2023-10-23 14:34:46
Car insurance will probably be 10 percent more expensive next year. This is what the Hannover Re subsidiary responsible for German business, E+S Rück, assumes. In a press conference at the reinsurance conference in Baden-Baden, Jonas Krotzek, Head of Central Division at E+S Rück, made it clear that even with this increase, the motor vehicle insurance division will not be profitable in the coming year: “Provided that market participants behave in a disciplined manner, This will not be the case until 2026 at the earliest.”
From discussions with primary insurers, there are signs of a 10 percent increase in premiums, said Krotzek. In order for insurers to make money again with comprehensive and liability policies next year, a price adjustment that is twice as high – namely 20 percent – is necessary. Michael Pickel, head of E+S Rück and board member of Hannover Re, had already discussed this magnitude at the reinsurance conference in Monte Carlo in September, but said that such a price jump would probably not be possible.
“It will get better, but not significantly better”
If the price increase of 10 percent is realized, the car insurers’ earnings in 2024 would still be 8 percent below the profitability threshold, so the combined ratio would be 108 percent. This means that for every euro collected in premiums, car insurers spend 1.08 euros to pay for damages. A combined ratio of 110 percent is now expected this year. “It will get better, but not significantly better,” summed up Krotzek.
Motor vehicle insurers earned well during the corona pandemic. The restrictions resulted in a sharp decline in mobility, and the number of damages caused was correspondingly low. This year the discussion is significantly different. However, the highly competitive industry has not succeeded in imposing the actually necessary price adjustments on consumers. This is now resulting in a historic loss for car insurers, which has not been incurred at this level in the past two decades.
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The Hannover Re subsidiary E+S Rück, whose shareholders also include eight German primary insurers, is itself affected to a lesser extent by the development, said Pickel. E+S Rück is the largest reinsurer in the German motor vehicle business. It counts 63 of 93 auto liability and comprehensive insurance companies among its customers. The explosion in the price of damages, caused by higher wage costs, a shortage of skilled workers and increased spare parts prices, primarily affects the comprehensive insurance area and less so the liability insurance.
Primary insurers often record hull damage on their own books and do not pass the risk on to reinsurers. The increasing number of extreme weather events is also putting pressure on motor vehicle insurers. For example, damage caused by hail is covered by fully comprehensive insurance.
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