Why French Motor Insurers Must Keep Their Eyes on the Road Ahead
There’s a price war happening between motor insurers in France right now, fuelling a strong debate between those who think prices should increase and others who want to stabilise, or even decrease, the motor tariff.
The claims picture is mixed. A quick review of recent publications might suggest the number of deaths on French roads remains in decline. However, ONISR (Observatoire National Interministériel de la Sécurité Routière) figures for September 2014 actually show a slight increase - up 0.5% on the same month last year.
The news that the number of accidents resulting in bodily injuries fell by 5.1%, and the number of people injured in these accidents reduced by 4.7% in the same period, is more promising – not least for motor insurers. However, it’s imperative that the industry keeps its eyes on the road ahead. Several other factors are converging that are likely to push up the cost of motor bodily injury claims:
- The publication of the updated Recueil Méthodologique - guidance used by courts as a reference for the settlement of bodily injury claims - is driving an increase in the amounts awarded for most personal heads of damages.
- French plaintiff lawyers are lobbying for a reduction in the discount rate applied to lump sum payments, from 2.35% to 1.2%, which would increase insurers’ costs significantly.
- A change in the indexation of annuities for new claims and possible changes in mortality tables (to reflect increasing longevity) would have further impact.
- Nursing care costs are also on the up following the entitlement for injured parties being extended to 412 days, in addition to higher costs per hour in general.
- Finally, a law passed earlier this year allowing consumers to cancel their policy anytime after the first 12 months is already adding to insurers’ administrative overheads.
Consistent tracking and analysis of all these different factors is needed to model their likely financial impact and evolution. They are important because, individually or together, these developments could dramatically influence the profitability of motor portfolios.
This is a challenge for all players, insurers and reinsurers, in the market. Gen Re's branch in Paris has been monitoring bodily injury trends for over 10 years, modelling possible outcomes for French motor insurers. Our insights allow us to give our clients an additional expert view of the market to inform their pricing and other underwriting decisions. Don’t hesitate to get in touch if you would like to find out more.