Insurers apply the biggest price increase in history to car insurance

Insurers have imposed the largest price increase in history on compulsory car insurance. So it is registers the National Institute of Statistics (INE). The annual change in motor vehicle insurance has averaged 10% since last June, which represents a record increase. In this way, it has become more expensive on average by almost 17% in the last two years. To see this kind of increase, you have to go back to February 2002, when car insurance rose 7.3% year on year. For more than 20 years, annual increases have been around 3% or less than that number.

Insurers are making price increases that they have been warning about since the inflation crisis began in Europe. General director of corporate finance MapfreFernando Mata, at the end of last July that there would be a new rate update in 2024 to be able to cover the costs incurred. Elena Sanz, the first operator of Mapfre Iberia, had shown the same line at the end of June, indicating that they had to apply increases to make the car industry profitable again.

The parent company is not the only one that has recognized a loss. There are others with similar problems. A financial director is a A straight lineCarlos Rodríguez Ugarte, warned in April that his company planned to continue increasing the prices of car policies this year. Although it has already returned to profitability, the company that took Bankinter public took a loss of 4.4 million euros in 2023, which it largely attributed to the “imbalance” in the main insurance business their cars.

The crisis is better Mutua Madrileñaalthough it does not rule out price increases either. Ignacio Garralda pointed out in April that “the car sector is losing money. Many companies are losing money and, as a result, they have to raise prices to make a profit.” “Inflation has had a significant impact on the entire sector, with a clear increase in workshop costs, material damage and personal injury,” said Garralda, who attributed the lower impact to exposure to Madrid, where he pointed out that the frequency of traffic is lower.

In recent years, the combination of income and expenses for insurers in the automobile industry has been negative. The companies themselves have been affected by this situation due to the increase in costs that they had to accept, both relevant and personal, due to the increase in accidents and the increase in prices. To try to recover, they had to increase fees for their clients, but this is always a complicated decision, as it is a very competitive sector and an increase in insurance can cause a loss of clients , resulting in billing losses. . Getting that combination right is part of success.

In addition to exogenous factors such as inflation, sources from the insurance sector who are familiar with the situation explain that there have been strategic failures in some companies that have led to the current situation. After the war in Ukraine started and fuel prices went up, some insurance companies believed that, based on the algorithms that show the historical behavior of their clients, car traffic and, therefore, accidents going down.

All this influenced them that it would not be necessary to increase the rates for the policyholders, because they would not have so many costs and without raising prices it is always easier to keep clients. But the reality was different and despite the fact that gasoline and diesel reached almost two euros per liter, travel did not decrease as expected. It should be noted that after the pandemic, consumption and consumption related to travel have grown strongly in the context of rapid economic recovery, which also increases traffic on the roads.

All this led, as the insurers admit, to an increase in the level of accidents above what was expected and at a time when the fees for workshops or clinics had increased significantly due to inflation , the costs of the insurers went up, which caused the business. to file a loss because the policyholders’ income did not grow in line.

To correct this situation and balance their accounts, companies had no choice but to raise prices across the board, as the INE now collects in the distribution of the basket of products in the Consumer Price Index (CPI).