067 OUTLOOK GROUP MANAGEMENT REPORT Chap. 2 against the previous year to 1.5 percent, any stimula- tion in the wake of the positive economic development might be obstructed by keen competition in property and casualty insurance, market saturation and, above all, the impact of political reforms. Again, the general improvement of the economic situation will only have a limited influence on the busi- ness development of life insurance in 2008. Despite rising income levels it is not to be assumed that private households will give up their reticence towards assum- ing long-term obligations, although the acceptance of products of private provision for old age has been steadily growing. In this area, insurance products are increasingly facing the competition of fund products. With the coming into force of the final withholding tax in 2009, competition is expected to intensify in this field. It still remains to be seen what will be the reper- cussions of the Insurance Contract Act (VVG) com- ing into force in 2008. As a matter of principle, the improvement of the position of customers should have a positive impact on new business. The dynamic development of the so-called Riester and basic pension covers should continue. Additional growth momentum is to be expected from premium adjustments under the fourth Riester incen- tive step. Without this extraordinary item, however, new business will probably witness a merely moderate expansion. The market expects new business growth of 4 percent. It is generally assumed that the trend towards unit-linked pension insurance will continue. As a whole, the GDV anticipates an increase in life insurance premium income of approx. 2 percent in 2008. Pension schemes and pension funds are not assumed to make a noticeable contribution to growth and therefore this forecast applies to life insurance in both its narrower sense and including pension schemes and pension funds. Private health insurance is expected to remain the line with the strongest growth in the year 2008. New business will, however, only be moderately dynamic as the new legal rules make it more difficult to switch to private cover. For the portfolio of business in force, rising healthcare costs will have an impact on premium development, but premium adjustments in the course of the year are anticipated to be only moderate. Sup- plementary covers will probably continue to witness growth. Although the share of this business in premium income is continuously rising, it only has a marginal impact on the overall premium development. All in all, a growth of 3 percent is forecast for private health insurance. In this context, however, it has to be taken into consideration that it is still difficult to assess the impact of the healthcare reform passed by parliament in 2007. A high degree of market saturation and persistent price competition in an increasing number of business lines continue to curb premium growth in property and casualty insurance. Only in some areas will the eco- nomic improvement lead to rising demand for insur- ance in 2008. Against this background, the industry anticipates a stagnation of the premium development in property and casualty insurance. Within the indi- vidual business lines, however, varying developments are expected: while for motor insurance a further 2 percent decrease in premium income is anticipated, the GDV foresees slight premium growth in private property insurance (in particular homeowners and householders), personal accident and legal expenses insurance. In Germany, the environment continues to be favourable for property construction. There is a low interest level, coupled with stable prices for construc- tion and for real property. Consumers, however, remain reluctant to invest. This is also illustrated by the strong decline in the number of construction permits. The building-society sector sees business per- spectives in the growing market of alterations and modernizations in the wake of rising energy costs and demographic changes and given the fact that it is envisaged to include residential property among the investments to be encouraged by incentives under the Retirement Income Act. The market again expects rising premium growth for life insurers +2% The dynamic development of Riester and basic pension business will con- tinue in 2008