In the coming months, consumers can also look forward to higher insurance prices. Higher prices are "essential" in both primary insurance and reinsurance, said Michael Pickel, Hannover Re's head of Germany, on Monday.
The triggers are essentially two factors: inflation and nature. Insurance is neither energy-intensive nor does it have high delivery costs, but general inflation is driving up claims sums. And the higher the damage, the higher the costs for insurers who pay for repairs or compensation for damage. Together with Munich Re and Swiss Re, Hannover Re forms the trio of the world's three largest reinsurers, with which primary insurers such as Allianz, Generali and Axa take out insurance.
Example car insurance
A prime example is car insurance, because even before the current phase of high inflation began, the prices for spare parts were rising sharply every year. If car insurers do not want to make losses, they are forced to raise prices themselves.
On average, tariff increases in the double-digit percentage range are required for motor vehicle insurance, according to a presentation by E S Rück, which belongs to Hannover Re. As the largest motor vehicle reinsurer in Germany, E S Rück has a good insight into the tariff structure of primary insurers such as Huk Coburg and Allianz.
"It can be assumed that this year will probably bring a technical loss for primary insurers in the car business," predicted Thomas Blunck, a member of the Board of Management of Munich Re, last week. "This has a lot to do with the fact that spare parts prices have increased, and both new and used cars have become significantly more expensive." The logical consequence is more expensive motor vehicle policies. This applies not only to new contracts, but also to existing contracts.
costs of natural disasters
In other areas, claims are also increasing without any inflation, especially the costs caused by natural catastrophes. "While the images of last year's devastating flood disaster are still very fresh in our minds, this year's winter storms, droughts and forest fires show that natural disasters are on the increase in Europe," said Pickel, manager of Hannover Re. Internet crime has been booming for years, resulting in growing losses in cyber insurance. Some niches are also very damaging, such as manager liability, which companies conclude for their executives.
This creates a reciprocal price spiral: High inflation and high natural catastrophe losses lead to rising costs, part of which the primary insurers pass on to their reinsurers. The reinsurers then raise their prices for the primary insurers, who in turn try to earn more money from customers.
Apart from that, another mechanism contributes to insurance becoming more expensive: According to Swiss Re, some reinsurers are reducing their "capacity" - which means that the reinsurers offer the primary insurers less coverage or fewer reinsurance contracts overall in order to control their own risks to keep. As a result, primary insurers have to assume a larger part of their risks themselves and have to make financial provisions accordingly. Swiss Re had already asked its customers last week to take more risks on their own account.
