Understanding Price Competition in German Motor Insurance

This paper analyzes price competition in the German motor insurance market since 1994 and looks for evidence to back up a claim frequently found in the trade literature—that there have been two recent price wars in this industry, the first in 1996–1999, the second in 2005–2006. In a first step, we analyze development of the German motor insurance market and compare it to that of other property-liability lines of business. In a second step the applicability of price war definitions found in the marketing literature to the German motor insurance market is checked. In a third step, a comparison to reference cases from other industries, where price wars have been subject to aca-demic analysis, is conducted to complement the analysis. We conclude that, contrary to reports in the trade literature, the periods of 1996–1999 and 2005–2006 should be considered as times of in-tense competition in the motor insurance industry, not as times of price war.