Paying Without Claiming: The Paradox of Family Insurance

In Belgium, the so-called “family insurance” — more formally known as personal liability insurance — is one of the most widely held insurance products. About 80% of Belgians have it, underscoring its popularity. That’s no surprise: it offers protection against the financial consequences of everyday accidents.

This insurance covers liability for damage caused by you, a family member, or even a pet to third parties. This can include both bodily injury and material damage. Think of your dog knocking over a cyclist, your child breaking a neighbor’s window, a skiing collision, a BBQ at a campsite accidentally starting a fire, a storm toppling your tree onto a neighbor’s car, or a mishap while helping a friend move.

It sounds indispensable. And yet, paradoxically, most people rarely — if ever — use it.

Despite its relatively low cost (around €80–€120 per year, depending on household composition and age) and broad coverage (including millions in potential compensation), the average policyholder makes just one claim in a lifetime.

There are several reasons:

• The deductible (franchise) - usually €250-€300 - often exceeds the value of minor damages.
• The claims process feels complicated, time-consuming, or simply not worth the effort.
• Lack of awareness and knowledge: many don’t know what’s covered, or even forget they have this insurance. Not surprising, given the many exceptions (e.g. intentional damage by someone over 16, damage under the influence of alcohol, damage to household members or property, or damage arising from contractual relationships).
• Social discomfort: many prefer to settle informally to avoid awkwardness with the injured party.

As a result, many policyholders feel like they’re leaving money on the table, leading to frustration and diminishing trust in insurers.

Although this situation seems favorable for insurers, the profits are not as excessive as one might think. With an average loss ratio of about 55%, only half of the premiums collected are paid out in claims. Add operating costs of around 36%, and the resulting profit margin of approximately 10% is modest. Still, for customers — especially those who never make a claim — it can feel like poor value.

In fact, investing €100 annually at a 3% return would yield over €27,000 in 75 years — a small fortune. It highlights the emotional disconnect many feel: “I’ve paid for decades and got nothing back.”

This situation calls for a re-evaluation. Should we:

• Make the product more flexible?
• Improve the claims experience?
• Or rethink the product entirely?

Option 1 - Make the product more flexible

One path forward is greater flexibility and personalization. Current pricing models are largely one-size-fits-all, based on age and household size. But insurers could go further by offering:

• Dynamic pricing tied to risk profiles
• Customer-selected deductible levels and coverage options
• Tailored support services

Loyalty rewards or partial reimbursements for claim-free years could also enhance satisfaction and fairness. With more control and visibility, the product could feel protective and empowering.

Option 2 - Fix the claim experience

If the barrier is complexity, then simplicity and transparency are the solution. Imagine:

• Intuitive digital claims processes that take minutes
• Real-time claim prompts based on contextual data (e.g. suspicious transactions or known accident patterns)
• Smart reminders from insurers when a claim might be relevant

Picture your banking app saying: “You transferred €1,250 to a neighbor with the subject ‘broken window.’ Would you like to file a family insurance claim?”

That kind of seamless integration could change everything.

Option 3 - Rethink the product entirely

Or perhaps it’s time to reposition family insurance altogether. Rather than covering minor accidents, the focus could shift to:

• Covering only high-impact claims (e.g. over €3,000).
• Functioning more like fire insurance — rarely used by design, unlike today’s version, which is underused due to customer choice or lack of awareness.
• Eliminate small claims and the deductible altogether.

This would redefine the product as long-term financial protection against serious, life-altering events — simple, focused, and less prone to misuse.

Ultimately, insurance is about peace of mind. But that peace shouldn’t come with regret or resentment. To remain relevant and trusted, family insurance needs a rethink — through added flexibility, frictionless claims, or a fundamental redesign.

Because the current model — where many pay, few claim, and most feel uneasy — is overdue for a reboot.