New life insurance products and product complexity in Germany

The development of less complex products with low capital requirements becomes increasingly important for European life insurers. Products are often difficult for customers to understand and, therefore, typically require time-consuming consultations with intermediaries, which can lead to high distribution costs. Furthermore, Solvency II introduced high capital charges for products with traditional guarantees. The aim of this paper is to analyze whether life insurers in Germany have been able to address these challenges in recent years via their product strategies, with a particular focus on product complexity. The analysis is based on a comprehensive empirical study of 347 product introductions in the German market from 2009 to 2015, and it offers insights for companies in other markets facing similar challenges. The results suggest that insurers reduced capital requirements by introducing savings products with reduced/alternative guarantees, whereas the product complexity (measured by the number of product alternatives and attributes) strongly increased.