German Households Overestimate Their Insurance Coverage for Natural Hazards

A large proportion of the German population fears an increased threat from extreme weather events such as floods, storms, hail or heat waves as a result of climate change. In a national survey of German households, carried out by the Mannheim Centre for European Economic Research (ZEW) in summer 2014, 97.2 per cent of the participants claimed to have experienced such a natural phenomenon. Damages as a result of extreme weather were reported by 40.8 per cent of the participants. There is, however, a clear discrepancy between the coverage which households expect from their insurance policies and the actual extent of coverage provided, in the event of flood damage and similar weather-related damage.

Around one quarter of households thus expect to receive financial support from the government in the case of flooding. There is, however, no legally binding framework on which to base this claim, and therefore, those affected often have no other option than to make claims on a private insurance policy. Indeed, more than 70 per cent of survey participants expect to receive financial support from their insurance company in the event of damage.

Of the home owners surveyed by ZEW, 61.9 per cent claimed to have comprehensive home insurance covering any damage caused by natural hazards. Around one quarter reported having a "simple" insurance policy which does not cover such events. While 3.5 per cent admitted to having no home insurance at all, 9.5 per cent of the home owners surveyed were not sure whether or not their insurance policy covers damage from natural hazards. Compared to figures held by the German Insurance Association (GDV), the share of households that claim to be insured against damage from natural events is surprisingly large. The proportion of German households which are actually insured against such events is only about 34 per cent.

The study reveals a very similar situation when it comes to contents insurance; 44.4 per cent of the surveyed participants claimed to have contents insurance that covers damage from natural events. According to GDV, this actually only applies to 20 per cent of households. To this effect, the coverage provided by insurance policies tends to be overestimated.

This finding is all the more relevant, given that more than three quarters of participants believe that the likelihood of suffering flood damage in Germany is set to increase. More than half of the households surveyed by ZEW also expect an increase in damages resulting from other extreme weather phenomena (heat waves, hail, storms) in comparison to current levels.

In total, more than 6,500 households in Germany participated in the study, which was carried out as part of the research project "Eval-MAP". The project is a joint effort between ZEW researchers and scientists from RWI in Essen (Rheinisch-Westfälisches Institut für Wirtschaftsforschung), Ruhr University Bochum and the University of Kassel. The project receives financial support from the Federal Ministry of Education and Research (BMBF) as part of the funding programme "Economics of Climate Change".

For more information please contact:

Dr. Daniel Osberghaus, Phone +49(0)621/1235-205, E-mail osberghaus@zew.de