The Austrian Association of Insurers (VVO) urges a united response to tackle demographic shifts and escalating climate-driven natural disasters, whose impacts on Austria are deep and long-term. The insurance industry, as a partner to the state, can play a central role in addressing these challenges.
Here are the arguments presented by VVO, which are, in fact, relevant to most markets.
Austria is facing significant challenges: demographic change, pressure on the state pension system and natural disasters as a result of climate change will have far-reaching effects on the social and economic structures of our country. In order to make Austria fit for the future, innovative and sustainable solutions are needed. Insurance companies can play a central role in this and, as a partner of the state, contribute to overcoming these challenges.
"As a society, we are currently facing many challenges here in Austria. The state budget has to cope with more and more burdens - be it the increasing need for pensions or the payments from the disaster fund following the extreme weather events of this summer. As an insurance industry, we have many proposed solutions to make Austria fit for the future," emphasizes Mag. Rémi Vrignaud, President of the Austrian Insurance Association VVO.
EcoAustria: Structural adjustments necessary for the future
An analysis by the EcoAustria Institute for Economic Research shows the areas of action that will continue to put public budgets under great pressure in the future: demographics and climate change. In 2070, life expectancy for men will rise to 86.3 years, and for women to 90.2 years. This will extend retirement periods by around five years in each case. This will mean that the ratio of average pension to average wage will fall from the current 56 percent to 45 percent in 2070. The consequential costs of weather changes and climate change will increase many times over. Various scenarios predict a four to eight-fold increase in 2050 compared to 2010. In addition to damage caused by river floods, climate change will also cause high costs for the energy industry, health care, forestry and tourism.
Prof. Dr. Monika Köppl-Turyna, Director of EcoAustria, summarizes: "Climate and demographic change bring major changes for the Austrian economy, especially costs for public budgets. These changes require an adjustment of structures."
Area of action for old-age provision: Strengthening the 2nd and 3rd pillars as a way into the future
The state pension is the first pillar and thus the cornerstone of the pension system. However, due to demographic developments, it is coming under increasing pressure. Every fourth euro of government spending already goes into pensions. This dynamic will intensify. Life expectancy is increasing and at the same time the proportion of the population of working age is constantly decreasing. While there are currently around 50 people of non-working age for every 100 people of working age, in 2060 more than 70 out of 100 people will be of non-working age. A quarter of the total population will then already be over 64. This means massive additional burdens for the public budget, especially in the areas of care and pensions. The individual pension gap, i.e. the difference between the last earned income and the benefit from the state pension insurance, is continuing to widen. Without private provision, many people face poverty in old age. For most people, the usual standard of living is no longer guaranteed by the state pension alone.
In the long term, company and private pension provision can make a significant contribution to the security of society in Austria. Life insurance guarantees protection and help in difficult life situations. Life insurance offers financial security for the family in the event of death or in the event of strokes of fate such as disability, occupational incapacity or need for care. Almost 30 million euros are paid out to Austrians in benefit payments every working day - a value that could be further increased through incentives. The positive effect of this is that purchasing power is strengthened and prosperity in Austria is preserved.
Studies show that people underestimate their own life expectancy by an average of seven years. The cost of living in old age is also underestimated. In this context, individual pension provision is becoming more important in order to secure the standard of living in old age. They also relieve the burden on the state pension system by offering additional financial security.
Field of action: natural hazards and climate change: location investments and insurance solutions
Insurers are among the largest investors. Through targeted investments and location investments, they are able to mobilize capital for measures related to climate change.
Extreme weather events are becoming more frequent and their consequences more drastic, as the floods of September 2024 showed.
To financially protect the population, we need natural disaster insurance that is sustainable and socially acceptable. The insurance industry's proposed solutions are on the table - what is missing is political implementation.
Necessary framework conditions
"The insurance industry is a key pillar of the Austrian economy. It stands for stability and helps to secure the livelihoods of many people in Austria. Insurers see themselves as partners of the state. In order to continue to be able to fulfil this responsible task in a future-oriented manner, however, improved framework conditions are also needed," says Mag. Christian Eltner, General Secretary of the Austrian Insurance Association VVO.
In view of these developments, rapid and consistent action by all parties is necessary to ensure that prosperity and social balance in Austria are secured in the long term. The necessary framework conditions include:
Retirement provision:
- Halving of insurance tax in life insurance
- Valorization of future security to 1,200 euros
- Private pension provision NEW
- Creating incentives for sustainable life insurance
Natural hazards:
- Natural hazards insurance: The VVO advocates a model in which natural hazards coverage is linked to fire insurance.
As a major investor and employer for around 190,000 jobs that are secured directly or indirectly by the insurance industry, the insurance industry reliably strengthens Austria as a business location and secures investments in uncertain times.
