Financial protection: insurance investment

In fact, the combination of insurance solutions and financial products offers the possibility of combining together return opportunities (i.e., asset enhancement) with protection from all risks (death, injury, illness, or property damage) that threaten the economic well-being of a person and his or her family.

Insurance products are widespread in Italy, so we want to try to see together all their merits and potential.

To understand this, a premise must first be made: the insurance industry is primarily divided into two major branches: The Non-Life Branch and the Life Branch.

All policies that protect against certain risks borne by the insured, for example, that of suffering an injury, illness, death, natural disaster, fire to the home, or traffic accident, are part of the non-life class.

The policyholder pays a sum of money (premium) and the company agrees to provide compensation or assistance if the event covered by the insurance occurs.

The other major area that makes up the insurance market is the Life Insurance Branch, which groups all policies taken out by savers for investment purposes, that is, to create financial capital for themselves. That is, the policyholder pays a cash premium that is then invested by the company and revalued over time.

The most popular life insurance policies in Italy are of two categories: those of Branch I that invest in Separate Accounts, that is, special financial management created by insurance companies, with assets that are composed of government bonds and other high-quality, low-risk bonds.

Also in life insurance, another popular product category is Unit Linked policies (or Branch III policies), which invest the policyholder's capital in a basket of mutual funds, which can be of various types, for example, money market, bond or equity (for those seeking more return opportunities in the medium and long term).

In recent years, multi-branch policies have also become popular, combining the return opportunities offered by unit-linked policies with the capital protection provided instead by segregated funds.

Also part of the multi-branch policy category is BG OLTRE, which invests policyholders' money in 3 thematic internal funds: PEOPLE, PLANET, and DIGITAL TRANSFORMATION, which have a focus on social, environmental issues and a vision that enhances the dynamics of digital transformation and the impact of new technologies on a rapidly changing, long-term society.

Those who subscribe to the policy can diversify their investment with a customized allocation to different funds and allocate a predefined amount, equal to 10 percent of the premium paid, to separate management.

Internal funds have time-varying composition with the goal of timely risk control while Banca Generali supports the manager with a targeted advisory service.

Thus, risk control is an important element in insurance investments.

In our country, policies are undoubtedly widespread however there are some product categories that are not appreciated as they deserve. This is not the case with life insurance policies, which in 2021 collected around 111 billion euros in Italy (Ivass data) with a growth of 5.9 percent compared to last year, confirming themselves as financial products that are much loved by savers.

Much less substantial, however, were the premiums earmarked by Italians in 2021 for non-life insurance, amounting to 39 billion euros (+2.9 percent year-on-year). However, if we exclude motor liability policies (which are compulsory by law for motorists), the figure for non-life premiums drops to 23 billion euros.

This is well below 2 percent of GDP, compared with 3 to 5 percent in major European countries, not to mention the United States where it is as high as 7 percent.

Yet, the risk protection provided by policies also has a very important function in protecting assets and financial wealth. Consider, for example, the important function of a death-risk policy, which insures a lump sum (even a large one) for the insured's children and heirs in the event of premature death, which can result in a very heavy loss of income for the family.

The same goes for an accident and illness or fire and burglary policy, which usually protect one of the largest components of the family's assets, namely the property owned by the family. In the case of Life Branch policies, however, there is another important element to note. The capital accumulated with policies of this type enjoys certain tax and regulatory advantages.

In fact, the accrued capital is by law seizable and unseizable by any creditors and is exempt from inheritance tax as well. For this reason, Life policies are particularly suitable for managing the generational transfer of wealth, that is, the transfer of assets between one generation of the family and the next, from parents to children to grandchildren. Finally, without forgetting that Life policies also allow for the naming of possible beneficiaries outside of the legal heirs, thus allowing for flexibility in inheritance practices.

Patrizia Contaldo, professor at Bocconi University and head of Observatory on Insurance Market, clearly explains why Italians are an "under-insured" people. "At the basis of this gap with many other foreign countries," she says, "there is a mix of factors of a mainly cultural nature." First of all, Contaldo points out, it should not be forgotten that consumers in our country have a relationship with the insurance world linked above all to Rc Auto policies, which are compulsory by law.

Which has contributed to a widespread perception in our country of insurance as a "sort" of tax to be paid even unwillingly, without really perceiving the importance and benefit of having coverage against certain risks.

Moreover, in a country like Italy where the national health service offers universal and free coverage, the insurance culture has undoubtedly spread to a lesser extent than in foreign countries such as the United States, for example, where the population has always been accustomed to protecting itself privately against certain personal risks, primarily against loss of health. "I think, however, that after the outbreak of the Covid-19 pandemic," Contaldo says, "some significant signs of change have emerged, which have also been accentuated by recent geopolitical tensions that have raised the need to protect oneself against adverse events."  For the Bocconi professor, there is still a problem of poor financial culture in our country, which is then also reflected in an insurance culture gap with the rest of Europe.

However, the new generations of millennials, who have grown up in the digital age, now unquestionably show greater sensitivity to these issues.