Motor Insurance Market in Europe

Source CEA

CEA’s Member Associations

Source CEA

33 National Member Associations:

27 EU Member States

+ 6 Non-EU Markets

Switzerland, Iceland, Norway, Turkey,

Liechtenstein, Croatia

2 Observers

Russia Ukraine

2

Content

market overviewcost analysis price of motor insurancekey factors influencing claims frequency and costconclusions

Market overview (1)Structural data

Market overview (2)Premium income data

• Motor insurance is the biggest class of non-life insurance business

• Decline of motor insurance premium is continuing in 50 % of the CEA member countries

Market overview (3) Premium income data

Evolution of motor liability premium

Cost analysis (1)Claims incurred

Representativeness: 98%

Cost analysis (2) Claims ratio

*Claims incurred/premium

Cost analysis (3)Operating expenses

Cost analysis (4)Combined ratio

Cost analysis (5)Breakdown of costs

Notes: For Italy, the breakdown of the claims is a rough estimate;For Germany, the claims expenditure includes the technical

provisions;For Luxembourg, the figures correspond to 2004 data.

Cost analysis (6)Cost of a bodily injury claim

Source: Insurance Supervisory Authority

Evolution of prices (1)

Source: Eurostat

Evolution of transport insurance price index(2005=100)

Evolution of prices (2)

How are motor insurance premiums set? (1)

Decline of number of claims since 2004

Decrease of average claim frequency

How are motor insurance premiums set? (2)

Average claim cost in 2005 €3 300

Large disparities in average claims cost between the countries : €5 000 in Finlandabove €4 000 in Italy

less than €1 000 in Latvia and Slovakia.

How are motor insurance premiums set? (3)

1. Taxation

2. National legislation

• Minimum amount of coverage and general liability

rules

• Rule of vulnerable road user in application in several

countries

• Unlimited cover for third party liability imposed in

some countries

Key factors influencingclaims frequency

1.Road safety

2. Traffic conditions

• Road density• Vehicle density• Driving habits

3.Fraud and non-insurance

Source: European Transport Safety Council (+CARE and national data)

Key factors influencingclaims cost (1)

Vehicle repair and spare parts prices, Medical care prices

Legal costs

Source: Eurostat Source: Eurostat

Key factors influencingclaims cost (2)

Differences in the impact of road accidents

Differences in personal injury compensation

*: 2004 data

Source: “L’indemnisation du dommage corporel en Europe”, CEA, 2004

Conclusions (1)

The motor insurance marketaround 1 000 insurance companies active in Europepremium income of €127.2 billion in 2006(-1.1% as compared to the previous year)combined ratio: 97.5% in 2006(+1.2% points as compared to 2005)the market is subject to a business cycle driven by the competitive forces

Conclusions (2)

Pricing in Motor Third Party Liability Insurance

standard approach is difficultaverage premium varies significantly from country to country due to:Differences in claims frequencyDifferences in average claims cost

local factors such as price of repairs and medical care, traffic conditions, drivers’ habits, etc. influence costs and frequenciestaxes and national legislation can also vary considerably according to the country

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