Natural Risks

Conference of Ministers of Justice brings clarity – compulsory insurance scheme debate ended

The Conference of Ministers of Justice today in Stuttgart announced its opposition to the introduction of a compulsory insurance scheme for natural risks. Rather than compel people to obtain coverage, the Ministers prefer to encourage the public to purchase insurance on a voluntary basis: accordingly, government aid to victims of flooding will only be available to those who made an adequate effort to obtain insurance for themselves in advance. In order to make the public more sensible of the danger posed by natural risks like flooding and heavy rain, the Ministers propose a nationwide educational campaign. There is also to be a national portal in which Germans can obtain information about their individual risk potential, as well as preventive measures and insurance options.

Today’s decision by the Justice Ministers is a clear signal to the public to protect themselves from natural risks. “The best protection that people can get is prevention together with insurance. Insurance coverage alone does not prevent disaster,” says Alexander Erdland, President of the German Insurance Association. The resolution brings clarity to the intense discussion which took place in the wake of the 2013 summer flood with regard to the introduction of a compulsory insurance scheme. Similar recommendations to those made by the Justice Ministers have already been made by the conferences of Environmental and Finance Ministers.

Education and prevention reduce weather-related losses

Although German insurers can insure practically all buildings against natural risks, insurance density is currently at just about 40 percent. Many homeowners are not sufficiently aware of their own vulnerability to natural risks, particularly flooding. To change this, it will be necessary to heighten the public’s awareness of natural risks. “Only those who know the risks can and will obtain adequate protection,” says Erdland. For this reason, the insurance industry supports the policy initiative for a nationwide educational campaign and a natural risks portal.

In addition, preventive measures need to be strengthened in order to avoid damage. This is a challenge for the federal government’s flood control policy above all, which is to be realigned with the new national flood control plan. But municipalities also need to act. They should no longer authorize construction in at-risk areas and should take steps to prepare sewer systems for future heavy rain events.

Following the 2013 flood, German insurers settled 140,000 claims for a total of 1.8 billion Euros and in the year 2013 as a whole, they paid out around 7 billion Euros in benefits for claims as a result of natural events.