Kathmandu. Insurance companies are under pressure due to rising road accidents and the cost of maintenance of expensive and high-tech vehicles in the Asia-Pacific region.
Insurers in Australia, Japan and South Korea are grappling with rising insurance claims for expensive repairs related to high-tech cars and unavailable parts. Laurel Hu, head of accident underwriting for the Swiss Rico Asia Pacific region, said the high frequency of accidents, urban congestion and inadequate maintenance infrastructure in emerging markets such as India, Indonesia and Vietnam also contributed to the rise in insurance claims.
In an email response to Insurance Asia, Hu said pricing has become a major challenge for motor insurers in a competitive market with low but steady profits. Vehicle insurance accounts for 40 percent of the $2.2 trillion global property and accident insurance market.
Despite these challenges, strict regulation is making it difficult for insurers to raise vehicle insurance premiums. “An increase in travel and car use amid economic recovery is increasing the likelihood of road accidents. Disrupted driving and increasing road speeds, especially in the post-pandemic context, are causing more serious accidents,” Hu said, adding that insurance claims are likely to remain higher if roads are not upgraded or safer technologies are not adopted. ’
Angat Sandhu, partner at McKinsey & Co, said the growing insurance claims are being fuelled by unavailable parts in the supply chain and high-tech mechanics. “Electric vehicle (EV) battery maintenance is expensive, so many insurers declare them a loss-making business,” he said, adding that the cost and time of maintenance are also not in line with the supply. ’
According to Global Data, vehicle insurance sales are expected to increase by 5.6 percent this year due to EVs. “Insurers are developing new policies to cover EVs with new risks. Because sales of EVs increased significantly in 2023-2024,” global data said. ’
Global data expects state subsidies and carbon reduction policies to further increase demand for electric vehicle sales and motor insurance. Insurers are now considering building their own fraud detection systems or partnering with technical providers to better evaluate motor insurance claims.
