The German private health insurance market is facing a challenging 2021 as it emerges from the shadow of the pandemic, according to rating agency Fitch.

Speaking at the webinar, European Health Insurance: Compare & Contrast Country Dynamics, Masha Delgoshaei, associate director for Germany, said that one of the main risks for the German health insurance sector in the immediate future will be that of ultra-low interest rate risks:

“The pandemic will prolong the low interest rate environment, leading to more severe price rate adjustments,” Delgoshaei said, suggesting the this will also have a negative impact on coverage, with the knock-on effect that products will become less attractive. These factors, as well as continuing weak economic conditions, will cause new client numbers to grow more slowly.

According to the ratings agency, the sector’s reputation and prospects will also probably be negatively affected by the expected large premium adjustments in full health insurance coverage – expected to be 8% on average for 2021 – needed to offset the impact of ultra-low interest rates.

The comments follow Fitch’s recent report on the German private health insurance market, which suggested that the coronavirus pandemic will only have a limited direct effect on the sector’s profitability in 2020–2021. the pandemic will prolong the ultra-low interest rates environment, leading to price increases.

In Germany, pandemic-related losses were mainly compensated for by the reduced number of other medical visits and non-essential surgery in 2020.

However, Fitch noted, some of these cancelled medical treatments have merely been postponed to 2021, which could lead to higher claims this year. The costs of the latest wave of the pandemic – and any subsequent waves – as well as vaccine-related expenses could also affect claims in 2021.

Fitch also suggested that the economic pressure on many sectors in Germany resulting from the pandemic-related restrictions is likely to temporarily reduce the number of self-employed and freelance workers – the second-largest customer base, after public servants, for important ‘full-coverage’ products.

Speaking more broadly about the pandemic at the webinar, panellists suggested that another looming threat to the European private health insurance market is that treatments that were held back in 2020 as a result of the pandemic could add to the claims burden this year.

Indeed, a rise in expenses is expected across all countries this year, though such a rise will not be even and very much depends on the extent and duration of national lockdowns.

According to the ratings agency, the sector’s reputation and prospects will also probably be negatively affected by the expected large premium adjustments in full health insurance coverage – expected to be 8% on average for 2021 – needed to offset the impact of ultra-low interest rates.