Price rises in motor insurance to decelerate as claims inflation eases: Swiss Re

Motor insurance rate increases are anticipated to decelerate soon, driven mainly by disinflation, improved underwriting performance, and increased competition, this in turn should lower the cost of car insurance for consumers, according to the Swiss Re Institute.

With increases in personal motor premium rates are near their peak, and experts expect to see a flattening soon, over the coming months.

Longer term, the main drivers of the deceleration in rate increases over the next two years are expected to be disinflation effects, an ongoing strengthening of underwriting results, and increased competition.

Outsized price increases in personal motor in Germany, the UK and the US have had a notable effect in terms of pushing headline consumer price inflation (CPI) higher.

Germany motor insurance CPI was up 23.4% y-o-y in March 2024, and in the US it was up 22.2%. Although an overstatement of motor inflation for the US meant the March core CPI print was likewise likely overdone, according to Swiss Re.

The producer price index (PPI) puts personal auto insurance inflation at 6.5%, while Swiss Re estimates based on industry rate filings data indicate a 14% y-o-y increase in March.

In the UK, data on all business underwritten show a 33.5% rise in premiums paid in 4Q23, and a 25% gain in 2023 overall compared to 2022.

Swiss Re found that this rise was driven by a surge in losses after the high underwriting margins experienced in 2020 and higher repair and replacement costs on account of global supply chain disruptions and costs of labour.

As well as a rise in the number of accidents as traffic density rebounded post lockdowns, which led to both higher claims frequency and severity.

These premium rates reflected soft market conditions, and profitability in many markets deteriorated markedly. In the US, personal motor insurers lost USD 53 billion 2022-2023.

The pricing improvement over the last two years should feed stronger underwriting results in 2024 and 2025, analysts expect.

With profitability also benefiting from lower inflation in motor-related categories. Swiss Re forecasts slowing claims cost growth compared to 2023 for used car maintenance and repair inflation.

Economic disinflation generally is also expected in the used car market, as well as increasing competition to drive the slowdown in premium rate gains.

For 2024-25, analysts also predict that underwriting profits in the US and UK could remain challenging. A main contributing factor to this is the ease of claims inflation, which together with more adequate pricing and rising investment returns, intensifies motor insurance competition.

Moreover, in the US, the CPI vs PPI comparison, and in the UK data on renewed vs new policies written also signals that competition is on the rise.

This website states: The content on this site is sourced from the internet. If there is any infringement, please contact us and we will handle it promptly.