Important Insurances in Germany
Interview with Julian Hennig (Head of Insurance - Feather) about the structure and future of German health insurance and important insurances in Germany.
Table of contents
German Health insurance System
Julian, thank you for joining the interview today. You are the head of insurance of Feather insurance so you have insights into the German insurance market like hardly anybody else of us. The insurance that most expats are interested in is health insurance. Can you please give us an overview of the German health insurance system?
First and foremost, health insurance in Germany has a pretty complex number of different options that are available. On the one hand, the state-funded public health insurance is the most popular and probably the best option for most people. About 80 percent of all people in Germany have public health insurance. On the other hand, there is also a very strong offering from private health insurance in Germany. The system is set up so that these private health insurance companies are supposed to compete with public health insurance providers. Therefore, it is not so easy to say which option is the best for you, because that depends on many individual factors, but we will get to that later. If you are unsure whether it should be public or private health insurance because you have just arrived through Germany or are applying for a visa, then there is a third option. We call it expat health insurance. That is usually the cheapest option and is used by many people, especially at the beginning (Did public or private increase more?).
You're absolutely right. This can be very confusing. We talked earlier about the fact that you have a recommendation tool on your website. So if people are not sure which health insurance suits them best, they can just do it on your website with a couple of clicks and then they will get a recommendation.
Exactly. So what we try to do is to make insurance simple. We know that insurance is not the thing you like to deal with when you wake up in the morning. That is why we started offering free customer calls to everyone, regardless of their situation. People really liked it. At the same time, it is also something that doesn’t scale really well. So we really wanted to reach more people. So we spent a lot of time over the last two and a half years developing something we call a recommendation tool (for public and private). This tool allows you to enter some information and then get an overview of what your options are for health insurance and also for other insurance. The great thing about it is that it really covers 98% of all situations, so not only the typical unemployed in Germany but also other cases where the answer is not so simple. It gives you a good overview of the options that are available and hopefully allows you to understand the system quickly. Hundreds of people use it every day and we are really happy that people seem to like it but of course, are we continuously working on making it even better.
Future of Public Health insurance
I have tried it myself. It is in English. It is very understandable. All the right questions are asked and you get some great recommendations afterward. However, public health insurance made some news last week when the association of public health insurance published a press release saying that 17 billion euros will be missing to fund public health insurance next year. The majority of this 17 billion is supposed to be paid by people insured in public health insurance. We don't know anything specific yet but everyone insured in a public system will probably pay a lot more next year than they actually do. All while private health insurance is getting 25.000€ richer every minute because of the seniority savings. Julian, what do you think about the future of german health insurance, especially after the pandemic?
I think you have to look at the bigger picture. The population in Germany is getting older and older. The median age at the moment is over 45. And we are getting into a situation where we have a relatively high number of people who want to use health services from the public health insurance system, while the number of people who work and contribute to financing the system is decreasing. And that, of course, it puts a lot of stress on the public health insurance sector. Now, there are basically two options. One option is to reduce benefits for everybody. So make the coverage worse and reduce cost by that measure. The second option, which you mentioned and which I think will come up, is to put more money into the system. That money has to come from somewhere. So it is likely that public health insurance rates will increase. At the same time, private health insurance is becoming more interesting, especially for young people or people that may not want to stay in Germany for their whole life, because it can be cheaper in some situations. The contributions work differently and are usually not based on your income, but based on your age. This can really give you some added flexibility (e.g. with a deductible and cashback). In the end, I think this is a common problem that we’re seeing all around Europe. One thing that we’re trying to do is to work with public health insurance companies to make the system as efficient as possible. We need to make sure that costs can also be reduced by making things more digital, which is not the case in Germany yet.
Benefits of the private Health insurance
I totally agree with that. I think private can be a really good option. You have many consultations with expats too. I feel there's hardly any topic all over personal finance where there are so many misconceptions and myths as in the private health insurance system. Many people in private health insurance absolutely love it, myself included. I'm privately insured, and people in public health insuranc defend public health insurance almost religiously. They say private is bad. You are an insurance expert. What do you think about the private health insurance system?
I think private health insurance is structured very differently in different countries around the world, and that’s one of the reasons why there are a lot of misconceptions. It is very strictly regulated in Germany. Much more than in many other countries around the world. For example, health insurance companies in Germany cannot cancel you because you use your health insurance too often, which is common in other countries around the world. Private health insurance companies also cannot increase monthly costs based on your age. There can be increases, but age is usually not a factor, and if you dive a little bit deeper and see that many of these private health insurance companies are actually structured as non-profit mutual health insurance companies where you don’t become a member rather than a customer, you will see that private health insurance offers some unique benefits. At the same time, it has to be said that in some cases the system in Germany is not so fair for everyone. For example, you may be forced into public health insurance because of your income, and you may be able to get private health insurance coverage with better benefits at a lower price only if you have a high income. This is not necessarily ideal. It means that some people can’t get private health insurance, and that can also lead to a negative public image of private health insurance. But, of course, that is not something that we can change. It is related to the regulation. Hopefully, in the future, there will be more flexibility for everybody. So that you can choose whether it is public or private insurance. Regardless of your situation.
Which health insurance should i choose?
We have just talked about the fact that there is a lot of flexibility in the private sector and perhaps not so much flexibility in the public sector. In my opinion, that's the beauty and also the complexity of the German healthcare system. The beauty because you can choose the coverage that you want to have individually. Either completely private or with private additives on top of the public health insurance. Complex because it can get confusing very quickly given that there are hundreds of different plans. Can you recommend the right health insurance coverage for specific groups of people?
I think I’ve already given the simple answer. For most people, public health insurance is the best option. Switching from public to private can be a little bit easier than the other way round. If you want to look at some groups, for example, an average person with an average salary employed in Germany, public health insurance is better. For students who are enrolled in a university and are younger than 30 years old, again public health insurance is better. If you are an artist and can join the KSK, which is a special fund for artists, again public health insurance is a fantastic option. If you have a family with several children, public health insurance is great again. Mainly because you can cover your whole family in a single plan. On the other hand, if you are a high earner employed by a German company, if you work remote somewhere else in the world, especially if you’re single, then private health insurance can be the better option. One thing that makes private health insurance a little bit more complicated is that your health status plays an important role. So, if you have some severe pre-existing conditions that are normally fully covered by public health insurance, private health insurance may not cover them or you may not be able to get private health insurance. In that case, you would be fine with public health insurance. I am a big fan of public health insurance, but it must also be said that dental benefits are quite limited with public health insurance. Many people, therefore, take out additional dental insurance with their public plan to ensure that everything is covered and they don’t have to pay a lot of money when they want to see a dentist.
I can really see that your team public health insurance while I'm more toward team private health insurance. So staying in public health insurance and supplementing it with private additives either in the dental, the doctor, or the hospital segment, could be a good compromise for people who can't switch to the private health insurance system. What do you think about this?
I think that’s what we actually see. Dental insurance, in particular, is very common among all people with public health insurance. So it can be a great inexpensive way to top up your coverage. Then, as we discussed, private health insurance is more for the expert user who is really interested in understanding the differences between public and private and has no problem getting into the details. This can definitely be a well-invested time because there are certain cases where you can make significant savings being on private health insurance. Especially if you’re not planning to stay in Germany for decades, but perhaps only for a couple of years.
Which Insurances are important in Germany
I love health insurance. I could talk about it all day, but we want to touch on other insurance topics as well. So let us talk about other insurances aside from health insurance. Julian, what are in your opinion important insurances to have?
At Feather, we distinguish between the essentials and the additional coverage you may need depending on your circumstances. For the essentials, I would definitely recommend liability insurance. It only costs a few euros per month and covers you if you accidentally damage somebody else’s property. The other is an expensive insurance. It is disability insurance. This insurance pays money if you are unable to work anymore. It will basically substitute your salary until you retire and also pay money if you are partially disabled or fully disabled. Of course, that’s not a topic people like to talk about. Even if you don’t have anyone depending on you. Usually, you want to keep your living standard and not want to go on social welfare or anything like that. For this reason, disability insurance is one of the most important insurance that many people do not have. The reason is that it is very difficult to get such a policy. You have to find an insurance company. Also, you need to fill out a lot of paperwork. This is where companies like Feather and PerFinEx can offer a unique advantage because they make it easy. You can sign up completely digitally, and it doesn’t take much time. You can adjust or cancel the coverage if you change your mind later. It is not locked into any kind of a long-term contract. So I would definitely recommend disability insurance. The next one is life insurance. It is kind of the same bucket but more relevant if you have children or other family members who depend on you. For the extra coverage household insurance is something that will cover your belongings. Perhaps legal insurance is also very useful, especially for expats. It covers the cost of a lawyer if someone needs or wants to sue you, or if you got a traffic violation ticket and think that it is unjust and want to fight it. Then you can use your legal insurance for that.
How Do insurance advisors help expats?
I completely agree. These are also the insurances I have. For many of the insurances that you mentioned, there are articles from PerFinEX that explain it in detail. You are right about the insurance landscape. It is horrible, especially for expats with a language barrier because of the German paperwork. How do you as Feather help expats there in particular?
What we ultimately try to do is to offer honest simple insurance. What does that mean? It means that traditional insurance companies are usually a little afraid to tell you what is not covered in your policy. We try to be very open and transparent about this. So that if you purchase an insurance you know what it covers, but you also know what is not covered. Because our business model is digital from the start, we can be much more efficient than traditional insurance companies because we have lower operating costs and we pass those savings that we get from that on to our customers. At the same time, with the digital business model, you can manage everything from your smartphone. You don’t have to call someone to report a claim. You can do that with a few taps in your Feather account. If you have a question, you can reach out to us by chat and if you do prefer to have one-on-one human interaction, then we also still offer video calls for our customers where you can talk to an expert and get personal advice.
Secret about feather insurance
Great that you are also helping expats living in Germany. That is our mission as well. To go one step further, Julian, you told me that you have great plans for the future and you also want to share a secret with us today..
Yes, we talked about making insurance simple and accessible to everyone. We see that this is not only an issue in Germany but also in other countries. When you move from Germany to another country, you basically have to cancel all your insurance policies and you have to buy new ones. You have to find somebody who can help you with that, and we think that is another cumbersome painful process. What we are trying to do is make sure that you have flexible insurance coverage that you can use wherever you live. To achieve that, we’re basically starting country by country, and we plan to start across the EU in the next few years. We are going to start soon in Spain. We will also make the process of getting health insurance and also other insurances easier for people that want to move there or who already live in Spain.
Great. As Europe becomes more unified, you are giving people the opportunity to travel through Europe as well. That's a request that we get all the time with the Peep pension, which allows you to move from one pension scheme to another in Europe, and now you will make it possible with health insurance. I think people will absolutely love it.
I hope so, too. As you said, this is an important issue especially when it comes to retirement. There are still a lot of questions that need to be answered. We are excited to do our part and unite Europe through insurance.