An initial survey of German life insurers under its supervision was conducted by BaFin in 2018 in order to contribute to the Evaluation of the German Life Insurance Reform Act (Lebensversicherungsreformgesetz - LVRG) (only available in German). This survey examined the effects of a reduction in the maximum Zillmer rate from 40‰ to 25‰ on the payments paid by life insurers to insurance intermediaries – including employed sales force. New business written in 2017 was used as a basis for this survey. “With a view to the implementation of the Insurance Distribution Directive (IDD) and the new statutory provisions on distribution remuneration¹, BaFin has now updated its survey based on new business written in 2018,” explained Dr Frank Grund, BaFin’s Chief Executive Director for Insurance and Pension Funds Supervision.

Total premiums from new business written in 2018 amounted to €108.4 billion, which corresponds to an increase of 3.6% compared to total premiums of €104.6 billion from new business written in 2017. Acquisition commissions paid by life insurers to remunerate the intermediaries’ successful brokerage rose from €3.9 billion for new business written in 2017 to €4.1 billion in 2018. The average commission rate, i.e. the acquisition commission expressed as a percentage of total premiums, therefore increased slightly from 3.77% (2017) to 3.82% (2018).

In addition to acquisition commissions, insurance intermediaries may receive payments for services that extend beyond those involved in brokering insurance contracts, e.g. remuneration for portfolio management. These other payments to intermediaries rose from €0.7 billion in 2017 to €1.0 billion in 2018 and therefore clearly showed a more marked increase than acquisition commissions. Total payments to intermediaries, i.e. acquisition commissions plus other payments, corresponded to 4.72% of total premiums written in 2018, up from 4.49% in 2017.

Acquisition commissions can be paid either immediately or as deferred payments. Deferred payments are, for instance, acquisition commissions paid on an ongoing basis during the period of premium payments. Commissions paid immediately rose from €2.8 billion (2017) to €3.2 billion (2018), whereas deferred commission payments decreased to €1.0 billion in 2018, down from €1.1 billion in 2017. “From the policyholders’ point of view, this trend is regrettable since deferred commissions may serve to increase the quality of the advisory services offered,” said Dr Grund. “This decrease is noteworthy because earlier on, during the evaluation of the LVRG, we observed a rise in deferred commissions – which was in fact the intention behind the LVRG.”

Saving products accounted for the majority of new business written in 2018; here the average commission rate was 3.25%. For some intermediaries, however, acquisition commissions received corresponded to an annual average of over 7% of total premiums. Insurance intermediaries who received acquisition commissions amounting to an annual average of over 2.5% of total premiums written for brokering saving products in 2018 accounted for 61.89% of total premiums for new business relating to these products. A number of these intermediaries, accounting for approximately 30% (28.23%) of total premiums, received acquisition commissions corresponding to an annual average of over 4% of total premiums written for the brokerage of saving products.

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