Insurers play the inflation shield game

“We have reached the best possible agreement in a very tense situation in the insurance world” : the tone is set by the Minister of Economy, Bruno Le Maire, following a meeting in Bercy with French insurers on the issue of purchasing power. “We will do our best to keep the average home and car insurance premium below inflation for 2022 and 2023”, said Florence Lustman, president of France Assureurs, the professional association of insurers in France.

It is a general commitment of the profession, which obviously does not take into account the particular situations of each policyholder, nor the specific commercial policy of each insurer. It is up to the latter to freely fix the increases in his premiums, as part of the agreement between Bercy and the profession. So far, insurers have already played moderately with an INSEE insurance price index up 2.2% at the end of June, compared to 5.8% for the general index.

However, the insurers’ effort may seem very modest in light of the guarantee given by banks a week earlier to Bercy, to limit tariff increases to 2% for 2023. Some banking institutions have even decided to freeze tariffs in 2023, such as BNP Paribas , LCL, Banque Postale and Crédit Coopératif. Already last July the Société Générale promised “stability” of its prices.

Realistic commitment

“We cannot compare bank rates and insurance premiums, because bank rates refer to services while insurance premiums must cover claims”, points out, however, Franck Le Vallois, CEO of France Assureurs. Insurers are constantly warning public authorities of the sharp rise in the cost of claims. Apparently they have been heard.

“It is not in the interest of public authorities to weaken the insurance sector while citizens demand greater protection”, makes a large insurer slip out of place. “This is a realistic conclusion from insurers and public authorities”comments for her part Cyrille Chartier-Kastler, president of the consulting firm Facts & Figures.

Slippage in the cost of claims is a major concern for insurers. The profession has also opportunely revised upwards the climate claims bill (excluding drought) to 5.2 billion euros at the end of August. An amount well above the € 3.5 billion recorded on average in the last five years. As Florence Lustman recalled at the beginning of September, time is not “superprofits” but “superclaims”.

“The whole debate today is whether we are about exceptional climatic phenomena or deeper climate change”asks Philippe Dumont, CEO of Crédit Agricole Assurances. For example, last June’s hailstorm is not expected to repeat itself in 50 years … according to current climate models. Whether these models are still relevant remains to be seen.

Increases from 3% to 5%

Especially since the inflationary spiral is aggravating an already very tense situation. It’s the cost of the tile that has risen by 30% since January or that of a mid-range windshield by 40% in three months. Not to mention the FFB construction index which jumped 10% at the end of June.

In total, the Facts & Figures company expects increases of 3% to 5% in auto insurance (with a greater “intensity” on SUV vehicles which are very expensive to repair), while the frequency of claims has returned to the level of before. health crisis, and 3% in home insurance (probably with an increase in the goods most exposed to climate risks).

“We will not be able to escape the increase in car and home prices, even if we are working on entry level offers”, explains Guillaume Oreckin, CEO of Predica (Crédit Agricole Assurances). But, he adds, the real question is to clearly define to what extent the risk must be segmented to apply the right price, avoiding that some of the assets are no longer insurable. Our belief is that we must be responsible in our approach to risk segmentation ”.

Banks and insurance companies sharpen their arguments before their meeting in Bercy on the purchasing power of families

Anti-inflation shield in Axa

Beyond the general commitment to moderate rates, the “anti-inflation package” announced this morning by the insurers includes most of the proposals sent to Bercy last July. First of all, it is a “check” for 100 euros on the car premium for unemployed young people. This will reduce the additional premium generally applied to young drivers. Likewise, insurers are keen to extend parenting complementary health contracts to this young audience.

Numerous initiatives by insurers should complement the anti-inflation system. Like the banking sector for so-called “fragile” customers, some should expand their offer llow price for the poorest families most affected by inflation. Thus, by the end of the year, Crédit Agricole Assurances will launch a new “low price” housing contract for young tenants under 30, an offer that will then be extended in 2023 to young owners.

Axa France, for its part, announces a whole series of initiatives to cushion the price shock. He does not hesitate to propose a freeze on car and home insurance prices for young people under 30, provided that they have not reported. Another fundamental measure: a discount of 100 euros for all Axa policyholders who intend to take out car insurance (50 euros for new home contracts). “We want to play our role despite the sharp increase in claims”says Patrick Cohen, CEO of Axa France.

Abolition of the green card

The other part of the “anti-inflation package” announced this morning by the insurers intends to attack the root of the problem, that of the endemic increase in repair costs. Under the aegis of Bercy, a working group will be set up to work on the cost of spare parts and on the promotion of “re-use” parts (the cost of which is 40% lower). This group will have to involve all the players in the sector, the minister specifies, and in particular the car manufacturers and equipment manufacturers.

“We need to find a way to recycle more without threatening our auto industry.”, specifies the Minister of Economy. The discussion promises to be delicate because car manufacturers make very comfortable margins on spare parts, whose prices in France are among the highest in Europe.

The measures envisaged also concern simplification, with the aim of abolishing the famous car insurance certificate, which “it is no longer useless because we now have a dossier of insured vehicles more effective in the fight against fraud”, says Florence Lustman. Indeed, Bruno Le Maire himself confirmed this cancellation, probably in 2023, in consultation with the Ministry of the Interior.

“It is a simplification shock for our fellow citizens and a cost that is reduced”, says the minister. The latter, in an intense anti-inflation campaign, can therefore congratulate himself on having instituted a tariff shield on energy (the biggest piece), on banks and now on insurance. Who’s next ?

The shortage of capital and inflation will drive up reinsurance rates