On the threshold of the new year, CED CBC – as your knowledge partner – would like to share some important insights with you. International trends in the industry and the market that can influence your and our business.
#1
Inflation and rising repair costs
The cost of vehicle repairs has increased significantly, driven by inflation and supply chain disruptions. This has caused insurers to raise premiums to cover higher claims payouts. Also, parts shortages, especially for advanced vehicle technologies, have led to repair delays and increasing costs. Insurance company Allianz reported that the repair costs for vehicles had increased by as much as 15-20% (including inflation). And consultancy company Deloitte reported that because of this, motor insurance premiums in Europe rose by an average of 5-10% over the last 12 months.
Increased adoption of telematics
There is a growing trend towards telematics-based insurance, where premiums are adjusted based on real-time driving behaviour. This data-driven approach appeals to younger drivers and encourages safer driving habits. Insurers are increasingly using this to better assess risk and offer personalised policies. In the UK and Italy, more than 40% of new car insurance policies included telematics-based premiums. Across Europe, telematics insurance policies are expected to grow at a compound annual growth rate (CAGR) of 16.5% from 2023 to 2028.
#2
#3
Focus on digital transformation
Many insurers have accelerated their digital transformation, streamlining claims-handling processes through AI, automation, and mobile apps. Digital-first insurance models, allowing customers to file claims, track progress, and receive payments via apps, are becoming more popular. This trend is particularly strong in Northern and Western Europe. Insurer AXA launched its AI-based claims handling system, reducing the average claim processing time by 40%. According to consultancy firm McKinsey, insurers that have embraced digital claims management reduced operational costs by 10-15% and increased customer satisfaction by 30%.
Impact of Climate Change on Claims
Extreme weather events, such as floods and storms, have led to an increase in motor insurance claims, particularly in Central and Southern Europe. The European Insurance and Occupational Pensions Authority (EIOPA) already estimated that weather-related claims accounted for 15% of all motor insurance claims. Germany saw a spike in motor insurance claims following the severe floods in mid-2023, where insurers faced claims exceeding €2 billion from vehicle-related damage. Therefore, insurers are adjusting their risk models to account for the growing impact of climate change on vehicle damage, leading to changes in pricing strategies.
#4
#5
Legal and Regulatory Changes
New regulations focused on consumer protection and data privacy, such as the EU’s General Data Protection Regulation (GDPR), are influencing how insurers handle claims and manage customer data. There is increased attention to claims transparency, requiring more clear and efficient communication with policyholders. End-consumer protection and treating customers fairly are now central to most insurers’ customer experience. But regulatory compliance costs for insurers across Europe are estimated to have increased by 8-12% over the past year, according to consultancy firm PricewaterhouseCoopers.
Rise in fraudulent claims
Fraudulent claims have been on the rise, especially in certain markets like the UK and Spain. In the UK, Insurer Aviva reported an 18% increase in fraudulent motor insurance claims in 2023. They see a sharp rise in ‘crash-for-cash’ schemes, where fraudsters deliberately cause accidents to claim compensation. The Association of British Insurers (ABI) estimated that motor insurance fraud cost the UK industry £600 million in 2023. This has pushed insurers to invest more in fraud detection technologies, such as AI and machine learning, to identify and prevent fraudulent activity.
#6
#7
Electric vehicles (EVs) and insurance coverage
The rising popularity of electric vehicles (EVs) is changing the motor insurance landscape. EVs generally require more specialised repair work, which can be more expensive, impacting claims costs. A study by Zurich Insurance revealed that repairs for electric vehicles can cost up to 30% more than traditional cars. Insurers are also grappling with limited data on EV risks, leading to evolving pricing models as they gather more information on EV accidents and repair trends. The European EV market grew by 28% in 2023, and motor insurers are adjusting premiums – typically 20-25% higher – to account for higher repair costs.
Post-pandemic adjustments
The motor insurance sector is seeing adjustments post-COVID-19, as driving patterns have changed. There is a lower frequency of claims compared to pre-pandemic levels, but the severity of claims has increased, possibly due to fewer, but more serious, accidents. A report from insurer Swiss Re indicated that the overall number of claims in Europe in 2023 was down 15% compared to 2019 levels, but the average claim cost increased by 10-15% due to more serious accidents and higher repair costs.