"As a result of the competition the combined ratios of all the companies and the sector in general have deteriorated and this indicates the price war is ending. We are already seeing companies with small increases in auto rates," Amis VP José Morales said in a press conference.
Auto premiums have fallen or stagnated for several years as a drop in claims spurred a number of companies to slash prices to grow sales and snatch market share from rivals. Premiums for the first nine months of the year fell 0.8% to 24.6bn pesos (US$2.35bn) compared to the year ago period, according to Amis.
Competition has started to take its toll on the sector, whose combined ratio was 97.6% in the third quarter compared with 94.6% a year ago, according to a report published by Mexico's third largest auto insurer Quálitas.
Ironically the drop in premiums comes at a time of brisk sales for the automotive industry. According to automotive industry association AMIA, a total of 884,214 new vehicles were sold in Mexico from January-October, a 4.1% increase from a year ago. Amis estimates that half of new vehicle sales in Mexico are made on credit, which includes obligatory auto insurance.
"I would expect [the sector] to grow next year. It's difficult to say how much but at least at the rate of inflation, 5-6% would be reasonable," Morales, who is also CEO of Mexico's fourth largest insurer Seguros Inbursa, said on the sidelines of the event.
Tough market conditions in recent years led the Mexican arm of Germany's Allianz to sell its auto portfolio to Quálitas earlier this year in order to focus on more profitable lines of business such as health and life insurance.
Auto insurance, which accounted for 24% of Seguros Inbursa's third quarter premiums, fell 10% in Q3 year-on-year to about 474mn pesos, while the combined ratio deteriorated to 98.4% from 86.7% a year ago.
Morales expects his company to grow at least 10% in auto insurance next year thanks to the bundling of insurance with auto loans made by the banking arm of parent company Grupo Financiero Inbursa, the country's seventh largest financial group.
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