Munich The traditional car insurance industry is facing massive changes. The younger generation in particular is increasingly turning to car sharing, leasing and subscription models. This is leading to a rethinking process among insurers the likes of which the industry has not seen in decades, because the focus is now on benefits over time – no longer on the family car.
Although the traditional market is still growing, this could change in a few years: "It may be that the ever-increasing spread of subscription and sharing models will slow down or end this development in the future," expects Katharina Amann, head of Volkswagen Autoversicherung, the joint venture between Allianz and VWFS, VW's finance division.
But in the meantime, spare parts and workshop costs are rising, most recently by 7.6%, and the industry is suddenly making losses. A combined ratio of 101 percent is the result, according to the GDV insurers' association. The ratio shows the relationship between the costs that the insurance company has to pay in the event of a claim and the income. A value above one hundred percent means a loss for the industry.
Huk-Coburg, the undisputed market leader in Germany for years with around 13.7 million policies, recorded a rate of 103.6 percent last year, compared with 93.3 percent a year earlier. The main trigger was the high level of motor vehicle claims, which had risen by an average of around eight percent.
"The stability of the pre-Corona era is not coming back, and uncertainty will continue to characterize 2023," says Klaus-Jurgen Heitmann, CEO of Huk-Coburg.
"Pay as you drive": insurance companies adapt to customer behavior
Due to the loss-making business, many providers are already working on extensive innovations. The driver here is changing customer behavior: "We have many more types of use and are moving away from owning to using mobility," says Thorsten Kruger, head of Volkswagen Insurance Service (VVD).
For a manufacturer like Volkswagen, which is rapidly shifting its production toward e-vehicles in the coming years, the business of insuring them will also have far greater significance in the future.
Car insurance is thus only one part in an overall package. Under the heading of "embedded insurance," the industry has therefore been trying for some time to embed insurance coverage in more and more products and services, as it were.
Over the course of the year, the insurer plans to offer a so-called "pay as you drive" tariff. "For example, we get the mileage directly from the car," announces Amann. "Pay as you drive" means here: Customers only pay as much for insurance as they actually use the vehicle.
Changing mobility: e-cars impact business
But the changing approach to mobility is not the only challenge facing insurers. Increased sales of electric vehicles are already creating a different claims picture than for combustion engines.
If, for example, an engine fire occurs as a result of an accident, the costs of disposal are disproportionately higher. Conversely, e-cars are stolen less frequently than those with conventional drives, which provides relief for insurers.
Providers are just beginning to get an overall picture from a large number of claims. "In terms of claims development for e-cars, we are in the middle of a development, and it would be far too early to have a conclusive opinion here," says Amann.
For a manufacturer like Volkswagen, which is rapidly shifting its production toward e-vehicles in the coming years, the business of insuring them will also be far more important in the future. "We want to retain half of all internal combustion vehicles built in the Group and 80 percent of electric vehicles, including insurance," says VVD board member Kruger.
For insurers, it is often cheaper when vehicles are repaired at a partner workshop.
(Photo: imago images/McPHOTO)
He sees major challenges ahead for his company. Because e-cars have so far often been used as second cars in the family and have had low annual mileage. This is likely to change with increasing ranges and higher market penetration, says Kruger.
In ten years, many first cars are likely to be e-cars. This has an impact on the claims statistics. "We will have to price faster and with more foresight than in the past," says Kruger.
Used car trade and vehicle leasing interesting for car brands
Other trends are emerging for motor insurers. The focus is on increased cooperation between the car industry and insurers. Last year, for example, market leader Huk-Coburg announced the acquisition of a 25.1 percent stake in the Pitstop repair shop chain in order to lower its own claims costs through better price control.
In addition, insurers have entered the currently lucrative business with their own used car sales in Dusseldorf.
The increasingly frequently agreed workshop commitment also contributes to cost savings for customers and Huk. Around two thirds of contracts now contain this module, according to which the vehicle is repaired in the event of a claim at a partner workshop of the insurer and not at a workshop of the customer's choice.
On the part of the car manufacturers the tendency goes into another direction. "Our goal is to lease a car not just once, but a second and possibly a third time," says VVD board member Kruger.