Swiss Re has issued a cautionary outlook for the global motor insurance sector, highlighting rising claims costs, shifting mobility trends, and ongoing economic and environmental pressures in its latest report, “Shifting Gears in a Changing Landscape: A Global Perspective of Motor (Re)Insurance.”
Motor insurance, which represents roughly 40% of the $2.2 trillion property and casualty insurance market, is facing challenges from several fronts. In 2024, nearly 90 million light vehicles were sold globally, all requiring mandatory motor insurance to cover third-party liability and vehicle damage. Despite a decline in accident frequency—partly due to improved vehicle safety features and reduced driving distances post-COVID—accident severity has increased. This is largely attributed to higher speeds and distracted driving.
The report also notes that the increasing complexity of modern vehicles, coupled with rising inflation, is driving up both repair and medical costs. This is putting additional strain on insurers’ profitability. Furthermore, new tariffs are expected to exacerbate claims severity. The ongoing shortage of spare parts and the strained supply chains are expected to increase both repair times and costs.
Weather-related events, including floods and hailstorms, are contributing to higher motor damage losses, a trend that may not yet be fully reflected in current premiums.
Laure Forgeron, Chief Underwriting Officer for Casualty at Swiss Re, stressed that rising claims costs and disruptions in the supply chain are reshaping the market. She pointed out the need for insurers to adapt to a technological shift in mobility. “Vehicles of the future will be more connected, autonomous, shared, and electric, and insurance must be tailored to fit this new reality,” Forgeron said.
Shifting Dynamics in the Asia-Pacific Region
In the Asia-Pacific region, the market is undergoing significant transformation, according to Laurel Hu, head of Casualty Underwriting APAC at Swiss Re. She noted that the adoption of electric vehicles (EVs), increased integration of technology, moderate inflation, and rising medical costs are reshaping how insurers approach motor coverage in the region.
The COVID-19 pandemic has had lasting effects, initially altering driver behavior and later contributing to claims inflation due to parts shortages. While many markets have not yet returned to pre-pandemic driving levels, competition in motor insurance is increasing as price corrections continue.
Regulatory and Profitability Pressures
The sector is also grappling with regulatory changes. In some countries, deregulation, such as in India, has spurred product innovation but also raised concerns about increased fraud risks. Additionally, despite stable claims inflation in China, profitability remains under pressure due to the increasing frequency of natural catastrophes and the short-term impacts of EV integration on motor insurance performance.
As the motor insurance market faces these complex challenges, insurers will need to adapt swiftly to the changing landscape in order to maintain profitability and effectively meet the needs of modern consumers.
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