Personal Finance

Life insurance in euros: when your money benefits other policyholders (and vice versa)

Because of the rules on profit sharing, not all insured persons are necessarily lodged in the same boat.

Whether it’s taxation or how it works, life insurance rules are relatively complex. In fact, policyholders rarely master all the subtleties. The case of profit sharing is a good example. Not all policyholders know this, but because of the profit allocation rule, it may happen that the money of one works in part for the other.

Distribution not necessarily egalitarian

The insurance code requires insurers to repay a minimum share of the profits made: 85% of the financial profits (from investments made with the funds of the insured) and 90% of the technical profits (difference between the costs invoiced and the real costs). But this “profit sharing” is appreciated at the level of the company and not at the level of each insured.

Thus, as soon as he pays back the minimum imposed, an insurer can very well adjust the results served by the same fund with a view to favoring certain contracts, offering a bonus to larger outstandings or encouraging customers to invest more in units of account. France Mutualiste, for example, paid between 1.62% and 2.12% in 2019 to the same fund in euros depending on the exposure of policyholders to units of account.

A distribution spread over time

It should also be noted that the distribution of this minimum share does not necessarily have to be immediate. In order to secure the future (and / or to smooth performance over time), the insurer may decide to put part of its profits in reserve by setting up a provision for profit sharing (PPB).

Recently, insurers have even been strongly encouraged by the authorities to increase these reserves. According to estimates by the specialist Good Value for Money, this pocket amounted to 3.83% of outstandings at the end of 2018.

Of course, these reserves also belong to the insured. But they belong to them collectively. So you can’t ask for your share if you buy your contract. The only constraint imposed here on the insurer is to return the provision no later than 8 years after its establishment. And of course, only the insured persons still present at the time of the return can benefit from it.

In other words, whether through the modulation of rates or through that of the reserve rules, certain policyholders may see part of the performance achieved thanks to their payments escape them or, conversely, benefit from the performance generated. by other people’s money …

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