Drivers in Germany see soaring car insurance costs

Comparison portal Verivox said that insurance firms have increased their premiums for the second year in a row to make up for the rising cost of repairs. 

Around 70 percent of car owners in Germany with a fully comprehensive policy - which covers damage to both a third party and their own vehicle - said they had received notice of a price hike, according to a survey conducted in January. 

Among car owners who have only taken out the legally required third party liability insurance, just over half (52 percent) reported that they had received an increased premium.

In general, premium increases are particularly steep for new drivers due to the risks involved and lack of driving history.

As a result, premiums should fall sharply in the first few years of driving in Germany. According to the Verivox survey, however, the premium still increased for 55 percent of 18 to 29-year-olds, while it remained the same for 27 percent.

Long-term customers have usually brought in a fair bit of income for their insurers, but companies do not differentiate between loyal and newer customers when allocating higher premiums. Even among respondents who have been insured with the same company for more than 10 years, 83 percent were affected by the increases, Verivox reported. Among drivers who have been insured with the same company for around one year, the figure is roughly the same at 82 percent.

Experts say that most drivers accept the price hikes instead of trying to switch insurers.

"Drivers have several options to counteract premium increases,’ said Wolfgang Schütz, Managing Director of Verivox. "In addition to switching to a cheaper insurance company, they can also switch to a different tariff from their current insurer."

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Hidden price hikes

Apart from the obvious price increases, an average of one fifth of car owners across all types of insurance received an indirect price increase, according to the survey. This is because insurers did not grant a higher no-claims bonus even though the car owners in question had not reported an accident or other claim in the previous 12 months.

"If you drive accident-free for a year, you rise in the no-claims class and actually get a higher discount. The premium then falls," said Schütz. "If the insurer does not take this discount into account, it is a so-called hidden price increase."

Only eight percent of those surveyed reported a reduction in premiums.

To compile the information, market research institute Innofact surveyed 1,005 people between the ages of 18 and 69 across Germany in mid-January on behalf of Verivox.

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Motor vehicle policies are loss-making business for many insurers

The findings from the survey are in line with recent predictions for the insurance industry.

In September last year, the German Insurance Association (GDV) predicted that the industry would post a deficit of up to €2 billion with motor vehicle policies this year.

The insurance association has been saying for several years that the cost increases for car repairs are far higher than the general inflation rate. One major factor is the rising price of spare parts and workshop costs.

Experts predict that drivers will see more insurance hikes in the coming years. 

Vocabulary

Premiums - (die) Prämien 

Insurance - (die) Versicherung

Price increase - (die) Preiserhöhung

No-claims bonus - (der) Schadenfreiheitsrabatt

counteract - entgegenwirken 

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