There are more people on the streets again. As a result, more accidents happen.
(Photo: imago stock&people)
Baden-Baden The world’s third-largest reinsurer, Hannover Re, believes it is necessary for German motor insurers to raise prices sharply in the current changing season. Due to sharply rising spare parts prices and longer repair times, the average amount of damage is currently increasing significantly.
At the same time, the number of damages increases again after the Corona break. “All of this weighs on the results in the motor division,” said Michael Pickel, CEO of the German subsidiary E+S Rück on Monday in Baden-Baden. In order to avoid losses, primary insurers are likely to raise premium income above the 30 billion euro mark for the first time in 2023.
The reinsurance industry traditionally meets in October in the Black Forest spa town to discuss the conditions for the following year with its customers. The renewed losses from natural catastrophes and the sharp rise in inflation had a “negative effect on the profitability of the industry,” said Pickel. He therefore considers rising prices and improved conditions in non-life reinsurance to be “indispensable”.
Bafin insurance supervisor Frank Grund also warned on Monday that insurers should prepare for higher inflation rates in the long term. It is therefore basically inevitable that the increased inflation in 2023 will result in higher premiums in property and casualty insurance, both in new business and in existing business.
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In the motor line of business, E+S Rück expects – in addition to higher prices for natural catastrophe covers and cyber insurance – particularly significant adjustments in both primary insurance and reinsurance. According to the responsible division manager Stefan Schmuttermair, the primary insurers would have to increase the premiums for the year 2023 by at least ten percent to 32.1 billion euros.
The world’s third-largest reinsurer expects prices to rise in motor vehicle insurance.
(Photo: dpa)
According to the E+S calculation, without price adjustments, the sector’s loss in the motor vehicle business would be around two billion euros in 2023, with a ten percent increase in premiums only 100 million euros. If you want to work profitably, you have to turn the price screw even more.
The fact that insurance premiums are likely to increase across the board is related to numerous challenges: After the severe restrictions imposed by the corona crisis, many people drive significantly more cars again – which also increases the number of accidents again.
According to E+S Rück, the claims frequencies have now approached the long-term trend again, but are still somewhat lower than before the pandemic. This is particularly noticeable in motor vehicle liability insurance. Schmuttermair expects significant price adjustments here as well as in fully comprehensive insurance. In his estimation, the increases in partially comprehensive insurance should be somewhat lower.
In comprehensive insurance, business was already difficult in 2021
In comprehensive insurance, the high level of natural catastrophe losses in 2021, in particular due to the flooding after storm “Bernd”, had hailed the results. According to the insurance association GDV, the damage-cost ratio in comprehensive insurance was therefore over 100 percent. That means the industry is already making losses in the division.
Not only is the frequency of damage increasing, the average damage costs are also increasing noticeably. The prices for spare parts have been rising for years, which is now being exacerbated by the massive rise in inflation.
>>Read here: High inflation puts pressure on car insurers – car policies are likely to become significantly more expensive
According to the GDV, car manufacturers increased prices by almost eight percent between August 2021 and August 2022. Disrupted supply chains as a result of the Ukraine war also mean that repairs are currently taking significantly longer than usual.
The trend of falling premiums should be over
Despite these developments, insurance premiums have fallen over the past two years – not least because providers are in fierce competition with one another.
According to GDV figures, the average annual premium for motor vehicle liability insurance in 2021 was EUR 254, after EUR 258 and EUR 260 in previous years. The average premium for fully comprehensive insurance was 324 euros in 2021 and 83 euros for partially comprehensive insurance.
The trend of falling premiums should now be over. However, insured persons do not simply have to accept an increase in contributions. A provider comparison can be worthwhile here. A cancellation for a change to the new year would then have to be made by November 30th.
More: Allianz calls for fewer new parts to be used in vehicle damage.