Higher food prices, steep hikes in gas and electricity prepayments, record gasoline prices. Most households are at the limit. Now the insurers are coming. If they have their way, motorists will pay at least ten percent more for insurance in the coming year. Building owners should be asked to pay 15 percent or more. Whether the companies can enforce this will depend on how willing the Germans are to change their insurer.
Hardly any car insurer has commented on this publicly. Because that could disrupt new customer acquisition in the coming weeks up to the end of November, when drivers can switch with effect from 2023. But at the reinsurance meeting in Monte Carlo that just ended, almost everyone agreed: Both the wholesalers of the protection, the reinsurers such as Munich Re or Hannover Re, and the primary insurers such as Axa or Zurich are preparing adjustments.
They cite inflation as the reason. As things stand at present, motor vehicle insurance prices in Germany need to be increased by at least ten percent just to compensate for them, said Hannover Re board member Michael Pickel in Monte Carlo. The main reason is the higher prices for spare parts. His company is number three in the world and one of the leading suppliers in Germany, Pickel is responsible for the market. His word carries weight.
“Inflation will peak in 2022.”
“In homeowners insurance, values and prices are up more than 15 percent,” he said, referring to house values and the cost of repairs. These dates are provisional. The companies may want to push through even more.
“Inflation will peak in 2022,” said Torsten Jeworrek, a board member of Munich Re, the world’s largest reinsurer. But it will still play a major role in 2023. Prices for reinsurance coverage need to reflect that, he said. “If we don’t achieve that, we withdraw reinsurance capacity.”
The message got through to primary insurers. “By the end of the year we will increase the prices for existing customers by 10 percent in vehicles and 15 percent in buildings,” said a board member of a medium-sized insurer from the Rhineland, who did not want to be quoted. That’s what most societies wanted to do. A few planned a five percent increase and a further step at the end of 2023.
In the past two years, motor vehicle insurers have earned better than they have in years. The reason was the pandemic. Drivers were out and about less, so there were fewer accidents. Car owners paid 29 billion euros in premiums for their insurance in 2021. The companies spent 23.8 billion euros on damage. There is also sales and administration. Nevertheless, 1.5 billion euros remained, despite the high level of damage that storm “Bernd” also caused to vehicles. In 2020, the so-called technical profit even amounted to 2.7 billion euros. In addition, insurers posted significant capital gains in both years.
Inflation is not just inflation, it varies from area to area.
Unlike homeowners insurance. In this division, “Bernd” caused a loss of at least four billion euros. In building insurance, there is also a phenomenon that insurers are particularly concerned about: inflation is not always the same, it varies from area to area. When settling damage in the Ahr Valley and other affected regions, it turned out that repairs and new buildings are much more expensive than calculated by the insurers, even if they constantly adjust these values.
There is another special feature in car insurance. The prices for certain spare parts have been rising significantly faster than the inflation rate for several years. If it is a part that is visible from the outside or inside, the manufacturer’s design protection applies. Then no third party is allowed to manufacture this part and possibly offer it cheaper. The manufacturer has a virtual monopoly here – and in view of the tight profit margins in the new car business, it makes full use of it.
However: Wanting to raise prices is one side. But whether the insurers can enforce the increase is another. There is fierce competition among companies.
How much the premiums rise depends primarily on the insured. In hardly any other area of the economy is the majority as lazy as in insurance. They shy away from the effort of finding a new company and entering and comparing data.
Not all insurers are listed on Check24 or Verivox.
This has led to the bizarre situation that almost all insurers treat their loyal customers worse than new customers. Anyone who stays with a company for a long time pays more than someone who changes frequently. In order to attract new policyholders, the companies subsidize their prices in the first year – at the expense of existing customers. In addition, some customers have ancient contracts with conditions that are just as old and are completely inadequate today.
Insurance customers should review their contracts at least once a year, even without the provider notifying them of the increase. It is often worth using a comparison portal to find out whether a rival offers the insurance cover cheaper. Attention: Not all insurers are listed on Check24 or Verivox, who act as insurance brokers and receive a commission if you click on an insurer and then conclude the contract there.
Germany’s largest car insurer HUK-Coburg and several other companies do not work with the portals. Nafiauto.de offers a neutral comparison, this comparator does not want to sell.
Basically, compare, compare, compare and don’t be afraid to change. Anyone who stays with a company out of sentimentality or loyalty to a representative should realize that this company has probably been cheating them for years with the inflated prices for existing customers. And she would have no scruples about terminating the contract after one or two damages.