They are images of unprecedented devastation, with those affected hesitatingly reporting how their existence was washed away in minutes and desperation was written on their faces. And then there is a ritual that repeats itself with unsightly regularity after every natural disaster in Germany: state and federal politicians arrive, they are photographed, and they promise non-bureaucratic aid to all microphones. Insurers promise to quickly compensate injured customers.
But after a few months it turns out that the aid is by no means unbureaucratic and does not reach many victims. And some insurers are quite stubborn when it comes to settling claims. This is followed by another debate as to whether landlords should not be required to take out insurance against such elementary damages.
Stop the ritual
Impressed by the devastating floods in Rhineland-Palatinate and NRW almost eleven months ago, the federal states now want to break this deadlock and take noticeable consequences. More than 180 people were killed and billions of property damage – mostly uninsured. That is why the federal states are now asking the federal government to consider introducing compulsory insurance for buildings in hazardous areas by the end of the year.
Problem: Simple building insurance is not enough to protect yourself against floods and other so-called natural threats. Homeowners need additional insurance for this. But only half of the homeowners have purchased protection. Climate change is expected to increase the risk of severe storms.
But which way is right is hotly debated. While private insurers also believe that more homeowners should take out natural hazard insurance, they believe compulsory insurance is wrong. Instead, the GDV lobbying association promotes its own concept: in the future, the underlying risk should be included in the standard when purchasing building insurance – unless customers explicitly wish to exclude this risk. Then they would clearly have to take responsibility if something happened.
All homeowners should get new contracts
If the association has its way, this should apply to existing contracts as well, and insurers should change them in time. “Insurers contact their customers in writing and inform them about new contracts and future premiums,” says managing director Jörg Asmussen. Clients can then accept or object to new contracts. “But because all building insurers do this, we need an interim bill from the federal government.”
Asmussen believes that the potential scope of compulsory insurance is much smaller as the constitutional report of the Minister of Justice delineates the limits of such a measure. “For example, if there is only one obligation for buildings in risk areas, then only 1.5 percent of private homes in Germany would be affected,” says Asmussen.
In Germany, there is already compulsory insurance – in motor third party liability insurance. Every vehicle owner needs such insurance. However, it only covers damage caused to third parties, unless you are fully insured. The situation is different with possible compulsory insurance for building owners, critics complain: It is not about the risk of harm and possible abandonment of third parties, but about the risk to own property. This is another reason why the insurance lobby is against it. Such a serious intervention is not warranted because milder alternatives are available.
Homeowner associations are also against compulsory insurance. “Compulsory insurance, as Baden-Württemberg has now pushed through, is not an option for us,” says Ralf Schönfeld, director of the Haus & Grund private landowners association in Rhineland-Palatinate. The federal state, including North Rhine-Westphalia, was particularly strong than the lows Bernd met. The reason for the refusal is that homeowners have already had to contend with a large number of regulatory requirements.
However, the association is not against the insurance itself, it explicitly encourages homeowners to take out basic damage insurance. “We strongly recommend that you take out such a policy,” emphasizes Schönfeld. Instead of coercion, Haus & Grund relies on voluntary risk prevention. Schönfeld sympathizes with the opt-out concept envisaged in the insurance industry’s proposal. “And anyone who chooses to opt out of protection will opt out of state support,” explains Schönfeld.
This is to ease the burden on the state, which is often forced to use taxpayers’ money to help those affected by major natural disasters. For those downstairs Bernd The federal and state governments have created a € 30 billion recovery fund for the damage caused.
Get out of the Samaritan dilemma!
The Insurance Federation, an association representing the interests of insurance customers, is one of the proponents of compulsory insurance. Also because his observations show that many building owners are unaware that the risk of natural disasters is not covered by basic building insurance. “BdV expects politicians to free us all of the Samaritan dilemma and find a comprehensive, mandatory solution now,” said BdV board member Stephen Rehmke.
The association proposes that the Länder establish a risk pool to cover the basic damage risk, which all building owners should finance through a real estate tax subsidy. Homeowners who have taken out private insurance should be exempt from the subsidy and participation. At the same time, the proposal provides for the support of homeowners in the search for adequate protection against natural hazards. An independent comparison portal is to be set up for this purpose.
There is little enthusiasm for this at the GDV insurance company. “I believe our overall concept is the best in the market,” said Asmussen CEO. The insurance solution itself does not reflect the topic from the association’s point of view. He criticizes that prevention and adaptation to the effects of climate change have played too little role so far. GDV requires additional construction measures and a construction ban should be issued in hazardous areas. “In the Ahr Valley, for example, all but 34 houses will be rebuilt in their original locations,” criticizes Asmussen. “Sometimes it is enough to put the house on a pedestal.”