Debeka Krankenversicherungsverein auf Gegenseitigkeit
Debeka Krankenversicherungsverein auf Gegenseitigkeit
Mutual Insurance Company
Incorporated: 1905 as Krankenunterstützungskasse für die Gemeindebeamten der Rheinprovinz a.G.
Total Assets: EUR 8.8 billion ($11.5 billion) (2004)
NAIC: 524114 Direct Health and Medical Insurance Carriers; 524113 Direct Life Insurance Carriers; 524126 Direct Property and Casualty Insurance Carriers; 524128 Other Direct Insurance (Except Life, Health, and Medical) Carriers
Debeka Krankenversicherungsverein auf Gegenseitigkeit, based in Koblenz, sees itself as Germany's number one private health insurer and as the country's fourth-largest direct insurance company. More than 3.7 million health insurance customers provide 40 percent of Debeka's premium income. Roughly one-quarter of annual revenues originate from three million life insurance contracts of Debeka's life insurance subsidiary, Debeka Lebensversicherungsverein auf Gegenseitigkeit. Debeka health and life insurance are mutual insurance companies which are organized as cooperatives and owned by their members who are represented by elected member representatives. Civil servants make up a large part of Debeka's member base. Through various subsidiaries the group also offers life, property and casualty, legal, and accident insurance, as well as financial services for homeowners and pension plans.
Early 20th-Century Origins
Debeka's history goes back to the turn of the 19th century, a time of fundamental political, social, and economic change in Germany. While industrialization of the country was under way, the chancellor of the German Empire, Prince Otto von Bismarck, initiated a number of social reforms designed to take the wind out of the sails of the swelling socialist movement. In 1883, he introduced obligatory health insurance for the German working class. Employers were required to contribute one-third of the premiums, and workers had to pay the remaining amount. The new health insurance for blue-collar workers spurred a growing number of organizations offering similar health coverage for other occupations. On July 2, 1905, a group of municipal civil servants from the German Rhine province, led by City Secretary Josef Funken of Koblenz, founded a self-help organization to provide health insurance to municipal civil servants in the Rhine region. Organized as a member-based association, members paid their premiums and received benefits in case of sickness or death from the association's collective funds. In September 1905, the new Krankenunterstützungskasse für die Gemeindebeamten der Rheinprovinz was approved as a mutual insurance association. Only one year later, the Krankenunterstützungskasse expanded its operation into Prussia and received the approval to do business in all of Germany in 1910. To reflect the change, the association was renamed Krankenkasse für die Gemeindebeamten und–Angestellten des Deutschen Reiches (Health Fund for Municipal Civil Servants and Employees of the German Empire).
At first, membership was limited to members of the trade association of municipal civil servants up to 45 years of age. Beginning in 1907, the wives of members could also be covered. Monthly premiums were affordable and depended on the member's age. Members who became ill received a fixed daily amount for up to six months. An optional death benefit insurance completed the coverage. Between 1913 and 1916, the Krankenkasse introduced extended coverage plans that included dental treatments, hospitalization, and certain items such as eyeglasses and bandages. Within the first five years of its existence, 599 members joined Krankenkasse für die Gemeindebeamten. In the next five years, the number of members more than doubled, reaching 1,330 by 1915. During World War I, Krankenkasse für die Gemeindebeamten continued its business under difficult circumstances. By the end of the war, the mutual insurer counted about 2,000 members.
Building a Professional Workforce in the 1920s–30s
Until the early 1920s, Krankenkasse für die Gemeindebeamten relied on volunteers to do its business. The association's board of directors took care of most administrative tasks such as general organizational and legal matters as well as investing the collected funds. Volunteer members, so-called Vertrauensmänner, collected the premiums, paid out benefits in cash, and were involved in promotional activities to win new members. According to the association's bylaws, every member had to take on its share of administrative work on an as-needed basis. That way of doing business had kept premiums affordable but became impractical as more and more people joined the organization. In the aftermath of World War I, Germany went through a period of hardship caused by economic problems that culminated in the galloping inflation of 1922 and 1923. The country's population suffered severe financial losses. Making a living became a daily struggle for many people and their general health suffered as well. As the salaries of civil servants grew more slowly than their health expenses, and existing nest eggs were eaten up by hyperinflation, they began to join Krankenkasse für die Gemeindebeamten in increasing numbers. In 1921, the mutual insurer counted 6,400 members. Only four years later, the health insurer had acquired 240,000 contracts. By the end of 1925, Krankenkasse für die Gemeindebeamten had become Germany's largest health insurance for civil servants.
This development was partly due to the fact that once again the range of people who were eligible to join the mutual insurer was expanded to include not only municipal civil servants but civil servants in general. Beginning in February 1925, civil servants working for the State of Prussia and for the German Empire became eligible to join Krankenkasse für die Gemeindebeamten. Three years later, this move was reflected in another name change. From 1928 on the organization was called Deutsche Beamten-Krankenversicherung a.G. (German Civil Servants' Mutual Health Insurance). The abbreviation "De-Be-Ka" soon replaced the insurer's long name in everyday business and later became the company name. In addition to Debeka's exploding member roster of civil servants from all over Germany, a number of similar mutual health insurers and self-help organizations for civil servants from other regions merged with Debeka during the 1920s.
The growing number of contracts made it impossible to rely on volunteer work for managing them. In 1923, the company's first full-time employees were hired and began to work out of an old castle in Koblenz. Debeka divided Germany into administrative regions and established additional offices in Munich, Nuremberg, and Berlin. The Koblenz staff soon outgrew its quarters in the castle and moved into brand-new headquarters in 1928. By the end of the decade, Debeka employed over 200 people. In 1932, the company began to build a professional sales force. A growing number of people were hired and trained to bring in new business exclusively for Debeka. During the 1930s, the company's workforce rose swiftly, reaching 1,109 employees by the end of the decade.
Growth and Turmoil in the 1930s–40s
The ripples of the 1929 New York Stock Exchange crash arrived in Germany in the early 1930s, throwing the country's economy into another crisis. Unemployment skyrocketed and German civil servants were confronted with substantial pay cuts of up to 20 percent of their salary. Debeka lowered premiums two times to keep health insurance affordable for its members, but the situation got worse. The mutual insurer introduced a new plan with significantly lower premiums. However, due to their decreasing income, a growing number of civil servants fell below the amount at which they were required by law to give up their private health coverage and join the state-managed public health insurance system, which offered income-adjusted rates but fewer benefits. On the other hand, more civil servants in the upper income levels signed up for private health coverage.
By 1932, the economic situation had gotten so far out of hand that the radical right-wing National Socialist Party gathered more and more followers and finally took over political rule in Germany in 1933. As part of their campaign against Jews, "non-Aryan" civil servants faced severe discrimination. Debeka followed the guidelines of the new political leadership by excluding Jewish doctors from premium refund programs, by canceling the policies of Jewish members, and by hiring only apprentices who belonged to the Nazi youth organization. As the insurance sector was brought under the central command of the Nazi state, the forced consolidation of the industry led to Debeka's takeover of a number of competitors. As a result of the aforementioned developments, Debeka experienced a surge in membership, climbing from 300,000 in 1930 to 800,000 in 1939.
Our recipe for success? To have courage even to swim against the current and to be different from the rest: Contrary to the trend, Debeka has always created new jobs. We pursue a conservative investment policy. Outsourcing is out of the question. Debeka is not affected by external influences. And this concept will remain valid in the future. Debeka will continue to strive for the leading market position in the consumer insurance market. In the future we will continue to guarantee excellent performance, affordable premiums and superb service.
The dynamic changes faced by Debeka were accompanied by a number of modifications in the company's product policies. Due to the takeovers of other private health insurers, whose offers became part of Debeka's product range, the company offered 13 different health insurance plans by the middle of the 1930s. In addition, a number of severe epidemics resulted in a sudden increase in claims. Consequently Debeka introduced five new health coverage plans in 1937 that replaced the old ones. Since 1923, Debeka had paid benefits based on the actual cost that occurred. Under the new rules, younger members paid higher premiums which were then invested to help contain premium growth for older policy holders. On the other hand, beginning in 1935, Debeka members whose benefit claims had been very moderate over the last five years were refunded part of their premium payments. Beginning in 1936, Debeka members could even recover part of their premiums if they did not exceed a certain claim amount within a single year. Initiated to discourage members from filing minor claims which caused an above-average amount of administrative costs, the refund program was soon also used as a marketing vehicle and became a huge and lasting success.
In 1939, Adolf Hitler's troops marched into Poland, thereby initiating World War II. As Germany occupied ever more territories in eastern and western Europe, Debeka expanded its geographic reach as well. At the home front, the Nazis required private health insurers to offer generous benefit packages but denied the necessary premium increases in order to maintain the population's morale. However, as more and more physicians were called to military duty, Germans remaining in the home-land could not see their doctors anymore and consequently could not claim any health costs. Efforts to introduce a national health insurance system that would have made private health insurance obsolete fell victim to the intensifying war. As the Allied forces started bombing German cities, destroying Debeka's headquarters in Koblenz and many regional offices, the company moved important records and information processing machinery to more remote places in the countryside. However, due to a few more takeovers of other mutual health insurers, Debeka's membership grew to roughly 990,000 by 1944.
On April 3, 1945, only a few days after American troops had taken the city of Koblenz, the American military issued a permit for Debeka to continue its business. However, only two of the company's 21 buildings had survived the bombings. After losing the war, Germany was divided into four zones with four different military administrations. As much of Germany's eastern territory was lost, private health insurance was forbidden in the eastern German zone governed by the Soviet Union, and when the Saar was occupied by France, Debeka lost over 360,000 members.
Nevertheless, the company's remaining employees immediately got to work after the war and rebuilt the enterprise, including its headquarters in Koblenz, in just two years. To reduce Debeka's dependence on a health sector that was heavily influenced by politics, the company founded a mutual life insurance subsidiary in 1947. Starting in 1949, Koblenz-based Debeka Sterbegeld-und Lebensversicherungsverein offered life insurance plans in all of Western Germany. To recover from the financial losses of the war and immediate postwar years, Debeka Health temporarily introduced deductibles for its members and cut back benefits somewhat. In 1951, Debeka introduced a new range of health coverage plans that replaced the old ones. As a result, the mutual insurer finally came out of the red and entered a period of dynamic growth.
New Political Challenges in the 1960s–70s
During the boom years that followed the postwar reconstruction period, Debeka Health membership soared. By 1950, the number of contracts passed the one-million mark. Five years later, when the company celebrated its 50th anniversary, Debeka had compensated the losses of the late 1940s. By 1965, the number of health contracts reached 1.4 million. Part of this growth was caused by measures taken during the 1950s. The maximum age for new members was increased; special introductory offers for trainees were introduced; certain existing health conditions were included in the coverage for an additional fee; and annual premium refunds for healthy members were extended to three monthly premiums. In addition, Debeka experienced a rising demand for supplemental private coverage for individuals with public health coverage.
With the extension of the income level for obligatory public health insurance in 1965, Debeka's growth came to a sudden halt. In a political climate that favored public over private health insurance, the company suffered severe losses in membership during the second half of the 1960s and in the following decade. To make Debeka membership even more attractive for new members, the company extended the maximum age for joining the health insurance to 65 years, waved the waiting period for certain benefits for trainees, and increased premium refunds to low-cost members to four monthly premiums. Debeka boosted the number of sales personnel and established a central sales department that organized their continuous training. In 1969, the income level for obligatory public health insurance was raised again. Two years later, a new law was introduced that increased the maximum income level for public health insurance automatically every year. At the same time, more and more groups within the population were included in the obligatory health insurance system: pensioners in 1968, farmers in 1972, students in 1975, artists and publicists in 1983. Due to these developments, Debeka reported net losses of 7,500 to 9,300 health plan members in 1968 and 1971. However, Debeka's efforts to make its health coverage more attractive paid off, resulting in a high number of new member acquisitions.
While Debeka Health was struggling with unfavorable circumstances in the 1960s and 1970s, its life insurance subsidiary enjoyed a growth spurt during the same period. In 1974, the company launched a new branch that offered savings plans for homebuilders. Despite a sluggish construction market, the new subsidiary made a profit right from the beginning.
- A mutual health insurance association for municipal civil servants of the Rhine Province is founded.
- The association expands its reach into the entire German Empire.
- The company's first full-time employees are hired.
- The company takes the name Deutsche Beamten-Krankenversicherung (Debeka for short).
- Debeka begins to build its own professional sales force.
- Debeka mutual life insurance is founded.
- The company launches a branch that offers savings plans for homebuilders.
- Debeka's general insurance subsidiary is established.
- Debeka starts offering private pension plans.
A Full-Service Insurer in the 1990s and Beyond
In 1981, 671 Debeka employees moved to brand-new headquarters. It took another decade to finish the whole complex of buildings, which was designed for future growth. By the time the project was finished in 1992, the number of employees working there had already doubled. Several factors contributed to Debeka's continued growth in the 1980s and early 1990s. The political conditions for private health insurers improved. In 1989, civil servants in Germany were excluded from obligatory public health insurance, expanding Debeka's core market. Debeka Life and the company's construction savings arm, Debeka Bausparkasse, grew at healthy rates as well. In 1981, Debeka entered the Direct Property and Casualty Insurance market when the company founded its general insurance subsidiary, Debeka Allgemeine AG. Starting with accident insurance, the new subsidiary soon offered renter's and homeowners' policies. In the 1990s, auto and legal insurance were added as well. Finally, Debeka quickly claimed its stake in the eastern German states after they joined the Federal Republic of Germany in 1990. By the end of that year, the company had set up 25 offices in eastern Germany in addition to some 100 offices in the western part of the country.
Beginning in the second half of the 1990s, the market for private health insurance was again heavily influenced by political decisions that followed a broad public discussion of issues resulting from the population's growing life span. In 1994, a law was passed that required private health insurers to offer elderly customers who were struggling financially a so-called "standard-rate" health plan that provided basic health coverage similar to the public health plans at premiums no higher than the average cost of public health coverage for seniors. To provide basic funding for the growing number of people who needed constant professional care at old age, an obligatory insurance was introduced in 1995 that had to be adopted by private health insurers, thereby boosting Debeka's premium income. In 2000, another law required private health insurers to charge an additional 10 percent on top of their premiums, funds that had to be used to dampen premium growth for customers age 65 and older. Another demographic issue was the decreasing number of workers contributing to the country's public pension system at a time when the population was aging and the number of pensioners was increasing. New legislation was passed to encourage supplementary private pension plans. Debeka reacted by establishing two new subsidiaries, prorente-Debeka Pensions-Management GmbH in 1995 and Debeka Pensionskasse AG in 2002, that offered the management of corporate pension plans as well as coverage for small businesses. By 2005, due to an attractive product range, a powerful sales force of over 6,500, and a consistently conservative investment strategy, Debeka had become one of Germany's leading insurance companies. Looking into the future, Debeka's management still saw sufficient financial strength to keep its legal form as a mutual insurance firm and sufficient market potential in Germany to restrain it from international expansion. However, Germany's pending health insurance reform constituted a major wild card at the beginning of Debeka's second century of existence.
Debeka Krankenversicherungsverein auf Gegenseitigkeit; Debeka Lebensversicherungsverein auf Gegenseitigkeit; Debeka Bausparkasse AG; Debeka Allgemeine Versicherung AG; Debeka Pensionskasse AG; prorente-Debeka Pensions-Management GmbH; Debeka Betriebskrankenkasse.
ERGO Versicherungsgruppe AG; HUK-COBURG Haftpflicht-Unterstützungs-Kasse kraftfahrender Beamter Deutschlands a.G. in Coburg; Allianz AG; AMB Generali Holding AG; WWK Versicherungsgruppe.
"Debeka steigert ihren Marktanteil," Frankfurter Allgemeine Zeitung, May 25, 2005, p. 15.
"Die Debeka-Versicherungsgruppe wächst," Frankfurter Allgemeine Zeitung, May 23, 1997, p. 30.
"Debeka will weiter expandieren," Süddeutsche Zeitung, June 30, 1993.
"Debeka wird hundert," Versicherungswirtschaft, April 1, 2005, p. 553.
100 Jahre Debeka: Geschichte und Geschichten, Koblenz, Germany: Debeka Krankenversicherungsverein auf Gegenseitigkeit, 2005, 69 p.