An analysis published by the Polish member of the Vienna Insurance Group family, insurer Compensa, highlihts 5 events that had a major impact on motor insurance in 2022, also anticipating some of 2023 trends in the Polish motor insurance business. As these trends are largely common to many markets across the CEE region, we are offering an English version of it.

Drivers from Poland conclude about 30 million contracts of compulsory third party liability insurance and 7 million voluntary motor own damage insurance (MoD) annually, according to the Insurance Guarantee Fund (UFG). According to industry experts, this year the number of purchased TPL and MoD policies will be higher compared to last year, but the growth rate will slow down compared to the pre-pandemic state. "The motor insurance market does not operate in a vacuum and is indirectly affected by the phenomena observed in the automotive industry. In 2022, this was clearly visible. First of all, fewer cars were leaving the factories, and the import of used vehicles clearly slowed down - these are still felt effects of the pandemic, intensified since February by the outbreak of war in Ukraine. They inevitably affect the number of MTPL and MoD policies purchased. In recent months, we have also dealt with several other factors that have had a major impact on the insurance market, including in the context of claims handling", says Damian Andruszkiewicz, responsible for motor insurance at Compensa TU SA Vienna Insurance Group.

Below are 5 events that had a major impact on TPL and MoD insurance in 2022.

• Claims handling: high inflation and new KNF guidelines

The passing year started with numerous damages caused by storms and gales. This was of great importance for MoD policies, which provide compensation after damage caused, for example, by hail or branches falling from trees. After an intensive beginning of the year, the situation in terms of claims normalized. The UFG reports that in the first three quarters of 2022, insurers received 1.3 million claims from TPL and MoD, which is slightly less compared to the same period of the previous year.

"Although there was less damage, year-on-year their value increased to PLN 10.83 billion. This is over PLN 1 billion more compared to 2021. The costs of repairs are increased by inflation and lack of access to parts, while the labor costs are also more expensive. Motor insurance premiums are linked to claims handling costs, so these increases are likely to affect TPL and MoD prices in 2023. Motor insurance rates are still rather low, and it will be difficult for insurers to maintain the current level. The recommendations of the Polish Financial Supervision Authority (KNF), i.e. a precise set of guidelines defining the quality of claims handling that came into force recently, add to the pressure on prices", explained Damian Andruszkiewicz from Compensa.

The rules formulated by the Polish Financial Supervision Authority have been in force since November 1, 2022. They are intended to introduce a common claim settlement standard for the entire market. Based on these, drivers receive detailed information about the origin and quality of the parts to be used to repair the car. In addition, insurers value the damage in such a way that the repaired car is as close as possible to the condition of "new".

• More expensive cars and "underinsurance"

Inflation, long waiting times for new cars, a weak zloty, or parts supplies disturbed by the pandemic and war in Ukraine have also increased the prices of used cars. In the first part of the year, experts from the OLX Group talked about increases of up to 30-50%. The higher value of one's vehicle means the need to update the MoD policy, because the maximum compensation (so-called sum insured) is determined according to the market value of the vehicle at the time of purchase of insurance.

"If, after concluding a contract with the insurer, the value of the car "goes up", even the highest compensation will not be enough to cover large damages. I mean theft or total destruction of the car in an accident. The term that describes this situation is "underinsurance". It is not the fault of the insurer or the driver, because the sum corresponds to the valuations of independent organizations: Info-Ekspert, EUROTAX or DAT. The value of the car in the policy can be easily updated. All you need to do is contact your insurance company in any way and ask for the sum insured to be changed to the correct one', explains Andruszkiewicz.

• Insurers with access to penalty points information

In mid-June 2022, insurers gained access to information on how many penalty points the drivers insured with them have. It was one of the loudest topics of the passing months - drivers were afraid that even minor offenses on the road would significantly increase the price for compulsory liability insurance. right? Probably not, as insurers may or may not use this information. In addition, there are many criteria for calculating the premium, and the most important ones have not changed with access to penalty points. This is simply one of the factors that affects the price of MTPL, which still depends to the greatest extent on, among others, on the driving history and the number of claims on the driver's account, his age, place of residence or car make and model.

• Development of electromobility

The subsidy program "My Electric" means that more and more electric cars appear on national roads. By the end of October 2022, there were 28.3 thousand fully electric cars in Poland, according to the Polish Alternative Fuels Association (PSPA). An electric car must be insured under the mandatory third party liability insurance, but the return of subsidies from the government program is secured by an MoD policy, which the owner of an electric car must have for 2 years. "The development of electromobility has a very large impact on the insurance industry - in terms of claims handling and premium calculation, because the valuation of an electric car policy is carried out on slightly different principles than for combustion cars. In their case, one of the most important criteria for the valuation of motor insurance is the engine capacity, because the car's power depends on it, which translates into potentially greater damage. There is no capacity in electric cars, so the insurance industry had to modify the method of MTPL and MoD pricing", Damian Andruszkiewicz from Compensa.

Drivers have doubts whether the Polish market is ready for electric cars - whether garages have access to parts and qualified employees, and what the assistance looks like, e.g. when the car discharges while driving. It is worth asking the insurer about it to be sure of support in the event of a breakdown on the route - e.g. towing to the nearest charging station or to a workshop that will deal with the fault of an electric car.

• Higher minimum wage - in 2023, two increases in penalties for the lack of liability insurance

The number of penalties for the lack of compulsory MTPL insurance is related to the minimum wage. The UFG charges the maximum fee after 14 days without an insurance policy - 3 times the minimum wage established for a given year in the case of trucks, 2 times for passenger cars and one third for other vehicles (including motorcycles).

In 2023, drivers will exceptionally face two increases in fines for the lack of MTPL, because in the middle of the year the minimum wage will increase from PLN 3,383 to PLN 3,450. So, from January 1 to June 30 next year, owners of passenger cars driving without a compulsory insurance policy will be threatened with a payment of PLN 6,770, and from July 1, as much as PLN 6,900. The stakes have never been so high.

Source: Compensa TU SA Vienna Insurance Group

Translated and edited XPRIMM