ADAS cuts crashes but not premiums
There is an unfortunate irony in the fact that motor insurance premiums are rising while vehicle crash avoidance systems are becoming more sophisticated and successful.
So, despite advanced driver assistance systems (ADAS) reducing the frequency of claims, vehicles are proving much more expensive to repair when collisions do occur.
This increase is due to several factors. Firstly, many ADAS features rely on cameras and sensors positioned in the most vulnerable areas of a vehicle. In a crash, these sensors must be replaced and recalibrated, adding to the parts costs and labour rates of repairs.
Secondly, the cost of standard raw materials has suffered sharp inflation in the past couple of years. The Association of British Insurers (ABI) reports that average paint and material costs have increased by nearly 16% in the past year.
The rise is compounded by supply chain delays in sourcing replacement components, which means vehicles are off the road longer. This adds to the number of days fleets require a replacement vehicle when hire costs have soared. The ABI says the price of courtesy cars has risen by 30% in the past twelve months.
And finally, the price of new and second-hand vehicles has experienced double-digit growth, inflating the cost of writing off a badly damaged car. Add into the mix the disproportionately high cost of replacing a battery pack in a crashed electric vehicle, and it’s no wonder that the cost of settling insurance claims is rising, pushing up premiums.
Insurance premiums vary widely across Europe due to differences in road risk, insurance taxes, minimum compensation amounts for victims, civil liability rules, and the cost of vehicle repairs.
However, time-lagged data from 2021 shows that costs have risen in most countries since traffic returned to the road at the end of the Covid-19 pandemic.
Motor premium change, 2021 vs 2020
[Source: Insurance Europe]
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