Mapfre fighting motor claims inflation with higher price in key markets

Mapfre SA aims to tackle claims inflation in motor insurance by raising rates in certain important markets, CFO Fernando Mata said.

The Spanish insurer's motor combined ratio jumped by 9.6 percentage points to 103.8% in the first quarter from 94.2% a year earlier. The company attributed the increase to high inflation levels and increased driving after COVID-19-related restrictions on movement were lifted.

About 4 percentage points of the increase could be blamed on a reduction in average premium stemming from COVID-19-related discounts, which are still being phased out, against claims frequency that is broadly similar to pre-pandemic levels, Mata said on an earnings call. The CFO attributed a further 4 to 5 percentage points of the increase to the effects of inflation.

"There is no other solution other than to adapt our premiums tariffs to the current risk profile," Mata said. "We have seen a significant increase of tariffs across geographies with different rates."

The company has seen single-digit motor price increases in Spain, but those in Brazil were "well above 10% and closer to 20%, Mata said. In the U.S., Mapfre introduced a 3% increase at the end of 2021 and is awaiting approval for a further 3% increase. Inflation for spare parts in the U.S. is well above 10%, the CFO said, resulting in an "asymmetry between tariffs and claims."

The rise in Mapfre's motor combined ratio, coupled with a 3.5-point rise in the health and accident combined ratio, pushed the group non-life combined ratio to 98.0% in the first quarter from 94.3% in the same quarter of 2021.

Mapfre announced a new three-year strategic plan in March, which covers 2022-2024. Targets include a return on equity of between 9% and 10% and a combined ratio of between 94% and 95%. Mata acknowledged that those targets could be affected by the effects of the Russia-Ukraine war.

"This invasion has brought enormous uncertainty to the current context. But be sure that we are acting quickly to protect the business and adapt our strategic plan where necessary, as we already did during the COVID crisis," Mata said.