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Germany

Privacy Worries Cost German Drivers Higher Insurance Rates

Young driver in Germany
Young driver in Germany
Herbert Fromme

COLOGNE — Germany’s leading car insurance company, HUK Coburg, may be set to join the automobile coverage revolution. Beginning next year, the company will offer its customers so-called "telematics tariffs," which feature lower premiums for those who agree to have their driving behavior remotely monitored via a special high-tech black box in their cars.

The practice has been used in several other countries and, though the Dusseldorf-based bank Sparkasse Direkt already experimented with it in 2014 to gauge interest, Germany is a special case because of particular concerns about privacy.

The economic benefits are hard to deny. Today, a typical 18-year-old driver registering a Volkswagen Golf pay annual liability insurance rates of at least 1,500 euro. But if the same driver were to have a telematics tariff, with the necessarily electronic monitoring device in his car, that insurance premium could be reduced by more than 400 euros.

These offers already exist in countries such as Britain, Italy, Ireland, and the United States. Germany has been notably late to this insurance innovation. Sparkasse Direkt last year finally equipped the cars of 1,000 customers with the special devices and rewarded the customers who displayed a cautious style of driving. The insurance companies AXA and VHV are also now expected to follow suit.


But the majority of German car insurance companies are still holding back. As opposed to Italian or British counterparts, German consumers are more concerned about data protection and are not willing to tolerate the permanent monitoring of their style of driving — even if this were to save them money.


But the doubts felt by most insurance providers towards this practice probably won't last. HUK Coburg, which is the leading car insurance provider with more than 10 million insured vehicles, has confirmed its interest in such policies and others inevitably are expected to follow suit.

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Headquarters of HUK-Coburg in Germany Photo: HUK Coburg

Here is an overview of the idea behind the concept: A black box or comparable system is installed in the car and determines the location of the vehicle via GPS, as well as constantly measuring the speed of the vehicle in comparison to the relevant speed limit in the area. The black box also registers how abruptly a driver brakes, and how he drives. The gathered data is transmitted constantly via radio to a data collection point.

The British way


With Sparkasse Direkt this is an external service provider, that analyzes the data and calculates a score. If the driver has a low score, the insurance premium goes down. The insurance provider only receives the scores, not the individual data, which remains with the external service provider, which in turn only knows the black box ID number but has no data concerning the customer. The customer is able to retrieve the data on the distance traveled and his/her score. This, the insurance company believes, secures the privacy of the customer sufficiently.


In Britain, other more intrusive methods exist. If a young driver is on the road between the hours of 11 pm and 5 am, he is immediately liable to a fine of 100 pounds, which the insurance company collects immediately. Such fines will not be introduced by insurance companies in Germany, whose main selling point is the reduced rate. The Hanover insurance provider VHV is offering a discount of 30% for recently qualified drivers. But the black box, that will have to be plugged into the cigarette lighter of the car, costs 130 euros, a cost that the customer has to bear.


"Cars nowadays already collect a vast amount of data and will collect even more in future," says Klaus-Jürgen Heitmann of HUK Coburg's board of directors. "The question now is if the insurance providers are going to be enabled to gauge the potential risks better by utilizing this data."

AXA chose a different path, deciding not to install specialist equipment. "Anyone who owns a smartphone and uses our app can avail of the special tariffs," says Daniel Schulze Lammers who is responsible for car insurance at AXA. The app monitors driving behavior. Those who sign up for the app will receive a general bonus and a credit entry depending on how they drive.


It is no coincidence that HUK Coburg is the first and most determined to offer telematics tariffs. It may be the leading car insurance company in Germany but it is, nonetheless, under pressure. Comparison websites such as Check24 and Verivox are enabling a thriving competition with online car insurance provider HUK24. So, the biggest player in the field is looking for new ways to offer tailor-made tariffs to their customers.

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