Thelife insurance is a form of insurance. The original purpose of life insurance is to guarantee the payment of a certain sum of money (capital or annuity) when an event related to the insured occurs: his death or his survival. However, a distinction should be made between insurance in the event of death known as “death insurance” which pays out the capital or annuity in the event of death and insurance in the event of life (also called life insurance), which pays a capital or an annuity in the event of life at the end of the contract (if death before maturity nothing is due to the inheritance)(1).
What is commonly called “life insurance” in France is a death insurance contract (capital paid in the event of death before the end of the contract) with “counterinsurance”, that is to say the reimbursement of premiums. paid during the term of the contract in the event of the life of the insured at the end of the contract, and possibly increased by the technical interest provided for in the contract. This makes it possible to present a quasi-savings product, endowed with the tax advantages of insurance. It is also possible to buy back your contract before maturity.
Life insurance also allows funds to grow while pursuing a long-term goal: retirement, a real estate investment, etc. It also offers significant tax advantages in matters of inheritance.(2).
A life insurance contract must have a fixed term at subscription, renewable or not depending on the contracts by extension from year to year.
Death insurance has long remained illegal: the Grand Ordinance of the Navy considers them as “condemned and against good morals” (Book III Chapter VI Article X) because they make one wish the death of the one from whom it is taken. In English-speaking countries, they may exist in the form of wager, which also slows down their distribution because they are suspect(3). In France, a Royal Life Insurance Company was created in 1787(4), but it is ephemeral; it was not until a decision of the Council of State in 1818 to authorize long-term death insurance.
The history of life insurance is expressed through forms such as tontines and annuities. These are conventionally evaluated by an Ulpian law(5) but it was Johan de Witt who was the first to evaluate them by the mathematical expectation of the present values of future sums to be paid(5).
Actors present(edit | modify the code)
- The subscriber: in an individual contract, it is the natural or legal person who takes out the life insurance contract directly with a life insurance company to cover certain risks, and who pays him premiums in return. He has the right to choose the beneficiaries of the annuity or of the capital in the event of the death of the insured;
- The insured: this is the person on whom the risk is based (death), he must be consenting for insurance in the event of death, it is he who fills out the medical questionnaire if necessary;
- The beneficiary: in the event of life the subscriber is generally the beneficiary, in the event of death the beneficiary is the one designated by the subscriber. He can be designated directly (surname, first name), indirectly (spouse, children, etc.) or be an accepting beneficiary. Note that in this case the accepting beneficiary will also sign the life insurance contract; the subscriber will then no longer be able to modify the beneficiary clause without his agreement. Since the decree of , the subscriber can redeem his contract without the acceptance of the accepting beneficiary. In addition, a clause appearing outside the contract is also valid (on a will or deposited with the notary by notarial deed). The beneficiary can be both the insured and the subscriber;
- The insurer: It is the legal person which undertakes to pay the capital or the annuity provided for, in accordance with the clauses of the contract, provided that the contributions have been duly paid by the subscriber. Only insurance companies set up in the form of public limited companies or mutual societies with fixed contributions can carry out life insurance operations. Life insurance contracts must be taken out with them(6).
- The broker, intermediary between the insurer and the subscriber when the contract is not marketed directly.
Investment supports(edit | modify the code)
There are two types of contract in France:
- contracts in euros or monosupports: they are only invested in funds in euros;
- multi-support contracts, which include both:
- one or two funds in euros
- units of account (or units of account), invested in particular – depending on the units – in shares of:
These investment vehicles are themselves mainly invested in stocks, bonds, or real estate investments.
Euro funds(edit | modify the code)
Euro funds are often mainly invested in bonds, sovereigns or corporate(7), by the contract insurer. Each year, the euro fund is revalued by a certain return called profit sharing. This annual return depends on the financial performance of the assets of the euro fund (invested by the insurer). In practice, profit sharing is reduced (or supplemented) by reservations made by the insurer to smooth the performance of the fund in euros from one year to the next.(8). In addition, profit sharing also contains a very small part guaranteed by contract, called the technical rate (or minimum guaranteed rate).
The sums paid and capitalized on the fund in euros are guaranteed by the insurer as part of a “ratchet effect”: excluding management fees, the amount of the fund in euros cannot fall. In return for this security, the gains are generally limited; in fact, the insurer must therefore mainly invest the fund's sums in euros in low-risk and low-volatility assets – therefore in particular good quality bonds (which the issuer, considered to be safe, will undoubtedly reimburse but with a profitability limited).
Some so-called dynamic euro funds may be partly or mainly invested in real estate assets(9) in order to curb the fall in bond yields (in a low interest rate environment), and thus provide better performance than “traditional” euro funds. In addition, some insurers require that payments on dynamic (or even conventional) euro funds be accompanied by a certain percentage invested in Unit-linked (10).
So-called “Eurocroissance” funds were created in 2014 and then modernized in 2020; in order to improve the returns of funds in euros by reducing the investment constraints weighing on insurers, they guarantee the paid-up capital only partially and only beyond a certain number of years, rather than completely and at all moment. Complex and unconvincing yield, they have not been commercially successful(11).
Account units(edit | modify the code)
The units of account available on multi-vehicle contracts, which can be financial assets of any type, are chosen by the insurer for each contract. Their number varies greatly depending on the contract, from one to several hundred. The sums invested in units of account are not guaranteed and therefore present a risk for the subscriber. The only exception: structured products, some of which have a capital guarantee at maturity.
There has been a new type of support in life insurance contracts in recent years: SRI funds, eligible in life insurance contracts. They offer to invest in companies that meet the criteria of sustainable development. The units of account offered are then managed according to financial but also extra-financial criteria (social, environmental, governance).
The insured is not the owner of the financial instruments, he only chooses the investment methods for the premiums he has paid to the insurer. One consequence is that he is not obliged to invest in whole units of UCITS, SCPI, etc. The insured can therefore invest in his contract (in the form of Units of Account) fractions of units of UCITS or other instruments, which can thus be small amounts (for example a few tens of euros for a UCITS or SCPI data whose size on the one hand would be several thousand euros). It is the insurer who is the real owner of UCITS units.
The insurer being the owner of the financial products corresponding to the Units of Account housed in the contract, it also guarantees the insured the liquidity of these Units of Account if the latter wishes to disinvest.
Ownership of funds(edit | modify the code)
In general on the life insurance contract, the insured only designates the investment terms of the premiums he has paid to the insurer. Consequently, the insured has a form of claim on the insurer (in fact, indeed insurance) both in euros (funds in euros) and in number of Units of Account (whose value in euros is not guaranteed). It is the insurer who is the real owner of the financial instruments (therefore euros, UCITS, SCPI, and others). The assets of the contract therefore do not belong to the insured.
There is a contract almost similar to life insurance, but the difference being that it does not constitute insurance but rather a claim and persists in the assets of the subscriber (who is therefore no longer an insured): the capitalization contract (whose tax particularities are therefore different, may be the subject of a donation and forming part of the estate assets).
In the event of an insurer's default, life insurance and capitalization contracts are protected by a Guarantee Fund up to € 70,000(12) for all contracts of an insured with the same insurer.
Management methods(edit | modify the code)
The subscriber can choose between several management modes offered in multi-support contracts:
- free management: the subscriber chooses the funds in which he will invest
- streamlined management: the subscriber chooses a typical static distribution of assets according to a few profiles pre-established by financial experts, from the most prudent to the most dynamic
- horizon management: the allocation between asset classes is made by financial experts who choose the values and allocation of assets (stocks, bonds, etc.) according to the profile determined by the insured, following a pattern depending on the age of the subscriber, very risky at the start then more and more secure when the contract comes to an end
- management under mandate or managed: the insured completely delegates the management of his portfolio to a professional according to his investor profile. Historically reserved for high-end contracts, this management method is tending to become more democratic, particularly among Internet contracts.
Collective or individual contracts(edit | modify the code)
Most of the contracts offered on the market are said collective : the insured is represented to the insurer by an association of insureds. Any change in the contract is then made by negotiation between the insurer and the association. In contrast, contracts individual are passed directly between the insurer and the subscriber, and any change to the contract can therefore only be made with the prior consent of the subscriber.
Although an individual contract is therefore more secure for the subscriber, it can increase the risk of the insurer giving up on regularly modernizing its contract (adding new investment vehicles, new services, etc.).
Fresh(edit | modify the code)
The usual fees in a life insurance contract are often expressed as a percentage of the sums invested and can be:
- payment fees, also called entry fees, paid only once at the time of payment and representing a percentage of the funds paid;
- administrative management fees, paid annually on account sums;
- arbitration fees, paid in the event of a change of investment vehicles in a multi-support contract;
- administration fees, which remunerate the act of administrative registration of the contract. These are rare.
In addition, on the unit-linked part, the costs specific to the chosen investment vehicles must be added. It is generally the most important layer of costs (from 0.8% to 2.5% per year depending on the media). Part of these costs can be retroceded to the insurer.
In France, the emergence of online brokers and banks has encouraged the emergence of low-cost contracts, often with the elimination of entry fees, and management fees of 0.5% to 1% per year depending on the contracts and depending on the media. Likewise, arbitration fees are often free for Internet contracts.
Tax system(edit | modify the code)
In France, the tax regime for life insurance has been particularly advantageous but has, however, experienced significant restrictions over the last few years.
Gains from a life insurance contract are taxed, only in the event of surrender (withdrawal of funds), total or partial. They are calculated at pro rata sums withdrawn: by redeeming 10% of the total of the contract, taxation will only be made on 10% of the interest generated since it was opened (the contract being considered as a single global set, the details of the gains or losses between funds and UC is not taken into account).
Social security contributions (17.2% in 2020) on earnings are due in addition to taxation in all cases and without deduction.
For contracts opened or payments made since 1998, the taxpayer can opt either for inclusion in the income tax of his earnings, or for a lump-sum deduction, which can be discharging (before 09/27/2017) or mandatory (on earnings from payments made after 09/27/2017).
|Less than 4 years||(no)|
|Between 4 and 8 years old||(no)|
|Over 8 years||4,600 € per year (9,200 € for a married or civil partnership)|
|Contract age||Rate (until 2017)||Rate (after 2017)||Abatement|
|Less than 4 years||35%||12.8%||(no)|
|Between 4 and 8 years old||15%||12.8%||(no)|
|Over 8 years||7.5%||7.5% (earnings on the first € 150,000 paid)|
12.8% (earnings on the following € paid)
|4,600 € per year (9,200 € for a married or civil partnership)|
The reduction of € 4,600 (on the fraction of the withdrawal corresponding to the earnings, the fraction corresponding to the payments is not taxed) is acquired regardless of the choice of taxation (IR or withholding tax) for all of the taxpayer's contracts. To avoid tax, it is wise to make an annual withdrawal whose interest does not exceed the amount of the allowance. In addition to this imposition of social security contributions (CSG and CRDS of 17.2% in 2018) withdrawn either annually on a contract in euros (since July 2011), or at the time of a redemption on multi-vehicle contracts (which is more advantageous, because this allows the interest not withdrawn to continue composing).
As part of the reinvestment of savings via arbitrage, no tax on the amount of savings arbitrated applies(13).
There are circumstances of redemption which exempt from taxation: dismissal, early retirement, invalidity of 2e or 3e category. The exempt event must take place in the fiscal year of the buyback.
A life insurance contract entered the base for the solidarity tax on wealth before its abolition. Unlike a tax envelope like the PEA, there is no payment ceiling or restriction on withdrawals or payments.
In the event of a life annuity, it will be subject to income tax for 70% of its amount if it is started before age 50, for 50% from 50 to 59, for 40% from 60 to 69 years, for 30% at 70 years and over. It will also be subject to social security contributions.
The tax regime for life insurance is different for French people living abroad (expatriates). In this case, there is in most cases an agreement between France and the country concerned to avoid double taxation on the interest. There is also a lower tax on inheritance for French non-residents who have opened a non-resident life insurance contract.
Estate regime(edit | modify the code)
When opening a life insurance contract, the subscriber can designate one or more beneficiaries. The beneficiaries can be members of his family (spouse / PACS partner, children, nephew, niece, etc.) or other people (partner, friend, etc.) Legal persons are also a possibility (association, political party, religious institution, foundation, etc.).
In the event of the death of the insured, the beneficiaries receive all of the capital with inheritance tax which depends on:
- the opening date of the contract
- the premium payment date
- the age of the subscriber
These different cases are summarized in the table below:
|Payment of premiums||Subscriber's age||Contract signed before November 20, 1991||Contract signed as of November 20, 1991|
|before October 13, 1998||before the age of 70||total exemption of transferred capital||total exemption of transferred capital|
|after the age of 70||The income from the premiums paid is exempt, taxation of the premiums paid under the conditions of common law beyond net payments exceeding € 30,500. For the spouse or partner of a Pacs: Tepa law = exemption from inheritance tax.|
|after October 13, 1998||before the age of 70||Abatement of 152,500 € on the capital transmitted to each beneficiary and taxation of 20% above on 700,000.00 €, taxation at 31.25% beyond. Following the implementation on August 21, 2007 of the Tepa Law(14), the surviving spouse and the PACS partner are exempt from all inheritance tax.||Abatement of 152,500 € on the capital transmitted to each beneficiary and taxation of 20% above on 700,000.00 €, taxation at 31.25% beyond. For the spouse or partner of a Pacs: Tepa law = exemption from inheritance tax.|
|after the age of 70||The income from the premiums paid is exempt, taxation of the premiums paid under the conditions of common law beyond net payments exceeding € 30,500. For the spouse or partner of a Pacs: Tepa law = exemption from inheritance tax.|
The sums transmitted on death are made without inheritance and without taking into account the inheritance reserve provided for by the civil code. Life insurance is therefore a preferred product for transmitting, without inheritance costs in most cases, part of the estate to people who are not heirs (for example to the partner, at the expense of the spouse whose not divorced), while donations between third parties are subject to a 60% tax, or to favor one heir at the expense of others. But in these particular cases, it is better to consult a specialized lawyer, especially if the sums involved are large.
Unclaimed life insurance contracts(edit | modify the code)
In most cases, finding the beneficiary of a life insurance contract does not pose any difficulty. In fact, for 80% of contracts, it is the subscriber who receives the capital or the annuity himself. For the remaining contracts, more than 80% of the beneficiaries are the spouse or children of the insured, which eliminates, in almost all cases, a problem of finding beneficiaries.
The cases where the insurer may encounter some difficulties in identifying the beneficiary therefore remain extremely rare. These are generally atypical beneficiaries (a person outside the family or a legal person, for example). The sum of these unclaimed life insurance contracts would reach 700 million euros, according to a survey by the French Federation of Insurance Companies (FFSA). This sum represents 0.06% of the total life insurance outstandings (which reached nearly € 1,620 billion).(15)).
In parallel with this estimate of dormant capital, let us underline the much more pessimistic one contained in decision 41 of the Attali report.(16) January 2008 (co-signed by Claude Bébéar, founder of Axa) which estimates the amount of dormant funds between 10 and 30 billion euros.
Since March 2009, insurers have been able to consult the INSEE file on natural persons to facilitate their research and find out about the possible death of the insured.
For their part, people who think they are beneficiaries of a life insurance contract can contact, since 1er May 2006, at theAGIRA (association for the management of information on insurance risk). This body, responsible for centralizing requests, detected 4,301 life insurance contracts for an amount of 334 million euros. Using AGIRA(17) is free.
The amount of unclaimed life insurance contracts is progressively allocated to the Pension Reserve Fund.
- To know more
- The law of December 17, 2007, adopted on the initiative of the deputies Yves Censi and Jean-Michel Fourgous, and whose rapporteur was Éric Strauman(18).
- The law of December 15, 2005, setting up the Agira(19).
In France, the life insurance market represents 40% of savings(20), for an outstanding amount of 1656 billion euros at the end of June 2017(21). Life insurance outstandings have grown significantly over the years: in 1981, investors' savings placed on life insurance in France represented 102 billion francs (15.6 billion euros).(22).
Life insurance groups(edit | modify the code)
The leading life insurance groups in France are by contribution amount in 2013 and as a percentage of the French market(23) :
- CNP Assurances: 18.7 billion euros in contributions in 2013 (15.8% of the French market)
- Agricultural credit: 17.9 billion (15.1%)
- Mutual credit: 10.9 billion (9.2%)
- BNP Paribas: 9.9 billion (8.3%)
- Axa: 9.3 billion (7.9%)
- Societe Generale: 8.3 billion (7.0%)
- Generali: 5.8 billion (4.9%)
- Allianz: 5.3 billion (4.5%)
The sector is also covered by a number of local players and CGPIs (Independent Wealth Management Advisors). Remunerated either by fees (real independence) or by retrocessions (partnership) by life insurance groups, they are distributed over the territory. The terms of their remuneration appear on their engagement letter. Unlike life insurance groups, they offer the contracts of several companies and base their analysis more objectively than commercially. They complete the sales system of life insurers who have their own agencies and sales forces, agents or general agents.
In terms of the amount of money managed in 2014 (more than 1.5 trillion Euros in total) and as a% of the French market, the top 10 life insurance groups in France which manage 1.2 trillion Euros (80 % of total) are(24) :
- CNP Assurances: 271 billion euros (18.2% of the French market)
- Agricultural credit (via Predica / Spirica): 228 billion (15.2%)
- Axa: 120 billion (8%)
- BNP Paribas Cardif: 112 billion (7.5%)
- Mutual credit (via ACMN, Suravenir and ACM Vie): 111 billion (7.5%)
- Societe Generale (via Sogécap): 85 billion (5.7%)
- Generali: 78 billion (5.2%)
- Aviva: 72 billion (4.8%)
- Allianz: 67 billion (4.5%)
- AG2R La Mondiale: 56 billion (3.7%)
Contracts(edit | modify the code)
There are more than 450 life insurance contracts in France. A census carried out by an independent body(25) there are 473 which can be divided as follows:
40 internet contracts (the management of which is offered exclusively online)(edit | modify the code)
- Of these 40 contracts, 14 have a fund in euros with a performance greater than 14% over the period 2006-2008.
- Of these 14 contracts, 12 have no payment fees.
- Of these 12 contracts, 6 had a return in 2008 of at least 4.5%.
433 traditional contracts (managed by an agency with an advisor)(edit | modify the code)
- Of these 433 contracts, 148 have a fund in euros with a performance of over 13% over the period 2006-2008.
- Of these 148 contracts, 36 had a yield in 2008 of at least 4.5%.
The performance of a life insurance contract reflects that of its carriers.
- The performance of single-asset contracts (100% in euros) or euro funds of multi-asset contracts, driven by inflation, is largely based on government bond yields. With the fall in rates, the yields of funds in euros have continued to decline to fall below 3.5% in 2010 as evidenced by a record over the decade 2000-2010. According to the FFSA, the average return on euro funds was 3.4% in 2010.
- The performance of multi-vehicle contracts combines the performance of the fund in euros and that of unit-linked funds (Sicav or FCP) within the framework of free management whose underlying are the equity and bond markets; management profiles in the context of profiled or managed management; mandates within the framework of management under mandate.
It is important to know the rate of return net of management fees, and this is how it is reported by insurers; indeed the expression of the rates in “Gross” would hide these costs which reduce their value.
- What is life insurance? on economie.gouv.fr
- Ronan Yhuel, ”How does life insurance work? “, sure NeoBanking.co, (consulted the October 8, 2019)
- Zelizer, Viviana (1979). Morals and Markets: The Development of Life Insurance in the United States, Columbia University Press.
- Kang, Z. & Thiveaud, J.-M. (1995) “Savings, retirement, ideal foresight” Financial economics journal, november p. 65-93.
- See “Construction of insurance premiums”, in Risks, n ° 81-82
- ”Life insurance “, Sky Eden, (read online, consulted on November 7, 2016)
- ”Life insurance: where does the money from funds in euros go? “, sure MoneyVox News (consulted the January 31, 2020)
- ”Funds in euros: the reserves of insurers always better endowed “, sure MoneyVox News (consulted the January 31, 2020)
- ”Life insurance: the best euro funds are … real estate “, sure MoneyVox News (consulted the January 31, 2020)
- ”Life insurance: why and how insurers push you to take risks “, sure YourMoney.fr, (consulted the January 31, 2020)
- Sarah Asali, ”Life insurance: will Eurocroissance (finally) convince savers to forget about the euro fund? “, sure Capital.fr, (consulted the January 31, 2020)
- ”Presentation of FGAP – FGAP – People's Insurance Guarantee Fund “, sure fgap.fr (consulted the 1er february 2020)
- Life insurance taxation
- Law on Labor, Employment and Purchasing Power
- ”Life insurance: net inflows at breakeven in September 2016 | French Insurance Federation “, sure ffa-assurance.fr (consulted the November 28, 2016)
- “For the liberation of growth”
- See Information of the beneficiary and payment of the capital on www.service-public.fr
- Law n ° 2007-1775 of December 17, 2007 allowing the search for beneficiaries of unclaimed life insurance contracts and guaranteeing the rights of policyholders, www.legifrance.gouv.fr
- Law No. 2005-1564 of December 15, 2005 on various adaptation provisions to Community law in the field of insurance, www.legifrance.gouv.fr
- Danièle Guinot, ”Life insurance: new tax tightening “, sure lefigaro.fr, (consulted the December 2nd 2013)
- French Insurance Federation, ”Life insurance: positive net inflows in June 2017 “, Site,
- Gilles Pouzin, ”Assurance-vie, stop ou encore ? », sur Le Monde,
- FFSA, données clés Assurance de personnes, 2013, p.9
- Ces 10 portefeuilles d'assurance-vie qui pèsent 1.200 milliards d'euros, CBanque, 22 septembre 2015
- Référencement des contrats d'assurance-vie en France effectué par le magazine Les Dossiers de l’Épargne