Higher prices for vehicle repairs have significantly eaten into insurers’ profits in 2023. This year, car owners will probably have to dig deeper into their pockets for vehicle insurance.
Drivers in Germany have to expect significantly higher premiums for their liability and comprehensive insurance policies due to the billions in losses suffered by motor vehicle insurers. Premiums in the industry are likely to grow by ten percent, predicted the General Association of the German Insurance Industry (GDV) in Berlin today. However, how the premiums actually develop is a matter for the individual companies.
Billionaires Loss for motor vehicle insurers
Last year, the industry made an underwriting loss with motor vehicle policies, the GDV continued. Expenses for claims, administration and sales exceeded premium income by around 2.9 billion euros. “For every euro collected there was an expenditure of 1.10 euros,” said GDV President Norbert Rollinger at the association’s annual press conference. A catch-up effect is therefore to be expected in prices.
“It is also to be feared that repair costs will continue to rise,” said Rollinger. The rising prices for spare parts, but also higher wage costs in the workshops, have been causing problems for insurers since the end of the corona pandemic. Recently, however, the premium increases were not enough to make up for this given the price war in the industry.
In general, property and casualty insurance premiums rose by 6.7 percent to 84.5 billion euros in 2023. However, the division’s underwriting profit collapsed by more than half to 1.5 billion euros because insurers were in the deep red with motor vehicle policies. According to the forecast, contributions are likely to be 7.7 percent higher this year.
Revenue in the Life insurance declined significantly
Overall, the insurance industry in Germany barely grew last year. The GDV reported that contributions in 2023 only increased by 0.6 percent to 224.7 billion euros. The main reason for this was the weak business with single-premium life insurance policies, which were much less in demand given rising interest rates and more attractive competing offers from banks. At the middle of the year, the GDV had predicted an increase in premiums of 1.3 percent across all sectors.
Given the difficult environment, “we can be quite satisfied with the result for 2023,” said Rollinger. Life insurers’ premium income alone fell by 5.2 percent in 2023 – more than expected. The GDV also blamed the economy, weak wage developments and consumer restraint.
Managing Director Jörg Asmussen is now more confident for the current year, as insurers have countered this with higher interest rates and shorter terms for their products. At the same time, it can be assumed that the central banks will keep their interest rates stable at least until the middle of the year, which will make short-term investments more attractive. “The bottom line is that we expect an end to the decline and a stable premium development,” said Asmussen. A premium increase of 3.8 percent is expected across all lines in 2024.