Why Do Car Insurance Premiums Keep Going Up?

Auto insurance premiums continue to rise each year, even though the number of claims decreased in 2023.
 

This situation may seem paradoxical, but it can be explained by the significant increase in the costs associated with each claim, as shown by the latest figures from the France Assureurs federation.
 

Last year, auto insurers saw a decline in claims across nearly all categories: property damage liability (damage to a third party’s vehicle) and bodily injury liability; all-risk coverage (damage to the insured’s vehicle); glass breakage; theft; and more. Only vehicle fires increased by 15.5% compared to 2022, but they affect a very small proportion of policyholders.
 

“After a sharp decline in 2022, the frequency of theft claims is improving slightly (-1.4% after +13.8% in 2022). The trend in the frequency of all-accident claims is similar to that of property liability claims: -1.9% compared to 2022,” explains France Assureurs in its study on personal auto insurance for the year 2023. Insurers therefore note “a 5.3-point decrease in the claims burden” paid to policyholders in the event of a claim.
 

The number of insured vehicles has also increased: 52,875, including more than 40,000 passenger cars. As a result, “2023 is also marked by a significant increase in the new business rate, rising from 14.5% of the vehicle fleet to 15.2%, reflecting strong growth in new vehicle registrations, but also the near-stability of used vehicles,” according to France Assureurs.
 

These factors are helping to improve auto insurers' results. In 2023, the loss-to-premium ratio was 98.7 percent, an improvement of 1.6 percentage points compared to 2022. This ratio represents the difference between what insurers must pay (operating expenses, claims payments, and commissions) and the premiums they collect.
 

However, this improvement in insurers’ profitability does not necessarily translate into lower costs for policyholders, as auto insurance premiums have been raised. “The average premium for a Category 1 vehicle covered under a single policy is 448 euros before taxes in 2023, up 3.4% from 2022.” 

"The overall average premium for a motorcycle is 260 euros before tax (+2.9% compared to 2022)," according to the insurance federation. For comprehensive coverage, the average annual premium is 534 euros.
 

This increase in premiums is partly due to the rise in the average cost of claims. For example, claims for theft cost insurers 10.8% more in 2023 than in 2022. Claims related to liability insurance involving property damage cost 6.2% more. The increase in costs compared to 2022 was 8.8% for glass breakage, 9.8% for fire, and 8.1% for all-risk property damage.
 

This increase is due to “high inflation in the cost of materials, which is driving the continued rise in the average cost of claims. This is the case in the auto insurance sector, where rising costs for replacement parts continue to drive up the cost of claims.” Among the solutions, the federation highlights the efforts by insurers to promote the use of recycled parts for auto repair claims.
 

Among the various categories, fire is the most expensive: the average cost of this type of claim is 5,785 euros. Theft ranks second, with an average cost of 3,975 euros. Next comes accident damage, with an average cost of 2,010 euros, followed by “property liability” at 1,865 euros, and finally glass breakage at 675 euros.