Motor vehicle insurance in Germany: Premiums continue to rise despite crises!

Motor vehicle insurance in Germany: Premiums continue to rise despite crises!

The motor vehicle insurance industry in Germany continues to face financial challenges. In the last two years, German motor vehicle insurers have recorded losses worth billions. According to Hannover Re, insurers spent almost five billion euros more on claims, administration and sales than they received in premiums. In order to cover the increased expenses, many providers have significantly increased the premiums for their customers. However, these adjustments were not enough to offset the costs in 2024.

Hannover Re estimates that insurers will be able to cover expenses again in 2024. The reason for this confidence lies in the expected stabilization of market conditions. But the last few years have been marked by drastic increases in the costs of spare parts, which have increased by over 80 percent on average. The consumer price index has risen by around 30 percent since 2015, which is putting additional pressure on premiums.

Financial losses and market forecasts

For 2023, German motor vehicle insurers expect a loss of up to two billion euros. Despite a forecast increase in premium income to around 33.6 billion euros, expenditure on claims and administration is expected to be between 34.9 and 35.6 billion euros. In the previous year, 2022, motor vehicle insurers already suffered a loss of over three billion euros. The main reason for these financial difficulties is the continuously rising repair costs, which have also led to an increase in the average property damage in motor vehicle liability insurance in recent years. This was around 4,000 euros in 2022, compared to 2,500 euros in 2013.

The General Association of the German Insurance Industry (GDV) emphasizes that there is a significant connection between the development of claims and the premiums for motor vehicle insurance. The insurance regulator BaFin expects motor vehicle insurers to take appropriate account of rising claims inflation when calculating premiums.

Market development and growth prospects

Motor vehicle insurance has a market share of 21 percent in the German insurance market, with accident and health insurance leading the way with 37.7 percent. However, the automobile insurance industry faces optimistic growth prospects. An average annual growth rate of 2.2 percent is expected between 2023 and 2028. In 2023, car insurance premiums increased by 1.8 percent, partly due to inflationary trends.

There has also been an increase in vehicle sales in Germany so far: 2.84 million vehicles were sold in 2023, representing an increase of 7.2 percent compared to the previous year. The number of passenger cars increased by around 688,000 vehicles in 2024; A total of around 69.1 million vehicles are registered in Germany.

A further increase in premium income in the motor vehicle insurance industry is expected in the future. A year-on-year increase of around 9.9 percent is forecast by June 2024, which could provide much-needed stability to the market.

However, challenges remain present and insurers must find creative solutions to adapt to the ongoing changes in the industry. Further information on the current situation of motor vehicle insurance in Germany can be found on the website Mirror, GDV as well as Allianz Direct.