Personal Finance

Coronavirus: life insurance suffers from poor inflows in April

Net life insurance inflows remained negative in April mainly due to the low payments made. The French Insurance Federation (FFA) invokes confinement which has restricted commercial activity and the number of operations.

Billions of euros more in Livret A, billions less in life insurance. This is the result of two months of strict confinement in the face of the coronavirus and, beyond that, of persistent economic uncertainties which are pushing the French to shift their savings.

Life insurance is the subject of a huge disaffection in the face of the “exceptional period of confinement and uncertainty”, summed up in a press release the French Insurance Federation (FFA), on the occasion of the announces April figures.

Life insurance withdrawals exceeded deposits by 2.1 billion euros, after already spreading by two billion the previous month.

This has been unprecedented since 2011, a year marked by significant economic uncertainty in the midst of the European sovereign debt crisis.

As at the time, each month now sees the total of savings saved on French life insurance melt by several billion euros.

Above all, life insurance is now in the red for the past year: since the beginning of 2020, the amounts saved have fallen by 1.9 billion euros.

The booklet A acclaimed

This contrasts with the other preferred placement of the French, the Livret A. In April, deposits there exceeded withdrawals by more than five billion euros, unheard of, after having already reached a very high level the previous month .

In total, in two months, the amounts saved on the Livret A savings account have increased by some eight billion euros, even though this investment has never been so remunerative. Since February, it has returned only 0.5% per year on the amounts paid, a level lower than inflation.

“The French have saved because they could not spend,” said Eric Lombard, managing director of Caisse des Dépôts, last week.

But the situation has not benefited life insurance, which suffers as usual from crisis situations. This placement appears all the less as a refuge since insurers have been encouraging their clients for years to increase the share of their contracts dedicated to “units of account”, potentially more profitable but also more risky, because they do not guarantee not to lose money.

As such, the disaffection observed in April followed a different movement from the previous month. In March, when confinement began, the French had mostly withdrawn money from their life insurance.

In April, withdrawals were not particularly high. This time it was the deposits that collapsed. While they had been running for more than a year at more than 10 billion euros each month, they stood at 6.5 billion.

Commercial activity restricted by containment

“Containment has restricted business activity and the number of operations,” said the FFA.

Does this mean that the placement will rebound with the lifting of the containment in early May? This is not to be won, because the economic uncertainties will remain and the political and financial authorities are preparing minds for a lasting crisis.

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In this context, authorities and economists wonder about the role of engine or brake that the savings of the French can play in the hoped economic recovery. The challenge is to distinguish money set aside by constraint, for lack of being able to consume, and that actually placed in reserve by worried households.

“The priority issue on the household side, therefore, is confidence, so that they quickly transform this accumulated savings into consumption and therefore into growth”, recently underlined François Villeroy de Galhau, Governor of the Banque de France.

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