A few more weeks, and then the hot phase of the changing auto insurance season begins. Car owners get the premium bills and find out if they will have to pay more or less for their auto policy in the coming year. This year, fall could be particularly exciting. The crucial question: will auto insurers fight the long-awaited price war this year?
Every year, millions of car owners search for a cheaper rate, and many switch providers. This is often a few euros, but sometimes triple-digit amounts can be saved per year. The differences between the rates are huge – almost always worth comparing. Nowhere is the competition between insurers so fierce.
The prerequisites for a price war – and therefore lower premiums – are in any case in place: auto insurers benefit greatly from the fact that mileage on German roads has dropped significantly due to Corona and that they have to pay much less for the damage than in the years before the pandemic. “Unlike many other industries, Corona is an exceptional source of income for auto insurance,” said Marco Morawetz, auto insurance expert at reinsurer Gen Re, at a specialist event in Cologne.
The Corona special profit amounted to several billion euros in 2020. Only a few insurers such as HUK-Coburg and DEVK have given a large share of this to their customers. Gen Re calculated that companies achieved a loss and expense ratio of around 87% in 2020. This means that for every euro they contributed, they only had to spend 87 cents on damages, l administration and sales. They haven’t been so profitable for a long time.
This year could also prove to be good for companies
The bottom line is that 2021 could also have a positive corona effect for auto insurers, Morawetz expects. Traffic is on the rise again, but the damage is still below average. Suppliers should therefore end the current year with a claims and expense ratio of around 95 percent, so still with a decent profit.
This is also noteworthy as auto insurers will have to spend significantly more on natural hazards this year than in 2020 – especially on cars destroyed or badly damaged in the severe floods in July. According to information from the GDV association of insurers, the “Bernd” storm depression alone costs almost half a billion euros.
Last year the price war had already failed to materialize despite high profits, and premiums have fallen slightly at best, expert Morawetz reported. So far this year, it doesn’t look much different. One reason: most auto insurers know their situation would be anything but rosy without the corona effect.
The differences in the market are big: some providers like the market leader HUK-Coburg with its online insurer HUK24 are working at a relatively low price and trying to extend their lead with the lowest possible premiums. Many competitors are lagging behind and rely heavily on search engines like Google or comparison platforms like Check24. However, these sales channels cost money. Uwe Stuhldreier, Sales Manager at HUK24, is therefore not lacking in self-confidence. The term price war only exists in the vocabulary of service providers who cannot afford the low contributions of their company. “HUK24 can afford its prices.”
Telematics tariffs and autonomous driving could lower premiums
More and more insurers are offering telematics rates in which customers are rewarded for safe driving with premium discounts. Insurers expect fewer accidents and therefore less damage. But in this country it has so far been a niche. “We cannot say that we are already in a phase of very strong growth in Germany”, explains Ute Apel, automotive expert at the insurer Ergo. The share of telematics tariffs in the total volume of motor insurance is still less than five percent.
Other countries like the UK, Italy and the US are further afield. Because car premiums are higher here, customers can save a lot more money with a telematics tariff than in Germany. It helped the policies triumph.
Experts predict a dramatic drop in damage and auto insurance premiums due to the growing spread of autonomous vehicles. So far, however, they are more of a dream of the future. Assistance systems, including parking and maneuvering aids or lane keeping systems, are already a reality. However, they have no influence on many types of damage such as car theft, falling rocks, hail and marten bites, according to a study by the GDV insurance association. Additionally, according to Apel, systems install more slowly than initially thought. “In addition, technology makes repairs much more expensive.
Nevertheless: telematics, assistance systems and reduced mileage, these are all prerequisites for insurers to earn real money with car insurance, at least in the short term. The temptation to increase its market share through lower prices or at least to protect it against attacks from competitors is all the greater.
The price war was therefore only postponed. Prices will start to move at the latest when the alliance wants to close the gap with the pressed competitor HUK-Coburg with even more publicity and lower prices. For consumers, this means comparison is the ultimate solution.
It can actually be worth it and fetch more than ten or 20 euros. One reason: because they have high costs in the fight for new customers and have to offer them at low prices, companies like to regularly raise prices for existing customers. Insurers themselves do not tell motorists that they are much cheaper for new customers.