Legal, illegal, don't give a shit – the legal fraud of life insurers
Guest comment Axel Kleinlein, Federation of the insured BdV
The phrase "legal, illegal, don't give a damn" is part of the collection of sponti slogans from the 80s. The Hamburg punk band Slime even made a song of this title in 1982.
And in exactly the same year an association was founded, which had nothing to do with punk. But with another slogan around the legality on itself drew attention: The federation of the insured ones.
The BdV, provoked with the slogan "Life insurance for retirement is legal fraud". And he is still right when he says that. And basically, life insurers could be accused of the other forms of increase as well…
Of course, terms like "illegal" or "fraud" are pretty hard stuff when you accuse one of the most powerful financial industries of doing just that. The BdV was allowed to determine that also quite soon.
Because the insurance industry was pretty quick to ban talk of "legal fraud". But did not make it. In the end, the judges confirmed that freedom of expression allows it.
I think that the term "legal fraud" is not only covered by the freedom of speech, but that the basic idea behind the retirement provision offers of the German life insurance has actually quite a lot of fraud – but is unfortunately also legal.
Unlike forty years ago, the fraud character has even increased. Meanwhile, there are three different fraud components that are intertwined:
"The classic legal fraud with surplus participation"
The classical life insurance pretends to be a savings product. It appears that the customers are paying in money. The money would be invested in an account similar to that of a bank. And there would be an annual surplus participation – similar to interest – which would be credited.
But this is not true.
Because first the deposited money is divided between the insurance mediators, the insurance enterprise and the insured ones. The bottom line is that out of 100 euros that the or. the insured person has transferred, there may still be 75 euros left over, which can be paid into their or the insurer's pension fund. whose names are invested.
Sometimes the investors then even make profits with this money. And then they go to the insured?
Under certain circumstances, perhaps, if the chief mathematician and the board of the insurance company think it is right, some of these profits can be credited to the policyholders at a later date.
When, how and in what amount this happens, the insurance companies have a lot of freedom. There is no automatism, on which reliance would be.
The insured are therefore led to believe that they are taking out a savings contract that works in a similar way to a bank. In fact, this is not the case at all, and insurance companies have plenty of leeway to shortchange customers.
This can already feel like fraud.
This has been the case for about 150 years and the laws allow it. That's why it's legal. Together, therefore, this is "legal fraud" – and it has accordingly been around for a very, very long time. So also already in 1982, back then, when the BdV was founded.
"The legal fraud with life expectancy"
About 25 years ago, many consumers and even some politicians realized that the classic endowment life insurance was quite a rip-off.
Therefore, the insurance lobby then developed a new legal fraud. This involves private pension contracts, Riester pensions, Rurup pensions and many pensions from occupational pension schemes.
In order to get the customers' money, the actuaries, the insurance mathematicians, calculate with a particularly high life expectancy for these pensions. If the amount is particularly high, the money saved at the beginning of the pension has to be spread over a longer period of time and the pensions are significantly lower.
In the event of death, the arithmetically outstanding pensions are then suddenly released as so-called risk gains, and the insurers are allowed to help themselves to some of them. The higher the life expectancy calculated by the insurers, the higher the risk gains and the poorer the pensions. And the insurers can push the life expectancy as far as they want, there are no limits.
It sounds like fraud, it feels like fraud, but it is not, because it is legal according to the law and the supervisory authority.
"The fraud of unsecured guarantees"
Time and again, insurance intermediaries pretend that the guarantees in the insurance products are really safe. But they are not.
Because they are now only maintained across the board in that the surpluses (i.e. the "interest", as it were) are used to back up the guarantees. There are so approximately 100 billion at surplus, which are withheld over this way at present the insured ones.
It's like a bank telling you that you'll get interest on your savings account, but you won't get it back. But they would have to be deducted again immediately, because you have a savings book, where the money may not become less.
Sounds stupid! It is also. And this also feels like cheating.
An unfair surplus system, calculation with far too high life expectancies and miscalculation of guarantees at the expense of the insured – all legal!
But all this feels like cheating, so illegal.
And that only shows one thing: insurers simply don't give a damn about their customers.
Actually I don't like punk. But when Slime play "legal, illegal, don't give a shit", it's an ode to life insurance. There one can dance then also times with gray hair Pogo.