Savers put much less money into their life insurance policies in 2020: 116.3 billion euros, compared with 144.6 billion euros the previous year. This behavior is directly linked to the Covid-19 crisis, but also to life insurance fees, which are particularly high for certain players.
What you need to know about life insurance fees
There are many fees applied to life insurance policies. Depending on the distributor, the insurer, the funds used and the management method chosen, investors can see the return on their life insurance policies impacted to a greater or lesser extent.
Among the applicable fees, there are the payment fees, which sometimes correspond to the entry fees. These are deducted each time the saver pays into the contract. They are used to remunerate the insurer, who passes on a portion to the distributor (bank, broker, general agent or financial advisor). Regulations limit them to 5%.
Arbitration fees may apply in the event of an internal change to the portfolio. These vary according to whether the arbitration is requested by the policyholder (referred to as on-demand arbitration) or automatic arbitration (arbitration triggered automatically according to changes in the value of a fund or portfolio).
Management fees are calculated on the basis of an annual rate, depending on the value of the contract. They are used to remunerate the management companies, insurers and contract distributors. In the long run, even with a modest percentage, these fees can amount to considerable sums.
Last but not least, transaction fees and exit fees need to be considered. These apply when the subscriber invests in "atypical" funds, or when he recovers the fruits of his investment.
Life insurance: who charges the least?
The encouraging performance of a life insurance policy should not obscure the fact that it comes with high charges. In the 4th edition of its life insurance observatory, CLCV has calculated the average fees applicable to different types of contract. Results: "traditional" insurers have the heaviest hand, with entry fees averaging 4.5 or 5% and annual management fees of at least 1%. Next come products sold by bank subsidiaries. Pay-in charges are often between 3 and 3.5%, while management fees are around 0.8%.
Mutual insurers appear to be the most competitive players. With MAAF, Macif and MAIF, for example, entry fees fall to 2-3%. Management fees remain very low, at 0.5% for euro funds, and a maximum of 0.8% for unit-linked products. Online offers are also among the least costly, as contracts are generally sold without any payment charges and with limited management fees.