Competition pushes cost of auto insurance down 40 pct

Greek car insurance rates have been nosediving in the past few years, dropping 40 percent from 2010 to the present and giving cash-strapped motorists a much-needed break. The reduction is a result of intense competition between insurers in a shrinking market, which has pushed rates to as low as 200 euros a year – the average cost across the country for third-party insurance of a standard car.

A study of the current rates shows that insuring a car with a 1.4-liter engine in Athens that has been in circulation for four or five years costs between 220-280 euros per year, compared with 365-465 euros in 2010. The reduction is attributed to the price war between insurers attempting to grab a bigger slice of an ever-shrinking market: In the January-May period this year, turnover in the car sales market contracted by 11.7 percent, despite the fact that the number of insured vehicles in circulation rose 6 percent in that same period. At end-July, the number of insured cars in Greece came to 5.8 million, from around 5.5 million at the end of 2015, a trend that professionals attribute to reduced insurance rates.

The decline in prices is expected to continue over the coming months as insurers vie for the custom of motorists previously insured with International Life and Enterprise Insurance, which recently went into administration. Together, these two firms accounted for around 290,000 car policies, which are now being gradually transferred to other insurers at rates that are as low as those that had been offered by those companies.

Market professionals believe that the level of insurance policies will not be affected by plans to raise the minimum rate of coverage for personal injury/death or material damages per accident to 1.2 million euros. The hike is scheduled to go into effect in 2017 and is the result of an automatic adjustment dictated by a European Union directive, though it is not expected to have an impact on consumers in terms of the insurance rates they pay. The reason, a source in the industry explains, is that this regulation pertains to compensation sought via litigation.

What is of concern to the industry is the gradual rise in the rate of damage claims, which has inched up to around 8 percent of all claims from 5.5 percent in previous years. The increase in vehicle damage claims means more payouts and less profits for insurers, undermining the robust performance of previous years.