AUSTRIA - Traditional life insurance sales are on the decline while insurance-based pensions investment fund solutions are growing fast, the Austrian federation of insurers (VVÖ) said.
Austrian insurers have seen their offerings for hybrid investment and insurance products grow by 24.9% over the last year while classic life insurance products only grew 2.9%.
The hybrid products tend to be 40% invested in equities and offers a guarantee on the contributions made.
But Herbert Fichta, chief executive, told journalists at a meeting in Vienna today "people want to take risks with their investments".
But he added: "But that will change again when the wounds they suffer on the capital market are becoming bigger."
He said many people were already asking for guarantees on their capital - "but that costs".
Fichta noted "insurance companies are currently moving away from their traditional role of offering fully guaranteed products" such as a classic life insurance in order to satisfy people's demand for investment products.
"But I am only saying that as I am the outgoing CEO of the federation," he noted.
Günter Geyer, head of the Vienna Insurance Group, will take over from Fichta from July, as he is retiring after two years in the position.
The federation noted it expects private retirement provision to continue to be the fastest growing part of business in 2008.
However, in order to really boost both second and third pillar retirement provision several changes to taxation and regulation of the products would be needed, the VVÖ argued.
Similar to demands from the Pensionskassen industry, the insurance companies want the EET tax model to apply to all contributions to retirement provision.
At present, only employers are not paying taxes on contributions, but employees are still required to do so.
Furthermore, the VVÖ would like to make it possible for each individual member of a Pensionskasse to switch to an insurance-based occupational pension provider without the whole company having to select one product or another.
"Of course, this would also allow people with an insurance provider to change to a Pensionskasse should they wish to take more risk," said Louis Norman-Audenhove, general secretary of the VVÖ.
Both representatives noted these demands have been on the table for a very long time but no government has so far wanted to realise them.
"I don't know why for example the EET model cannot be realised in Austria," said Fichta.
"It is the simplest solution and exactly what we currently have for first pillar contributions."
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