As the crisis bites, 40 per cent more people cashed in their life insurance policies in the first six months of this year compared to the same period last year, statistics released by the Insurance Association of Cyprus show.
A total of €111m was redeemed by policy holders between January and June of this year, compared to €79m over the same period in 2011.
“It’s an easy way for people to get money during the economic crisis,” general manager of the association, Stephie Dracos told the Cyprus Mail.
“Banks are no longer giving out loans, the value of land is depreciating and stock prices are falling, so redeeming their policies is a simple option,” she added.
Dracos warned that people should only redeem their insurance policies in cases of real emergencies as “insurance exists to help people out during a problem or difficult time”.
Leading life insurance firms such as Laiki Cyprialife are aware of the trend.
“Given the current economic climate in Cyprus the policy redemptions appear higher than previous years,” said investment manager for Laiki, Chrysanthos Pantazis.
Another reason people are cashing in on their policies is that they simply don’t have the money to continue paying the monthly premiums said Dracos.
Laiki Cyprialife is attempting to help customers maintain their payments by rearranging payment schemes.
“We understand the changes to the financial situation of our clients and we therefore actively offer them various flexible solutions to reduce their monthly payment, while maintaining an adequate insurance coverage for their needs,” said Pantazis.
Although there has been this large withdrawal of cash from insurance companies, Dracos said their large reserves cover them from any losses.
Despite the large increase in life insurance policy cash-ins, the statistics were not all doom and gloom. The total amount of money paid to insurance companies over the first six months of 2012 has risen by 2.21 per cent compared to the same period in 2011. In 2011 over that period, insurance companies received €228.01m compared to €233.05m this year.
“People understand the importance of insurance policies,” explained Dracos. Payments towards insurance policies that cover accidents, healthcare and property for example have risen substantially.
“Because of the rising cost of medicine and healthcare people prefer to pay a little bit more for insurance,” she added.
Source: Cyprus Mail