Over the first 6 months of the year, French households saved massively via the Livret A passbook. The Covid-19 crisis has reinforced their traditionally cautious behavior, encouraging them to dip into their life insurance policies.
Fourth consecutive month of outflows
Since March, the French have been gradually turning away from life insurance. Average monthly outflows have reached 2 billion euros in recent months, the highest since 2011. In June, the sector suffered its 4th consecutive month of net outflows, bringing the total outflow since the start of the year to around 5 billion euros.
Other figures revealed by the federation: insurance companies collected 54 billion euros in contributions during the first half of 2020, compared with 74 billion euros over the same period in 2019.
Closure of branches and sales outlets
The life insurance market suffered from the health crisis on several levels. Firstly, to curb the spread of the virus, most bank branches closed their doors during the containment period, making it difficult to take out a life insurance policy. In fact, this type of subscription and online payments are not yet fully rooted in French habits.
Building up precautionary savings
The coronavirus crisis has given rise to fears and economic uncertainty. As a result, the French largely turned to precautionary savings. According to the Observatoire français des conjonctures économiques (OFCE), 75 billion euros were saved in the 16 weeks following the outbreak. Savers favored the Livret A and LDDS passbook savings accounts, products that reached record levels in the 1st half despite their low yields: 26.13 billion euros in deposits, including over 20 billion euros in the Livret A.
The Fédération française de l'assurance considers this to be "bad news" for the economy. "All the billions that are going out the door are billions that are not being invested in companies," says Florence Lustman, President of the FFA.
A gradual return to normal
The figures show that June could mark a slowdown in outflows. Indeed, gross inflows in June stood at 9.9 billion euros, compared with 6.4 billion euros in April and 5.7 billion euros in May. By way of comparison, in June 2019, gross inflows had reached 12.2 billion euros.
Insurers can be reassured on another point: the good performance of unit-linked products. Whereas during previous economic crises, the French shied away from risky investment vehicles, causing unit-linked inflows to plummet, this time their behavior is different. Unit-linked sales remained stable, accounting for 35% of total sales in June.