German motor insurers anger buyers with mid policy price hike demands

“I believe that this action will remain unique,” said the Chief Financial Officer of a large Hamburg-based company affected by the increase who did not want to be named. “As most of the companies will not accept higher prices the insurance industry is not doing itself a favour with such requirements.” He was unprepared for the moment his insurance company asked him to pay more than double the amount for fleet cover than he had previously been paying. “I have never experienced such a thing in my working life of 25 years,” he said. The insurer in question, R+V, did not deny the hefty increase, but said that this happened only in a ‘few isolated cases’ with heavy loss load. By law, both German insurers and their customers have the right to cancel a policy following a claim. If a customer cannot pay, or refuses to pay, a higher quoted price, insurers can cancel the policy of every vehicle covered that subsequently suffers a claim regardless of whether its policy is up for renewal or not.hideThis can result in huge administration costs and effort for companies’ insurance departments, who have to deal with every claim separately. The threat of insurers to customers not prepared to pay up is that the insurer would in each case of a claim cancel the contract for that vehicle. This would make administration even of a small fleet hell for companies’ insurance departments. In recent years, the CFO’s company, which operates a small fleet of about 35 vehicles mainly for salespeople and its management, has had high claims. They might have been unacceptable to the insurer. “But this is nothing new,” the manager said. “Why now?” The German insurance industry has been waging a price war in the motor sector since 2004, initiated at the time by insurance giant Allianz. Following seven years of softening prices very few companies are left in the sector that actually manage to produce underwriting profits. With premium income of €20.2bn, motor insurers had costs and claims totalling €21.6bn in 2010, after claims reserves were released. The reserves are so far reduced that there is not much left to convert. Low interest rates mean that investment profits provide little relief. Supervisory boards and owners are pressing for a solution. “Of course it's understandable that companies are coming under pressure due to negative results,” said Robert von Bennigsen, one of the two chief executives in charge at brokers BDJ Burmester, Duncker & Joly in Hamburg. “However, this way of proceeding is irresponsible because it endangers policy stability.” In reaction the affected company’s Chief Financial Officer has employed a wait and see policy, and has not paid the amount asked for by his insurer. “We are currently checking alternative insurers,” he said. “Now it is the insurer’s turn. We are waiting how he reacts on the next notices of claim.” Companies displaying this aggressive behaviour include Axa, Basler, SV Sparkassenversicherung Stuttgart and SV Sachsen. Other insurers are observing the situation to see how things play out. A spokeswomen for SV Sparkassenversicherung in Stuttgart confirmed the events. “This is not our normal approach; in general we maintain policies until they fall due for annual renewal,” she said. By this she means the normal expiry date of the policies. “However, in some cases we simply had to react to a catastrophic development in claims.” The company managed to reach agreement with at least half of the companies approached, she continued. A spokeswoman for Axa declared that the company regularly conducts talks with customers and brokers in order to find a new premium basis in situations where the claims history turns bad or remains negative. If this is not possible they then can decide to cancel the policy. “We can see premium rises of 20% to 25% being charged,” said one source at a Hamburg-based brokerage.

German motor insurers anger buyers with mid policy price hike demands

Want to read this article?

Read Next

Risk managers taking centre stage in ESG

Costs rapidly rising for employee health insurance in Portugal

UK market must innovate rather than exclude emerging risks: BIBA

EC probes Meta for alleged breaches of Digital Services Act

Markel ‘reinforces commitment’ to Chinese market

Risk managers taking centre stage in ESG

Costs rapidly rising for employee health insurance in Portugal

UK market must innovate rather than exclude emerging risks: BIBA

EC probes Meta for alleged breaches of Digital Services Act

Markel ‘reinforces commitment’ to Chinese market

Want to read this article?

Read Next

Risk managers taking centre stage in ESG

Costs rapidly rising for employee health insurance in Portugal

UK market must innovate rather than exclude emerging risks: BIBA

EC probes Meta for alleged breaches of Digital Services Act

Markel ‘reinforces commitment’ to Chinese market

Related Articles