Price competition in the German motor market: reinsurer Swiss Re emphasises the importance of adequate pricing. Reinsurance cover increasingly dependent on price structure.
20 Jul 2005
Pricing in the German motor insurance market is becoming increasingly competitive. At a media briefing in Unterföhring near Munich, Swiss Re Germany provided an overview of the market and explained that, in the future, Swiss Re would strive to be even more selective in providing underwriting capacity, calling on cedents to introduce risk-adequate pricing structures.
Swiss Re, the world’s second largest reinsurer and Germany’s leading motor reinsurer, told media representatives that current developments in the German motor insurance market were cause for concern. If the price war continues at its current level of intensity, underwriting losses will once again be a distinct possibility. A further issue is the rise in medical and long-term health care costs — currently above the rate of inflation — along with rising compensation awards for pain and suffering.
"Unless a significant number of primary insurers rethink their pricing policies soon, we will be looking at a new round of losses,” commented Dr Ludger Arnoldussen, Chairman of the Board of Swiss Re Germany. “As reinsurers, we are watching the latest developments with a certain trepidation. We want to use our risk capital to promote those insurance companies for whom tailored, risk-adequate pricing structures are a matter of priority." Swiss Re Germany is the reinsurer with the highest volume of motor business in its portfolio, with premiums from motor treaties making up some 35% of the total volume.
Swiss Re pointed out that German motor liability insurers produced combined technical losses of around EUR 6.5 billion in the years from 1987-2004. "It is important that the positive technical results currently on insurers’ books are not eroded again," explained Roland Voggenauer, Head of Actuarial Consulting at Swiss Re Germany. "From a reinsurer’s point of view, we must avoid a situation similar to the one in the middle of the 1990s, when the motor line ran up huge losses in the wake of deregulation."
To support the insurer and make a contribution to risk-adequate pricing in motor insurance, Swiss Re recently registered a patent for a new product: "Mileage Monitoring" is an innovative pricing instrument which enables the mileage driven by insured vehicles to be recorded on a chip card. This information, vital for calculating premiums, can be forwarded quickly, reliably, and above all, on a regular basis to insurance companies, where it can be used effectively as a rating factor within a modern tariff structure.
Rising costs of medical and long-term health care outpacing inflation
"In Germany, the claims frequency — that is the number of claims relative to the number of insured vehicles — is around 8%,” explained Dr Thomas Fausten, Head of Claims Management Germany. “With 1.3 road fatalities for every 10,000 vehicles, Germany occupies a mid-table position. In terms of compensation, however, Germany is right at the top of the European league table. It is important, therefore, that this issue be paid some attention during pricing."
Germany is by far Europe’s largest motor insurance market, both in terms of premium volume (EUR 22 billion) and registered vehicles (around 53 million). An average motor liability policy costs around EUR 300 in Germany, which is within European norms. Claims involving serious bodily injuries are having an increasing impact on the results of motor insurers, however. Claims payments —for instance those made in the event of severe injuries — rose from EUR 1.25 million in 1990 to around EUR 2.2 million in 1998, and to EUR 3.5 million in 2003. This represents an increase of 170% between 1990 and 2003.
The long-term development of serious bodily injury claims is an important issue in motor liability insurance. It is essential that insurance companies recognise trends as early as possible in order to respond to future claims developments. Against this backdrop, Swiss Re published a study entitled "European motor markets", which analyses the motor markets of 15 European countries.
"European Motor Markets" is available in English and can be ordered by e-mail (info.srmuc@swissre.com),
by telephone (+49 89 3844 1234), or by fax (+49 89 3844 2279).
Information for editors
Swiss Re Germany
Since July 2001, Swiss Re Germany has been responsible for property and casualty business in Germany, Austria and the Nordic and Baltic countries, as well as in Central and Eastern Europe. German life business is also serviced from Munich. With its service companies AssTech and ReIntra, Swiss Re Germany offers a comprehensive range of state-of-the-art risk management services going far beyond simple risk transfer.
Swiss Re in Munich employs a staff of around 550. In 2004, the company’s gross premium volume amounted to some EUR 1.86 billion.
Swiss Re Group
Swiss Re is one of the world's leading reinsurers and the world's largest life and health reinsurer. The company operates through more than 70 offices in over 30 countries. Swiss Re has been in the reinsurance business since its foundation in Zurich, Switzerland, in 1863. Swiss Re offers a wide range of products for managing capital and risk. Traditional reinsurance products, including a broad range of property and casualty as well as life and health covers and related services, are complemented by insurance-based corporate finance solutions and supplementary services for comprehensive risk management. Swiss Re is rated "AA" by Standard & Poor’s, "Aa2" by Moody’s and "A+" by AM Best.
Contact:
| Marketing Communications | Munich | tel. +49 89 3844 1234 |
| Group Media Relations | Zurich | tel. +41 43 285 7171 |
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