New price war? In car insurance, the pressure is growing

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DThe reinsurance meeting in Baden-Baden is similar to the meeting in Monte Carlo six weeks earlier, like the engine room to the sundeck. If you philosophize on the Côte d'Azur about the great lines, it is on the edge of the Black Forest to concrete contract content. It will not be long before the new contracts start on January 1st. At that time, contract drafters (underwriters) know exactly what messages they want to send out to the market.

Philipp Krohn

Philipp Krohn

Editor in business, responsible for "People and Economy".

But in 2019, which can not be overseen by reinsurers after the recent typhoon in Japan, there are even experienced managers who, even after three days, still have no idea what trends will shape the talks.

"We may now have weaker results for the third year in a row," says Frank Reichelt, responsible for Swiss Re's Northern European business. "The question now is whether the higher premium rates are now spilling into damage-free markets." Over the past two years, there have been more natural disasters than before. Where reinsurers had to pay for high losses, they were able to enforce higher prices for their primary insurance customers – but not in damage-free countries like Germany, where hailstorms and floods continued to go well in the absence of rain. Actually no reason for higher rates – unless the market trend prevails.

By 2020 it will be more expensive

Thus one can already venture a prognosis for the premium development also for end customers in the most important German damage branch, the auto insurance. E + S Rück, in which Hannover Re's German business is bundled, expects a strong increase for auto insurers in 2019. In the past year, the industry had earned 3.9 cents on every euro contribution, this year it could still be three cents, then a penny, expects Andreas Kelb, responsible manager of E + S Rück. "In 2019, the effects were offset by lower claims frequency and higher average claims costs," he says. In the coming year, he expects a lower decline in claims frequency than most recently.

Mathematically, there would be room for lower premiums in car insurance. In the partial coverage, Kelb expects an average reduction of 1.8 percent. Liability and comprehensive insurance are likely to remain unchanged in price. Only in the coming year, he suspects a rise in premiums by three percent.

Others are once again seeing the first signs of a price war. New competitors such as the Insurtechs, which in some cases have major cost advantages, are entering the market. Traditional suppliers do not want to lose market share. "We know that from our discussions with our customers," says Swiss Re-Manager Reichelt. Insurers have learned to improve their cost structures – especially since digital property insurers work with much lower fixed costs. But the technical implementation is difficult. "The market is having a hard time advancing big technical innovations. Players who are faster put pressure on others. "

Even if you ask the Munich Re, you can filter out no clear trend theme. It is clear how dominant technology has become for the reinsurance business: to settle damages more quickly, to more accurately estimate the financial expense of an event or as a new loss class. "5G enables new capabilities to network business units," says Doris Höpke, Member of the Munich Re Board of Management. "Investing in IT security will therefore increase." In a rapidly growing market for cyber insurance, the reinsurer wants to maintain its global market share of around nine percent. In Europe, it expects the premium volume to double within two to three years. "We are experiencing a shift in risk from tangible to intangible assets," says Jan-Oliver Thofern of reinsurance broker Aon. Insurers and reinsurers would have to react with their products.

In the past two years, the topic of forest fires has come to the fore, because more and more insured values ​​have emerged in hazardous areas. Increasingly, Munich Re is trying to link its own data, customer data and scientific data in order to make new risks insurable. "Speed ​​is important to create products that meet customer needs," says Höpke. Today, this will happen within two to four months instead of earlier in a year or more.

(Re) (t) ISIN_DE0008430026 (t) Swiss International Air Lines (t) Swiss Re (t) car insurance (t) reinsurance meeting

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