In search of an efficient system of unemployment insurance the authors take a look at German history. Four periods of German unemployment insurance are analyzed, namely those of 1871/1914, 1918/32, 1933/39 and 1949/2001. These periods differ greatly with respect to the levels of unemployment as well as regarding the underlying political situation. It turns out that the German unemployment insurance of today has its roots in the year 1927. The main elements — i.e. the lack of insurance principles, the mandatory character and the lack of actual or potential competition — have been upheld since then. These elements did not help ease labor market tensions in the years following 1927, similar to the revealed inefficiency of German unemployment insurance over the past 20 years.