Swiss Re's latest report "Shifting gears in a changing landscape" provides insights into the trends and challenges that are currently shaping the motor re/insurance market. Swiss Re's mid-term global outlook for motor insurance is cautious as challenges persist in this competitive market and are being joined by new ones, as mobility undergoes a dramatic transformation.
Swiss Re's Chief Underwriting Officer Casualty Laure Forgeron said: "The global motor insurance market is both dynamic and rapidly evolving. At this moment, the introduction of new tariffs will have a material impact by increasing repair costs and putting supply chains under pressure, ultimately leading to rising claims cost.
As we look ahead, the ongoing technological transformation will undoubtedly add complexity while also presenting unprecedented opportunities for innovation in motor insurance. Vehicles of the future will be more connected, autonomous, shared and electric, and insurance must be tailored to fit this new reality."
Key takeaways
Making up about 40% of the USD 2.2 trillion P&C market, motor insurance is a strategic business for the insurance industry. In 2024, nearly 90 million light vehicles were sold globally, all covered by compulsory insurance policies. These policies protect against third-party liability for property damage and bodily injuries, as well as motor-own damage from accidents and natural catastrophes.
Several trends impacting motor insurance merit closer scrutiny of primary insurers and reinsurers:
- Impact of COVID-19 and inflation: The motor insurance market has been significantly impacted by the COVID-19 pandemic, which influenced driver behavior and led to claims inflation due to shortage of spare parts. While the industry is working through these impacts, competition is increasing after price corrections.
- Reduction in accident frequency: As automobiles are equipped with more safety features, we see a reduction in accident frequency, which is having a favourable impact on motor insurance profitability globally. Also, distances driven in many markets still have not returned to the levels of 2019.
- Greater accident severity: At the same time, higher speeds on the roads and distracted drivers through factors such as in-car technologies, mobile phone use and eating and drinking have contributed to greater accident severity and higher fatality rates even as accident frequency has reduced.
- Accounting for natural catastrophes: Intensifying weather-related perils may not be sufficiently reflected in premiums, with events such as floods, hailstorms and wildfires driving greater motor-own damage losses.
- Rising costs: The complexity of modern vehicles is driving maintenance and repair costs higher. Also, the costs of health and medical care for bodily injured are expected to continue to rise, with significant increases in the UK, the United States, India and Germany.
- Tariffs: The introduction of new tariffs will materially impact claims severity and significantly drive-up repair costs as inventories of spare auto parts diminish. This will also increase the time for repairs whilst manufacturers set up local operations and supply chains come under pressure.
- Regulatory and legal changes: Changes in regulations, such as the Ogden discount rate in the UK and higher minimum liability limits in California, are impacting the motor insurance market. Deregulation such as seen for example in India can spark innovation in product offerings but also increase fraud risk. Insurers need to stay vigilant about these changes to navigate the evolving landscape.
- Future of mobility: The future of motor insurance will be shaped by connected, autonomous, shared, and electric (CASE) vehicles. Insurers must adapt to this new reality to remain competitive and capitalise on new revenue opportunities.
- Commercial motor challenges: The commercial motor sector faces challenges such as social inflation in the US, driving up litigation costs. Changing demographics and the rise of less experienced commercial operators are also considerations for insurers to take into account.
Read the full report here.
