Insurance rules and practices in France

This is a blog about living as an expat in France, and about fitting into French legal, financial, and social systems when you are a foreigner. I'm an American, specifically, which means I'm a non-European. Citizens of countries that are members of the European Union, including the British and Irish, have many fewer administrative hurdles to negotiate than other foreigners do. Of course, we all have to deal with the French language, at least to some extent.

One aspect of this life, and one reality of life in any country, is the necessity of taking out insurance against accidents. Your house has to be insured. If you rent it, you probably want insurance on its contents. If you own it, you want both the building and its contents covered. It is probably your biggest investment and asset. And of course, your car has to be insured. If you cause an accident and injure or kill somebody, you might see all your assets go up in a puff of smoke.

If you're lucky, you'll never need to file an insurance claim. I've only filed one or two, for minor damage to my car, in my life, and I'm 62 years old. I once filed a small claim on our homeowner's insurance — a fence had blown over in a windstorm. I've been lucky.

When we came to France to live — exactly eight years ago today — we had already owned our house in Saint-Aignan for nearly two months. The final papers had been signed in April. The house was not insured at that point. When we arrived in Saint-Aignan, after a few days recuperating from jet lag with friends in Normandy, we went to the notaire's office to get the keys. The first thing the notaire's clerk told us was that we must immediately go and purchase a homeowner's policy to protect ourselves financially in case some catastrophe came along.

Neither one of us had any idea what company we ought to buy insurance from, and we didn't have time to do a lot of research. We needed to act fast. In the U.S., we had never been in that situation. There, a bank won't even consider giving you a mortgage unless you have already taken out a homeowner's insurance policy. Bank personnel or real estate agents advise buyers if they aren't sure who to turn to.

In France, we didn't have a mortgage. We were able to buy the house outright, without taking out a loan, so nobody really required us to have insurance on it. Choosing an insurance company was basically a stab in the dark. We didn't have any pre-conceived notions about which ones might be better than others.

In Saint-Aignan, I had seen an AXA insurance agency on the street that runs along the river. It was near the bridge. I'd heard of AXA, I thought. The man whose name was on the front door of the AXA agency was Monsieur Langlais. That seemed appropriate. I figured I might as well go in there and find out what homeowner's insurance would cost us.

I really liked the woman I talked to at AXA. She was helpful and informative — not formal, prickly, or pushy. She carefully explained the details of the coverage we'd get and the premiums we'd pay. She went through the options. What I especially liked was the price. The annual premium for a policy providing replacement value for the house and its contents in case of fire, water, or storm damage was just 250 euros. In California, we had been paying about $1500 a year for similar coverage (which did not include earthquake insurance).

I subsequently bought a car in Saint-Aignan and had it insured with AXA as well. Again, the annual premium for a full-service policy — liability, collision, and comprehensive coverage — was much lower than it had been in California for a similar policy. It all was very easy and the agent was a pleasure to work with.

Did you know that in France you are not allowed to cancel an insurance policy in the middle of your coverage year? In other words, you have to wait out the year before you can change insurance companies. In the past, you were required to give two months' notice if you didn't intend to renew a policy on its next expiration date. If you forgot to act two months' before the renewal date, you were out of luck.

Of course, if you sold your vehicle or your house, such rules didn't apply.

About 18 months ago, the insurance agent I knew and liked at AXA told me she was going to retire. My car insurance was about to come up for renewal. I thought the agent's retirement might be a good excuse for me to do some research and see if the rates we were paying for car insurance were competitive. I went to the offices of another big company, MMA, and got the information I wanted

I found out two things. First, I was paying nearly twice as much for coverage through AXA compared to what MMA would charge me for an equivalent policy. Twice! The MMA agent asked me if I had had an accident recently or other reasons to file claims. She thought my annual premium couldn't be so high if I had a good driving record. She found out it could.

MMA also informed me that a new law had been passed in France to give policyholders the possibility to cancel their insurance much closer to the renewal date. In other words, the two-months'-notice requirement had been softened. Now, you have 20 days from the time the insurance company mails out your renewal notice to cancel the policy and take out insurance with a different company. MMA took care of canceling my AXA car insurance policy and setting up a new one for me. I had saved a tidy sum, and every eurocent counts.

I decided to take my homeowner's insurance business to MMA as well. The policy was going to come up for renewal in about three months, so there was time to follow the two-month rule. It turned out that the MMA premium was about the same as AXA's for the same kind of policy — about 300 euros. Still, I thought I might as well consolidate my policies, putting them all with the same company. And I didn't have a personal relationship with anybody at AXA any more, since my agent there had retired.

I do think that insurance agents and companies depend on their customers' immobilisme as a way to maximize profits. Rates edge up, and most people just accept it. It's more trouble to go out and find another insurance company with better rates than to just keep paying. Besides, if you like your insurance agent, you're reluctant to make changes.

So this year, when I got a call from a different company about taking my insurance over to them, I thought I might as well consider it. Problem is, there was a snafu with the issue of "corporate" vs. individual ownership, as I wrote about yesterday.

Why did Walt and I form a corporation to buy the house here? It's because French inheritance laws are very strict. If we owned the house as two individuals, and if I died, my half-interest in the house would automatically and inevitably go to my legal next of kin. In other words, to my mother or my sister back in the U.S. Walt would have to buy them out, or rent back my half from them. If he died, I would have to do the same, dealing with his 7 siblings!

Anyway, we don't want to disinherit anybody, but we do want to keep such things simple. We incorporated ourselves and formed a Société Civile Immobilière (SCI) because such an entity does not fall under family inheritance laws. In France, you can't just leave your property to whomever you please in your will — not if you have children, living parents, or siblings. But you can set things up so that you and your co-owner are business partners, one of whom can inherit the other's half-interest in the corporation if he or she dies.

So there we are. I know of quite a few people, expats included, who have formed SCIs for the same reasons we did. Of course, as a foreigner in France you have to know about the inheritance laws and the possibilities for avoiding their restrictions before you can do so. I bet a lot of foreigners who come to live here aren't aware of them. And of course, for married couples the situation is different. They can inherit from each other. Unmarried couples can't.

What surprised me when I talked to the agent of the insurance company that contacted me last week was this: He quoted me an annual premium of 315 euros for a policy when he thought I was buying insurance as an individual. That was little higher than what MMA (Mutuelle du Mans Assurances, I think, is what that stands for) charges me for coverage that wasn't quite as good. But the company was also offering a 20% discount to new customers like me.

Then when I made it clear that Walt and I don't own the house as individuals but through a real estate company that we ourselves founded and own equally, things changed. All of a sudden, the annual premium of 315 euros covered only the contents of the house. Never mind that earlier it had covered both the building and the contents. To insure the house owned by an SCI, there would be an extra charge of 200 euros to insure the building itself.

It doesn't seem logical to me that 315 euros covered house+contents in one situation, and then the contents only on the other. Maybe I'm not getting something. Of course, the news of the significantly higher premium came after I had sent in a signed form authorizing the new insurer to draft the annual premium from our bank account. So far, no transaction has appeared on our bank account, and I've been reassured that none will.

I renewed my policy with MMA yesterday. Both MMA and AXA are, were, and have all along been aware of the existence of our SCI.