, only one percentage point below the total increase in Non-Life lines.
For the insurance of healthMapfre Economics has verified that insurance companies have been forced to pass on part of the general increase in costs to customers in the renewal of the policies, which, in most cases, are carried out in the month of January. This has caused the premiums to increase in 2023, which is motivating a part of the clients to cancel their policies, while another important part begins to make greater use of the benefits. All in all, heThe income from the line follows the growing trend of recent years, with an increase in premiums of 7.3% until May, thanks to the dynamism of Reimbursement of expenses, which grew by 10.4%, and of Health care, which grew by 7.3%.