More than three decades after reunification, people in East Germany still have GDR insurance policies. Insurers are trying to convert the old contracts into new ones. Does that make sense?
Household insurance is typical of an old GDR insurance policy – a bundle of personal liability, household contents and luggage insurance. Some residential building insurance also dates back to the time before 1989. It was widespread and often offered protection against elemental risks such as natural disasters and floods, which is no longer offered in newer contracts. These policies were particularly life-saving during the Oder floods in 1997 and the Elbe floods in 2002.
After reunification, many people took this insurance with them to a new provider. Fabian Herbolzheimer, insurance and finance expert at the Saxony Consumer Advice Center, knows that new policies, especially in the area of natural hazards, are either very expensive or that some buildings in at-risk areas are no longer insurable at all.
In the GDR, houses were insured if they were half in the Elbe, Herbolzheimer quoted a now retired homeowner as saying. Today, it is difficult to insure a house if it is on the Elbe. But what should owners do with an old GDR insurance policy – keep it or change it?
The State Insurance Company of the GDR was a state-owned insurance company based in Berlin. It was the only provider for private customers and had a monopoly on various types of insurance, including life and accident insurance, as well as motor liability and comprehensive insurance. After reunification, Allianz took over the private customer divisions and renamed the State Insurance Company of the GDR “Deutsche Versicherungs-AG” and “Deutsche Lebensversicherungs-AG”.
Over time, insurers try to convert old contracts into new ones, reports Jasmin Trautloft, head of the consumer protection center in Plauen. “Those affected often react with uncertainty and increasingly ask us whether a change could have disadvantages,” says Trautloft.
However, changing insurance can make sense if it results in cheaper premium rates or a wider range of benefits. However, property owners should take a closer look at the old GDR residential building insurance policies. Consumer advocates advise property owners to keep their insurance, especially if they live in a flood zone or in a region where other natural hazards are a threat.
“If you are thinking about switching, you should only cancel your old insurance once the new contract has been concluded. Otherwise, you may find yourself without insurance cover for your home,” says financial expert Herbolzheimer.
In the residential building insurance policies from the GDR era, often only the material damage that occurred was insured. If the house is damaged, however, further costs arise, for example for the removal and disposal of rubble. There are now policies that include significantly more benefits than the old tariffs. Hotel accommodation costs that arise due to an apartment or house being uninhabitable can also be insured.
In addition, a new contract can insure risks that were not included in old contracts due to technological advances. Anyone who has a photovoltaic system installed on their roof, a charging station for electric cars or a heat pump in their basement should definitely renew their policy.
A key product of state insurance during the GDR era was household insurance. More than 95 percent of all households in the GDR had one. The Association of Insured Persons explains the high market penetration by saying that household insurance included contents insurance for private households, liability insurance and travel luggage insurance. Liability insurance covered all private risks that could have occurred.
According to the BdV, the old GDR insurance contracts have many insurance gaps according to today’s insurance standards. For example, the waiver of defense in the case of gross negligence is often missing. This means that the insurance company can reduce or refuse benefits if the damage was caused by gross negligence.
However, with this clause, the insurance company undertakes to settle the claim in such cases as if there had been no gross negligence. The Saxony Consumer Advice Center therefore advises that you should read the small print on old GDR insurance policies. In particular, in the case of natural damage such as flooding, storm surges or the risk of landslides, it is important to clarify up to what amounts the insurance will pay.
Take your time when changing contracts and do not sign immediately. It is advisable to read the contracts carefully and, if necessary, have them checked by an independent expert or consumer advice center.
