Why ERGO's Nexible Is Exiting Car Insurance: A Strategic Shift Explained
Have you ever wondered why some insurance companies change their product focus? In a significant strategic shift, ERGO's digital subsidiary, Nexible, has decided to stop writing new car insurance policies. This move highlights the intense challenges within the German auto insurance market and offers broader lessons about the insurance industry's evolution. Understanding these dynamics can help you make smarter choices, whether you're comparing German private health insurance (PKV) options, navigating US Medicare plans, or simply looking for a reliable insurance company.
Nexible's Journey: From Digital Disruptor to Strategic Reevaluation
Launched in October 2017, Nexible was ERGO's ambitious digital venture designed to sell auto insurance entirely online. The product was available through Nexible's own website and major comparison portals like Check24 and Verivox. By the end of 2017, it had insured nearly 20,000 vehicles. To boost brand awareness, Nexible even enlisted German comedian "König von Mallorca" in an advertising campaign.
However, the initial momentum proved difficult to sustain. Financial reports tell a telling story:
- 2019: Earned gross premiums in motor insurance grew strongly from €11.5 million to €24.5 million.
- 2020: Growth slowed dramatically to just 6.08%, reaching €26 million. The number of contracts lasting at least one year even decreased slightly by 2.82% to 90,553.
More critically, the motor insurance business remained unprofitable. The overall combined ratio for gross business was 121.49% in 2020, meaning the company paid out more in claims and expenses than it earned in premiums. While the ratio for motor liability improved from 153.70% to 128.34%, it was still deep in loss-making territory.
The Core Problem: A Hyper-Competitive and Costly Market
The challenging loss ratio wasn't the only factor. The German car insurance market has been fiercely competitive for years. For a long time, insurers used auto policies as a loss-leading "entry product," accepting losses to acquire customers they hoped would buy more profitable products later. While this trend has eased slightly, the business remains expensive due to several structural issues:
| Challenge | Impact on Insurers |
|---|---|
| High Acquisition Costs | Steep commissions paid to comparison portals (Check24, Verivox) and significant spending on SEO and online ads (Google, Facebook) make customer acquisition very costly. |
| Customer Churn | Car insurance customers are notoriously disloyal and prone to switching providers, making it hard to retain a profitable book of business. |
| Thin Margins | Intense price competition squeezes premiums, while claims costs remain high, leading to poor combined ratios. |
This environment is akin to the competitive pressures in other insurance sectors, such as the search for affordable health insurance in the US or the choice between German PKV and GKV, where price sensitivity and comparison shopping are equally prevalent.
The New Strategy: Focusing on Travel and Dental Add-On Insurance
In response to these tepid results, Nexible is pulling the plug on new car insurance business. According to industry reports, existing motor insurance customers will not be affected, but no new policies will be written.
Instead, Nexible will pivot its focus to two specific product lines:
- Travel Insurance: Nexible plans to expand its international travel insurance business, targeting markets where the ERGO Group already has a successful presence with its travel policies.
- Dental Add-On Insurance (Zahnzusatzversicherung): This product, a popular supplement to German public health insurance (GKV), will become a core offering. For US readers, this is somewhat analogous to a Medicare Supplement (Medigap) plan or a private dental insurance add-on.
Key Takeaways for Insurance Consumers and Professionals
Nexible's strategic shift underscores several important trends in the insurance world:
- Digital Doesn't Guarantee Profitability: Even with a fully digital model, the fundamental economics of a saturated, price-driven market like car insurance are difficult to overcome.
- Focus is Key: Insurers are increasingly specializing in niche products where they can build expertise and achieve better margins, much like how some providers specialize in Medicare Advantage plans or best private health insurance for specific demographics.
- Consumer Behavior Drives Strategy: High churn rates in auto insurance force companies to constantly spend on acquisition. In contrast, products like travel or dental insurance may foster longer-term customer relationships.
Whether you're an insurance professional analyzing market trends or a consumer shopping for coverage, understanding why companies like Nexible change course can provide valuable context. It reminds us that the insurance landscape is dynamic, and the most sustainable providers are those who adapt to market realities while focusing on areas where they can deliver genuine value.
Insurers and brokers struggle with high backlogs in claims management, increasing claim frequencies, a shortage of skilled professionals, and growing customer expectations. Manual processes are expensive and slow.