Not all savers have rediscovered a taste for life insurance, as shown by the July 2020 figures recently published by the Fédération française de l'assurance (FFA). In fact, for the 5th consecutive month, the market recorded an outflow of 500 million euros.
Outflows have been negative since March
The life insurance market is struggling despite the end of confinement. The net outflow between June and July was around 500 million euros. In July, the French deposited 10.4 billion euros in their contracts, slightly more than the 9.9 billion euros recorded in June. However, these figures are still lower than those for the previous year: 13.4 billion euros deposited in July 2019.
According to FFA data, outflows have been negative since March. In March, April and May 2020, outflows were close to 2 billion euros per month.
Euro-denominated investments hardest hit
Guaranteed-capital euro funds, very popular with savers just a few years ago, seem to be the hardest hit. Low interest rates are weighing on their attractiveness, dragging yields down. Facts & Figures estimates that the rate paid on euro funds in life insurance policies will be between 1% and 1.10% in 2020. What's more, insurers are now encouraging their customers to take out unit-linked policies, which are riskier but also offer higher returns.
Finally, these poor figures can be explained by the operational difficulties associated with the health crisis. Containment forced many distribution outlets, notably bank branches, to close their doors. Today, it remains difficult to take out a life insurance policy remotely.
One-third of contributions paid into unit-linked products
Since the beginning of the year, a third of contributions (or 3.5 billion euros) have been paid into unit-linked products, proving that the proportion of savings collected in these vehicles continues to grow. This flow has been fuelled by the gradual locking-in of euro funds, as well as by new managed products such as the Plan d'Epargne Retraite (PER), which has met with considerable success, and the Plan d'Epargne pour la Retraite Collectif (PERCO).
One thing is certain: the less restrictive and more secure Livret A and Livret de développement durable et solidaire (LDDS) have benefited from this outflow. The two regulated passbooks recorded net inflows of 2.5 billion euros in July, and 28.6 billion euros over the first 6 months of the year. The months of April and May reported quite spectacular inflows, of 5.4 and 3.9 billion euros respectively, amounts not seen since January 2013 (8.2 billion euros).