Understanding the Increase in Car Insurance in 2023
The observed increase in car insurance costs in 2023 can be traced back to two primary factors. Firstly, there is a noticeable recovery in margins which has led to an increase in prices. Secondly, there has been a significant boost in profit. This increase in profit has also played a role in driving up the cost of car insurance. However, the pressing question that remains is how these price dynamics will evolve in the coming months. This is a question posed by Ivass Councilor Riccardo Cesari in his report to the Guarantor for price surveillance.
One interesting observation is that the response of car insurance prices to the general price trend tends to be delayed. This delay is evident in the trend values. According to the report, this suggests that by 2024, the inflationary pressures currently affecting car insurance prices are expected to be substantially exhausted. However, this is a prediction that is subject to change based on various market factors.
Analysing the Components of the General Index
If we delve deeper into the components of the general index that are closely associated with the car market, namely, the prices of spare parts and repairs, a different picture emerges. These components are observed to have a much slower dynamic compared to the overall basket. This implies that the rate at which these prices change is slower than the general rate of price change in the car insurance market.
In the last few months of 2023, the deceleration of these components was observed to struggle to fall below 4% on an annual basis. This suggests that the cooling off of car insurance prices might also be a slow process. The implication is that this slowdown could extend into 2025 and beyond, further affecting the dynamics of car insurance prices.
