The limits of competition: Housing insurance in Switzerland

Abstract

In Switzerland there are seven cantons where the housing insurance market is competitive, while in the 19 others there are local state monopolies. This paper compares the price/performance relationship of these different market forms. It is shown that for a very similar product the state monopolies charge 70% lower prices, that they spend substantially more on fire prevention, and that they have much lower damage rates. One of the main reasons for the higher prices of the private insurance companies is the fact that they spend considerably more on sales and administrative costs. The housing insurance market is thus a classic example of a situation where state monopoly outperforms private sector competition.