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 the Economy, Bruno Le Maire, following a meeting in Bercy with French insurers on the subject of purchasing power. “We will do our best to keep the average auto and home insurance premium below inflation for 2022 and 2023,” declared 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 insured, nor the specific commercial policy of each insurer. It is up to the latter to freely set the increases in its premiums, within the framework set by the agreement between Bercy and the profession. So far, insurers have already played moderation with an INSEE insurance price index up 2.2% at the end of June, against 5.8% for the general index.

The effort made by insurers may however seem very modest in view of the guarantee granted by the banks a week earlier to Bercy, to cap tariff increases at 2% for 2023. Some banking establishments have even decided to freeze tariffs in 2023, like BNP Paribas, LCL, Banque Postale and Crédit Coopératif. Last July, Societe Generale had already promised a “stability” of its prices.

Realistic commitment

“We cannot compare bank rates and insurance premiums, because bank rates relate to services while insurance premiums must cover claims”, stresses, however, Franck Le Vallois, Managing Director of France Assureurs. Insurers are constantly warning the public authorities about the sharp rise in the cost of claims. They were apparently heard.

“It is not in the interest of public authorities to weaken the insurance sector while citizens are asking for more protection”, slips a large belayer out of place. “This is a realistic conclusion on the part of insurers and public authorities”comments for his part Cyrille Chartier-Kastler, president of the consulting firm Facts & Figures.

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

“The whole debate today is whether we are on exceptional climatic phenomena or deeper climatic changes”, asks Philippe Dumont, CEO of Crédit Agricole Assurances. For example, the hailstorm last June should not happen again for 50 years… according to current climate models. It remains to be seen whether these models are still relevant.

Increases of 3% to 5%

Especially since the inflationary spiral is aggravating an already very tense situation. It is the cost of the tile which has increased 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 firm Facts & Figures anticipates increases of 3% to 5% in motor insurance (with a higher “intensity” on SUV vehicles which are very expensive to repair), while the frequency of claims has returned to its level of before the health crisis, and 3% in home insurance (probably with an increase on the goods most exposed to climate risks).

“We will not be able to escape increases in car and home prices, even if we are working on entry-level offers”, explains Guillaume Oreckin, Managing Director of Predica (Crédit Agricole Assurances). But, he adds, the real question is to clearly define to what extent the risk must be segmented in order to charge the right price, avoiding that some of the goods 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 household purchasing power

Anti-inflation shield at Axa

Beyond the general commitment to moderate rates, the “anti-inflation pack” announced this morning by insurers includes most of the proposals sent to Bercy last July. It is first of all a “cheque” of 100 euros on the car premium for young unemployed drivers. This will reduce the additional premium generally applied to young drivers. In the same way, insurers are ready to extend parents’ complementary health contracts to these young audiences.

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

For its part, Axa France is announcing a whole series of initiatives to cushion the price shock. He does not hesitate to propose a price freeze on car and home insurance for young people under 30, provided that they have not declared a claim. Another key measure: a reduction of 100 euros for all Axa policyholders who wish 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 pack” announced this morning by insurers intends to attack the roots of the problem, that of the endemic rise in the cost of repairs. Under the aegis of Bercy, a working group will thus be set up to work on the cost of spare parts and the promotion of “reuse” parts (the cost of which is 40% lower). This group will have to associate all the actors of the sector, specifies the minister, and in particular the car manufacturers and the equipment manufacturers.

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

The measures envisaged also relate to simplification, with the aim of abolishing the famous automobile insurance certificate, which “is no longer useless because we now have a file of insured vehicles that is more effective in the fight against fraud”, says Florence Lustman. In fact, Bruno Le Maire himself confirmed this deletion, probably in 2023, in consultation with the Ministry of the Interior.

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

Capital shortage and inflation will drive up reinsurance rates