Overcharging foreign nationals for auto insurance is banned in the European Union, but in Switzerland it is not only allowed, but also widely practiced.
These are the facts: young foreigners, especially nationals of certain countries, pay significantly more for their Swiss auto insurance.
Drivers from Kosovo, North Macedonia and Turkey, for instance, pay up to 74 percent more than the Swiss, according to the online comparison tool Comparis, which examined the premium gaps between Swiss drivers and those from the eight largest foreign populations in the country.
Insurance companies justify this system by pointing out that it is based on statistics: in determining premiums, they take into account criteria such as age, driving record, car type, and, yes, also nationality.
All these factors influence the probability of an accident, and data indicates that certain foreigners are involved in more accidents than others, insurance providers say.
Yes, but is this legal?
Turns out it is.
While it comes across as discriminatory, according to a legal expert from the TCS motoring organisation cited in the media, this practice is totally lawful.
Chalk it up to the principle of ‘economic freedom’ which is enshrined in the Swiss Constitution, and which allows private (but obviously not public) companies – including insurance carriers – to freely set their private insurance premiums.
“In car insurance, in addition to gender, age, and place of residence, nationality is also taken into account in the calculation of premiums,” the expert points out. “This is permitted if the insurer can objectively justify the differentiating criteria.”
For instance, the company can cite accident statistics to explain why drivers of a certain nationality pay higher premiums than their Swiss (or other foreign) counterparts.
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What does this mean in terms of money?
Compared to an average premium for a Swiss driver (1,912 francs a year), people from Kosovo pay 3,178 francs, those from North Macedonia 3,169 francs, and people from Turkey 3,127.
That is much higher than insurance rates for drivers from the EU — ranging from 2,304 for the Portuguese to 1,910 for Germans.
The legality of this practice, however, doesn’t give insurers a green light for unjustified, abusive, or arbitrary discrimination based on client’s nationality (or other factors like age or gender, for that matter).
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What rules should insurance providers consider?
The Federal Justice Office has defined rules for nationality pricing criterion, including these:
- Insurers can’t exclude individuals based solely on their nationality. If they use ‘nationality’ as a rating criterion, it must apply it to all policyholders, and not just to foreigners.
- They must maintain clear statistics on their rating criteria.
- The ‘nationality’ factor should be used only based on factual risk-related considerations.
- Regularly monitor and adjust nationality criteria as new risk data emerges.
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Winds of change
Car insurers have used these pricing models for a long time, but under a new proposal now before the parliament, premiums would no longer be based on drivers’ citizenship, age or gender.
This change would bring Switzerland into line with regulations already in place in the European Union.
Is the same leeway given to other insurers as well?
As long as they are private, then yes.
Providers of complimentary health insurance, as well as household, liability, and other optional policies, are free to apply the nationality criteria on the same (justified) basis as auto insurers, though there is no indication that they do so.
The only notable exception is the obligatory health insurance (KVG/LaMal) which, while sold by private insurers, is tightly regulated by the government.
The only factors determining the KVG/LaMal premiums are your age group, your place of residence, the chosen annual deductible, and the specific health insurance model you select.
READ ALSO: How did Switzerland end up with its compulsory health insurance system?
