Incorporated: 1933 as Haftpflicht-Unterstützungs-Kasse kraftfahrender Beamier in Erfurt, e.V. (HUK)
Sales: EUR 3.85 billion ($3.67 billion) (2002)
NAIC: 524126 Direct Property and Casualty Insurance Carriers; 524113 Direct Life Insurance Carriers; 524114 Direct Health and Medical Insurance Carriers; 524128 Other Direct Insurance (Except Life, Health, and Medical) Carriers
HUK-Coburg (whose full name is HUK-Coburg Haftpflicht-Unterstützungs-Kasse kraftfahrender Beamter Deutschlands AG) in Coburg sees itself as Germany’s number one auto insurer. Roughly every sixth German household has a vehicle covered by HUK-Coburg, which by sales adds up to a 10 percent market share. Some 56 percent of the group’s premium income originates from auto insurance contracts. HUK-Coburg’s main clientele are civil servants, which includes teachers and pastors. The company also offers property and casualty, life, legal, accident, disability and health insurance, as well as financial services for homeowners through legally independent subsidiaries that are organized under the umbrella of HUK-Coburg Holding AG. HUK-Coburg is a mutual insurance company which is organized as a cooperative owned by its members who are represented by elected member representatives. Austrian mutual insurer Wiener Städtische owns a 5-percent share in HUK-Coburg Holding GmbH. Vereinigte Postversicherung, another strategic partner, holds 10-percent stakes in HUK-Coburg Rechtsschutzversicherung and HUK-Coburg Bausparkasse.
Motorized Minister Takes the Initiative in the 1920s
HUK-Coburg originated in Erfurt, a city in central Germany. Set up as a non-profit association for auto insurance, the company’s development mirrors Germany’s history of motorization. Up until 1914, automobiles were a rare sight on German roads. Their wealthy owners mainly cruised the streets of big German cities, such as Berlin, Frankfurt am Main, Hamburg, and Munich. After World War I, the number of motor vehicles in the German Reich almost tripled between 1921 and 1925. In Berlin, the busiest European city in terms of automobile traffic in the 1920s, automobile races, which were held at the city’s newly-built racing course AVUS, had become very popular. By 1930 the number of motor vehicles registered in Germany had reached half a million. The automobile had become the status symbol of modern life, and more and more people wanted to take advantage of the mobility a car offered. However, the German middle class had suffered severe financial losses during postwar years of hyperinflation; years of savings dwindled to almost nothing.
To make owning an automobile financially viable, middle-class customers depended on affordable financing options and insurance. Not surprisingly, a variety of associations pursuing this purpose popped up across the nation. They were usually set up to serve members of certain trades or professions, such as medical doctors. One of the pioneers in this movement was the Reverend Karl August Fritsch, a minister from the countryside in the central German state Thuringia. Almost 100 of his colleagues showed interest when he suggested they help each other in matters concerning automobile ownership in 1925. The following spring Fritsch founded Pfarrer-Kraftfahrer-Vereinigung e.V. (PKV)—an association for motorized ministers that aimed at promoting their ministry through automobile-ownership. The PKV brokered used cars, which had been carefully inspected by mechanics, for sale to its members. The association also offered insurance at reduced rates, since it was able to provide statistics showing that ministers and other clergymen were responsible drivers and had fewer accidents and lower damage rates.
Although premiums offered through PKV were lower than average, they were still calculated by private insurance companies. To find a way around these profit-oriented corporations, the ministers set up a second organization in 1929: their own non-profit car insurance co-op, which was open to all PKV members. Although none of the benefits offered by the Bruderhilfe der PKV auf Gegenseitigkeit—the mutual brotherhood of PKV—was legally binding, the additional financial benefits and the solidarity and trust among clergymen were incentive enough to attract a growing number of members over the next few years. The insurance contracts were brokered by Paul Brendel, an Erfurt-based insurance agent who specialized in insuring civil servants, including ministers and teachers. Brendel had close contact with Wilhelm RuB, chaiman of the Kraftfahrer-Vereinigung Deutscher Lehrer (KVDL), the association of motorized teachers in Germany.
When Adolf Hitler’s National Socialist Party came to power in 1933, it mandated that all private insurance companies participate in a government-regulated cartel, offering standardized contracts at standardized rates. Initially the new law was introduced to reduce car insurance rates for the masses. However, it had the opposite effect. Special rates, rebates, and other favorable offers by private insurers competing for business became obsolete. All existing insurance contracts had to be updated according to the new law—with the result that many Germans, including the members of PKV and KVDL, had to pay up to twice as much for their auto insurance.
Fritsch, RuB, and Brendel came up with a solution. The law stated that trade-based associations that offered financial assistance not secured by law were not considered insurance companies, and therefore, the three men concluded, did not fall under the new cartel regulations. On September 3, 1933, a new entity was founded by PKV and KVDL: the Haftpflicht-Unterstützungs-Kasse kraftfahrender Beamier Deutschlands e.V. —better known as HUK. Based in Erfurt, the new nonprofit cooperative was open to former PKV and KVDL members but had the right to refuse membership to individuals whose responsibility was questionable. The organization’s declared goal was to offer financial aid to members liable for damage caused while driving an automobile.
Extreme Challenges Before and After World War II
In April 1934, HUK held its first all-member meeting. Membership at the time was about 400. By the end of that year, it had almost tripled. By 1939 it had increased to 4,500. However, the National Socialist government was unwilling to tolerate an association that offered its members better auto insurance rates than the administration-controlled insurance cartel. HUK’s elected representatives had to appear before the RAA, a government authority that oversaw Germany’s insurance industry. The RAA gave HUK its choice of two options: convert to a regular insurance company or dissolve. HUK’s board of directors decided in favor of the first option. In August 1937, HUK was registered under a new legal form and started charging the same premiums as all other auto insurers. However, its members were still able to profit from their HUK-membership; the organization paid them a refund resulting from low accident rates and low administrative costs. Despite the efforts of HUK’s leadership to save the organization, the RAA raised new objections and issued new demands. In 1938 HUK’s founding entities—PKV and KVDL—were dissolved under RAA pressure. In April 1939, Germany’s minister of transportation “recommended” that HUK shut down. However, the outbreak of World War II, five months later, changed the focus of the German authorities and the matter was not pursued any further.
During World War II, automobiles were generally seized by the military, and only a few select individuals were permitted by German authorities to own and operate a vehicle. Consequently, HUK’s membership dwindled. In the last stages of the war, most motor vehicles were destroyed during bombing raids. Erfurt was occupied by American forces, and later became part of the Soviet zone. The few motor vehicles that survived the war were useless as gasoline was simply not available. In the first months after the war, roughly 25 million Germans—prisoners of war, refugees from eastern Prussia, and people who lost their homes or families—were on the road, trying to find a place to stay. If they were lucky, they got on one of the overpopulated trains. Others traveled on horse coaches or bicycles. The rest walked. Auto insurance was the last thing on people’s minds.
In the summer of 1945, a few weeks after the official end of the war, the Soviet military administration ordered that HUK e.V. be liquidated. HUK director Brendel was required to help transfer the business to Landesversicherungsanstalt Thüringen (LVA), a newly-established state-owned insurance company for the state of Thuringia. Brendel did what he was told to do, but he did not give up. While working as an employee for another company in Erfurt, he asked LVA to give him a chance to carry-on HUK’s activities for the members in the three western German zones. In April 1946 LVA allowed Brendel access to HUK’s files. HUK’s main sphere of influence had always been in central and eastern Germany. As it turned out, less than 4 percent of HUK’s prewar members were located in one of the western German zones.
HUK-Coburg is an insurance association based on the mutual assistance of its members. Its subsidiaries, too, are based on that principle. Whoever enters a contract with us becomes a member of a strong community. The financial burden for the individual is limited to the necessary amount. This is done through especially favorable premiums and—wherever possible—premium refunds. In return, members develop an interest in behaving in a risk-conscious way.
Together with Wilhelm RuB, Paul Brendel took up the challenge of reviving HUK. Their start-up capital: 188 addresses. First, the business was tentatively moved to Coburg, a city 100 miles south of Erfurt, to the offices of Brendel’s acquaintance, insurance agent Otto Bahmann. Then HUK signed a reinsurance contract with an Austrian insurer and set up bank accounts in all three western German zones. More than 100 prewar HUK members who survived the war showed their loyalty to the organization and rejoined in 1946. Two years later, HUK reported 157 members. In mid-November 1949 Wilhelm RuB received written approval from the Bavarian authorities to continue HUK’s business activities in the western German zones. The following summer, the company was officially registered in Coburg and became known as HUK-Coburg.
HUK’s first postwar meeting was held on August 8, 1951, as members convened in Nuremberg to elect their representatives. Reverend Fritsch rejoined the board of directors, together with Brendel, RuB, and Willi Hussong, a church administrator from the Pfalz region. The assembled members decided to open HUK to other civil servants besides ministers and teachers and named August 8th HUK’s “day of rebirth.”
Dynamic Growth in the 1950s–60s
During the 1950s HUK-Coburg grew slowly but steadily. In accordance with the organization’s main principle—to keep costs to a minimum—HUK-Coburg renounced the use of professional insurance salesmen. Instead, the backbone of the enterprise were volunteers, mostly long-time members who worked for their insurance co-op from home after their regular workday ended. HUK-Coburg’s main advertising vehicle was word of mouth. The news about this very affordable auto liability insurance was first spread among relatives, friends, and colleagues at family reunions, meetings, and conferences. The volunteers were reimbursed financially for their efforts. While these honorariums were more of a token of appreciation than a commission, HUK-Coburg’s network of volunteers kept expanding. Another factor that helped grow the organization’s membership was the feeling of belonging and trust among colleagues. Ministers trusted other ministers; teachers trusted other teachers. They shared many interests and often knew each other personally.
Two major outside factors contributed to HUK-Coburg’s dynamic growth during the 1950s and 1960s. The first was the massive motorization of private households in West Germany. After the postwar reconstruction years had met their basic needs for enough food, clothing, and housing, West Germans used their growing purchasing power to satisfy their hunger for high-quality consumer goods. First and foremost, everyone wanted to own a motor vehicle. Between 1950 and 1960, the number of motor vehicles in the country quadrupled, and doubled again in the following decade. By 1970 there were over 16.7 million motor vehicles registered in West Germany, compared with roughly two million in 1950. The second factor that helped HUK-Coburg win new members during the “economic miracle “years was the abolition of the standardized premiums for auto liability insurance that every insurance company was obliged to charge in West Germany until 1962. From then on, insurance companies were allowed again to calculate their own premiums, which then had to be approved by West Germany’s federal insurance agency. HUK-Coburg was thus able to lower the premiums it charged to reflect their own low costs. As a result the company was overwhelmed with new membership applications. In 1962, the number of HUK-insured motor vehicles doubled, reaching 231,000 at the end of the year. By 1965, the number of contracts reached more than half a million and almost tripled in the following decade.
The explosion of HUK-Coburg’s business challenged the company’s administration. The growing number of members demanded an expansion of HUK-Coburg’s capacity for member services. Up until the late 1950s, Paul Brendel’s office had handled all insurance cases for HUK-Coburg. Beginning in the late 1950s, the home offices run by part-time volunteers were replaced by a growing network of customer service offices staffed with full-time employees. By the end of the 1970s there were 28 HUK-Coburg offices in Germany.
Opening to the General Public in the 1960s–70s
For almost three decades HUK-Coburg focused solely on liability insurance for motor vehicles. However, in the 1950s a growing number of members expressed their interest in buying other kinds of insurance coverage from a provider they already trusted. Consequently HUK-Coburg introduced collision coverage, accident insurance, and luggage insurance plans in 1958. This was the first step in a development that transformed HUK-Coburg from a small, specialized mutual insurer into a full-service insurance company of national importance. Under the leadership of Dr. Bruno Schroder, a former executive in the German government, HUK-Coburg ventured into renter’s and homeowner’s insurance, general liability and accident insurance, and motor boat insurance. However, all of the above were offered solely to civil servants. In 1968 HUK-Coburg established a new subsidiary that offered life insurance, HUK-Coburg Leben. Three years later the company founded its own legal insurance subsidiary.
- Haftpflicht-Unterstützungs-Kasse kraftfahrender Beamter Deutschlands e.V. (HUK) is founded.
- The organization is transformed into a state-owned enterprise by the Soviet administration.
- HUK is allowed to continue its activities in western Germany and is officially registered in Coburg.
- Collision coverage, accident insurance, and luggage insurance are introduced at HUK-Coburg.
- Standardized auto insurance rates are abolished in West Germany.
- HUK starts offering renter’s, general accident, and liability insurance.
- Life insurance subsidiary HUK-Coburg Leben is founded.
- Health insurance arm HUK-Coburg Krankenver-sicherung is established.
- HUK-Coburg Bausparkasse starts offering savings plans for would-be homeowners.
- Online insurance subsidiary HUK24 AG is launched.
To compete for HUK-Coburg’s core customers, other German insurance companies introduced special auto insurance premiums for civil servants. Statistical evidence of lower accident and damage rates for this group justified lower premiums. However, to win over more new members, insurers did not mind offering coverage to people who worked for government employers but did not have the status of civil servants. This approach caused a controversial public discourse which resulted in new legislation. Beginning in 1977, individuals seeking insurance coverage were obliged to prove that they were currently civil servants, and insurers were required to demand such evidence from their prospective customers. If someone dropped out of government service, the insurance company had to be notified and the insurance contract had to be terminated. The new law not only increased the amount of paperwork HUK-Coburg had to process, but the company was also facing the loss of about 60,000 contracts worth DM 25 million annually.
HUK-Coburg’s leadership decided to fight for the company’s long-time customers. HUK-Coburg Allgemeine was founded for all former HUK-Coburg members who could not be insured under the new legislation. The company offered them coverage and the cancellation of their old contracts. Over 80 percent of the people who received such an offer took advantage of it. Although they had to pay higher insurance premiums, they were attracted to the premium refunds HUK-Coburg’s customers enjoyed. Likewise, HUK-Coburg’s life and legal insurance subsidiaries were opened to the general public.
Increasing Competition in the 1980s–90s
To be able to handle more business, HUK-Coburg’s operations had to be expanded. During the 1980s, a network of about 120 customer service centers was established in selected German cities. In October 1987 HUK-Coburg founded another new subsidiary that offered private health insurance, Krankenver-sicherungs AG der HUK-Coburg. Three years later the reunification of the two German states unexpectedly opened up a large new market as every auto insurance contract in former East Germany had to be renewed. That year, one-quarter of HUK-Coburg’s new auto insurance business originated in the eastern German states. Also in 1990, HUK-Coburg pioneered private liability insurance by introducing a policy with unlimited coverage, after a special insurance case made the news headlines. A fire cracker set off by a 15-year-old started a forest fire, causing DM 10 million in estimated damage. Until then, no liability insurance could be found in Germany that covered a risk that high. In 1991 a subsidiary that provided financial services for would-be homeowners, called HUK-Coburg Bausparkasse AG, was founded. In the following year, an emergency service center for travelers with insurance coverage from HUK-Coburg began operations in Frankfurt am Main. By the end of 1992, there were eight HUK-Coburg customer service offices in eastern Germany.
HUK-Coburg’s expansion into new markets, combined with the strengthening of its distribution network, resulted in significantly higher revenues. The number of insurance contracts signed with the company more than tripled between 1975 and 1985. By that time, HUK-Coburg Allgemeine had acquired over 340,000 new contracts. After this decade of extraordinary growth, premium income kept climbing steadily at HUK-Coburg and its subsidiaries—if at a slower pace. By 1992 HUK-Coburg was ranked eighth among Germany’s auto insurers. The company’s distribution network included 39 sales offices, 180 customer service centers, and roughly 3,600 part-time contact persons.
In the 1990s HUK-Coburg focused on strengthening the company’s standing as an affordable insurer for the whole family. However, in an increasingly saturated market with increasingly aggressive competitors, this was not an easy task. Especially in the field of auto insurance—HUK-Coburg’s mainstay—the market became more difficult. In the early 1990s, high rates of car theft by organized criminals caused costs to skyrocket. At the same time, the struggle for market share between auto insurers resulted in a downward price spiral, and many of them ended up in the red. Premium refunds seemed to be a thing of the past for HUK-Coburg in their core market segment. The company worked hard on cutting cost and winning new customers. Bad risks were eliminated and the new D-Tarif was introduced as a special plan for employees of formerly state-owned companies that had been privatized. HUK-Coburg’s subsidiaries introduced new products, such as private pension and disability plans for individuals, to make up for the huge losses in auto insurance, which in the late 1990s amounted to hundreds of millions. In 2000 the company established its own online arm, HUK24 AG, which offered many HUK-Coburg products for up to 20 percent less for customers comfortable with customer service performed exclusively over the Internet. In the following year HUK-Coburg founded a new holding company for all its subsidiaries, a structure that allowed the company to exchange and sell shares in them more easily.
Beginning in the middle of the decade, faced with the increasing consolidation and internationalization of the European insurance market, the company started looking for partners. In 1996 HUK-Coburg entered a strategic partnership with the two mutual insurers for the employees of the German Post Office and for the formerly state-owned national telephone service provider Deutsche Telekom: Vereinigte Postversicherung (VPV) and Kólner Postversicherung (KPV). VPV and KPV kept offering life insurance to their exclusive clientele, but transferred all requests for auto, property and casualty, health, and legal insurance to HUK-Coburg. As a part of the deal, VPV received a 10-percent share in HUK-Coburg’s legal insurance arm and in the homeowner’s savings society HUK-Coburg Bausparkasse. In early May 1999 HUK-Coburg and another mutual insurer, Haftpflichtverband der Deutschen Industrie (HDI), Germany’s number three business insurer, surprised the industry with the announcement that they would merge to form Germany’s third largest insurance company. However, the deal fell through when HUK-Coburg’s member representatives refused to cooperate and voted against the plan two months later. In summer 2001 a strategic partnership was officially established with Wiener Stadtische, a leading mutual insurer in Austria. One of the two companies’ main goals was to further expand into the markets of eastern Europe. The Austrian firm already generated 20 percent of total sales from abroad and held a strong position Italy, Liechtenstein, Croatia, Poland, Romania, Slovakia, the Czech Republic, and Hungary. Beginning in 2001, HUK-Coburg and Wiener Stadtische jointly invested in two insurance companies in Poland as well as one in Bulgaria. Wiener Stadtische and HUK-Coburg also announced plans to swap the stock of their holding companies up to mutual shares of 20 percent. In fall 2002 HUK-Coburg acquired a 38-percent stake in the financially struggling Verbund der Versicherer im Raum der Kirchen (VRK), a German mutual insurance group for church personnel.
The new Millennium brought about another challenge. The bust of the so-called Internet-bubble was followed by a worldwide economic recession, resulting in steep declines in the equity markets. In 2001, HUK-Coburg’s revenues from capital assets dropped by almost one-third. HUK-Coburg’s life and health insurance arms reported losses. The sale of a 5 percent share in HUK-Coburg Holding GmbH to Wiener Stadtische helped improve the annual balance sheet. By the middle of 2002, competition in the auto insurance market finally seemed to let up. For the first time in years, HUK-Coburg reported positive results in its core business segment. Looking ahead, in spite of fierce global competition, HUK-Coburg had no plans to alter its status as a cooperative owned by its members. Nor was the company planning to change the basis of its distribution system: 5,000 part-time representatives and 400 customer service offices throughout Germany.
HUK-Coburg Holding AG; HUK-Coburg Allgemeine Versich-erung AG; HUK-Coburg Rechtsschutzversicherung AG; HUK-Coburg Krankenversicherung AG; HUK-Coburg Lebensver-sicherung AG; HUK-Coburg Bausparkasse AG; HUK24 AG; HUK-Coburg Assistance GmbH.
Allianz AG; AMB Generali Holding AG; AEGON N.V.; ERGO Versicherungsgruppe AG.
Wachstum durch Vertrauen: Die HUK-Coburg Versicherungsgruppe, Dusseldorf: ECON Verlag, 1993, 134 p.