The price war in car insurance premiums is behind the dramatic drop in the sector’s turnover, which declined by 15.2 percent last year compared to 2011 and another 6.5 percent on a yearly basis in the first nine months of this year, according to a report on the sector issued by the Hellenic Association of Insurance Companies.
A glance at the report’s data confirms that the decline is not due to the reduction in the number of vehicles insured, but rather the fierce competition between companies, which has led to a slide in premiums. In fact, it appears that the drop in prices has led to an increase in the number of cars insured.
At the end of October the number of insured vehicles stood at 5.7 million, up from 5.3 million in December 2012. Besides the fact that the drop in premiums has made insurance more attractive to those who had been reluctant to comply with the law’s provision for the obligatory insurance of vehicles, the fear of being fined for not doing so, as dictated by a recent law which has yet to be activated, has also resulted in an increase in the number of cars insured. However, there are still about 1 million cars without insurance.
The study also points to a considerable decline in the number of companies operating in the sector as, after a number of closures, car insurance firms have dropped from 48 in 2008 to just 31 last year.
On the positive side, the industry has returned to profit, with the main reason being the reduction in expenditure thanks to the decrease in car use as a result of the financial crisis. This trend is more obvious from the reduction in payouts by companies in 2012, which declined to 758 million euros from 829 million in 2011.
The cost of securing new car insurance contracts remained high in 2012 despite the increase in online insurance sales. The share of the commission paid to agent networks and intermediaries came to 18.7 percent last year, against 19.5 percent in 2011, while the cost of securing new contracts in other insurance sectors that are not obligatory by law amounts to no more than 16.4 percent on average. This confirms the strong competition among insurance networks for the biggest possible market share.