Swiss Re: Auto Insurance Price Rises to Decelerate as Claims Inflation Eases

Auto insurance price rises are expected to decelerate from current heights as claims inflation eases, according to a new economic analysis from Swiss Re.

With more adequate pricing returning, competition in auto insurance is beginning to intensify, leading to expectations that underwriting profits will remain challenging in 2024-25, according to the Swiss Re analysis.

“The sharp gains in motor prices in advanced markets over the last two years came as insurers sought to repair underwriting profits,” the report states. “U.S. personal motor insurers lost a cumulated USD $53 billion in 2022-23. We anticipate that the rate increases will decelerate soon, driven mainly by disinflation, improved underwriting performance, and increased competition.

Key points from the authors of the report include:

• We expect price increases in personal motor to flatten soon.
• In the U.S., an overstatement of motor inflation meant the March core CPI print was likewise likely overdone.
• The rise to current highs has come as insurers re-priced premium rates to repair underwriting results. In the US, personal motor insurers lost USD $53 billion 2022-2023.
• We expect improved profitability, falling prices for used cars and repairs, economic disinflation generally, and increasing competition to drive the slowdown in premium rate gains.
• In the U.S., the CPI vs PPI comparison, and in the U.K. data on renewed vs new policies written signal that competition is on the rise.

“In our view, increases in personal motor premium rates are near their peak, and we expect to see a flattening of month-on-month changes over the coming months,” the report states. “Longer term, we expect the main drivers of the deceleration in rate increases over the next two years will be disinflation effects, an ongoing strengthening of underwriting results, and increased competition. The deceleration should lower the cost of car insurance for consumers.”