Car Insurance: Why Have Prices Soared?

Car insurance prices are higher, and drivers are looking for alternatives to save. This is the case of professor Francisco Jomário Pereira, 34, from Campina Grande (PB), who changed insurance companies to spend a little less.

Last year, he paid BRL 900 for the insurance of his Renault Kwid, a brand new car purchased in 2020. This month, he went to renew the insurance, and the price rose to BRL 1,900 in SulAmérica, a little more than double the amount paid in the previous year.

“The cheapest insurance I found for my car was R$1,500 at Azul Seguros, which was the one I chose. I split the payment into ten installments on the card”, says Pereira.

Insurance rises 33% on average in 12 months

On average, insurance prices rose by 32.45% in the last 12 months, according to the IPCA (Broad Consumer Price Index), an indicator that measures the country’s official inflation.

The experts heard by the UOL say that the rise in the price of cars – both zero kilometers and used – and the increase in the use of insurance are the main factors that justify the price of the service.

Paulo Eduardo Fernandes, a partner at brokerage Fernandes Associados Seguros, states that the value of the insurance is calculated based on the value of the car in the Fipe table, which shows the average prices of cars announced by sellers, both used and new.

“In 2021, an average car cost between BRL 40,000 and BRL 50,000. Fipe prices increased, on average, 40%, which generated a loss for insurers, as they need to indemnify the customer who uses insurance based on the Fipe table on the day of the accident”, says Fernandes.

With the pandemic, automakers around the world had difficulty maintaining the production of new cars due to the lack of semiconductors, which are basic parts for the manufacture of cars.

This limited production by automakers and reduced the amount of new cars available at dealerships. With the scarcity, used ones became more sought after and, consequently, became more expensive.

The use of insurance was also another factor that increased costs. Data from Susep (Superintendence of Private Insurance) show that the total paid in indemnities rose 41.3%, reaching R$ 7.2 billion in the first quarter of 2022 compared to the same period last year.

At the same time, revenue from car insurance grew much less: 23.3% in the first quarter of 2022, from R$8.6 billion to R$10.6 billion, also in relation to the same period in 2021.

“As the cars were returning to the streets, the loss ratio rose again. This, added to the increase in the price of new and used cars, made insurance more expensive”, says Manes Erlichman, vice president and technical director of Minuto Seguros, a Creditas broker.

Prices will remain high

Erlichman says insurers started raising prices in September and October of last year. For him, prices should begin to normalize in October this year.

For Fernandes, the drop should only be felt after the first half of 2023.

“This year, we should still have a lot of instability due to inflation and the election. Probably in the first half of next year we will have stability. production of cars”, says Fernandes.

Inflation added to the uncertainties of the face-to-face election make it difficult to improve the scenario for this year, according to José Varanda, coordinator of the undergraduate course at ENS (Escola de Negócios e Seguros).

We have high inflation, but I would say that, in the medium term, we will have a normal situation, in the middle of next year.
José Varanda, coordinator of the ENS undergraduate course

Consumer can get discount

Insurance is more expensive both for first-time buyers and for those who renew their insurance after a year. The big difference is that policyholders who are in the renewal process can count on the policy bonus discount.

“The bonus represents a discount of up to 30% in the value of the insurance, and the percentage is applied to the new insurance of the year”, says Fernandes.

Each year the policyholder takes the insurance, he levels up with the bonus. It has nothing to do with the consumer’s profile, but with the number of times the insurance premium has been used. If the person crashes the car, for example, it goes back one class at the bonus level.

“If you’re in class four and you had an accident, you go back to class three. With each accident, it’s a step backwards”, says Varanda.

But this only applies to the use of basic insurance coverage. The insured will not lose the bonus for using services such as a towing, tire change or locksmith, for example.

Alternatives to save

Experts say that the ideal is for the consumer to hire insurance suitable for their needs, including only what makes sense for the person’s routine, thus avoiding greater expenses than necessary.

Customers are switching insurers to save money, in order to maintain the value close to the previous year. There are also those who preferred to reduce coverage.
Manes Erlichman, vice president and technical director of Minuto Seguros

Erlichman says that consumers should at least maintain comprehensive coverage, which is the most traditional in the industry and covers major problems such as accidents, theft, theft and fire, and that they try to negotiate prices with brokers and insurers.

“To save money, you can hire an assistance package compatible with the reality of consumer use. If you don’t travel, for example, you can opt for a tow truck with lower mileage”, says Erlichman.

There are also subscription insurance, in which the consumer makes monthly payments.

“There is insurance by subscription, there are some companies that allow you to pay a small monthly amount and pay per kilometer traveled. The consumer has to see if it is suitable for him. For those who drive little, this type of insurance is worth it”, says Balcony.