Why Do Germans Love Insurance So Much?
hamburg fire map
A map of damages of the Hamburg fire of 1842.

Why Do Germans Love Insurance So Much?

Summary:

Many expats are surprised by the number of insurance policies Germans usually have. So why do Germans love insurance so much? History has some answers.

Last week, we had the pleasure of speaking with Jenna from Life in Dusseldorf to answer some common expat insurance questions. She started off by asking our insurance expert Kyle perhaps the most basic question of them all: “Why do Germans love insurance so much?”

You can check out his answer here:

But Jenna’s question really got us thinking about the German relationship to insurance. Many expats are at first overwhelmed by the sheer number of insurance policies that are recommended for newcomers, and by the widespread acceptance of them in German society. For example, while 85% of Germans have personal liability insurance, standalone personal liability policies aren’t usually available in the US—they’re usually looped in with renter’s insurance (which only 34% of US renters have) or under “umbrella” homeowner’s insurance policies (which only around 10% of US homeowners have). And while nearly 50% of German households have legal insurance, most of our expat customers have never even heard of it. 

So where does this widespread love for insurance come from? First of all, it’s hard to deny that insurance at its core is just a good idea. This collective approach to risk mitigation provides peace of mind—and the more people buy into the system, the cheaper the policies are. (That’s why you can get personal liability insurance for under €50/year, for example.) 

A history of coverage

But this concept is nothing new—in fact, many of the types of insurance we sell today have been common in Germany for centuries. Here are a few things you may not have known about the longstanding German tradition of having “an insurance for everything”: 

hamburg fire map
A map of damages of the Hamburg fire of 1842.
  1. Germany has the oldest public health insurance system in the world: The origins of the Krankenkassen (public health funds) can be traced back to the founding of the German republic. In fact, the first German health insurance bill was passed into law in 1883, under Otto von Bismarck. Under that law, members of certain professional groups (e.g. metal workers, shipyard workers and power plant workers) were required to join a Krankenkasse. At the time, this requirement applied to only about 10% of German workers, but the legislation laid the groundwork for the current social insurance scheme. 
  2. Beer brewers were the first to pool their risk: The first known fire insurance in Germany was the brainchild of brewers in Hamburg. Because breweries had particularly high risk of fire, a number of brewers began drawing up “fire contracts” as early as the 1590s. In 1676, the city of Hamburg was the first place in Germany (and indeed the world) to create an official insurance body to protect property owners against fires.
  3. The Great Fire of London sparked the commercialization of the German property insurance market: One September evening in 1666, a fire that started in a bakery rapidly engulfed large swathes of London. In the years that followed, Londoners struggled to rebuild—and quickly realized that the previous risk management strategies (mainly based around church donations) weren’t cut out to cope with these massive damages, estimated at around £1.5 billion in today’s money. In 1680, London’s first property insurance company was established, and others quickly followed. A decade later, one in 10 houses in London were insured. This concept of property insurance began spreading throughout Europe and was widespread in the German principalities (though largely administered by English firms) by the early 1800s. 
  4. German life insurance has its roots in Polish church records: For centuries, churches were the main keepers of life and death records in Europe. But the meticulous records of a pastor in Wroclaw, Poland, helped English astronomer Edward Halley create what was essentially the first life insurance table. After further work by statisticians, the first known life insurance company—with established rates based on the likelihood of mortality—was established in London in 1762. Aristocratic circles in Germany began adopting the concept around 25 years later

With centuries of insurance knowledge under their belt, we think it’s safe to say the Germans might be onto something! Interested in learning about your insurance options? Get a personalized recommendation today.

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