Insurance companies in Europe are pushing for a gradual increase in insurance sums to match the levels seen in the European Union (EU). This move is aimed at improving coverage and providing better protection for policyholders.
Currently, insurance sums in many non-EU countries are significantly lower compared to those in the EU. This means that policyholders in these countries may not receive adequate compensation in the event of a loss. For example, the average motor insurance sum in the EU is around €1 million, while in some non-EU countries it can be as low as €100,000.
The push for higher insurance sums is driven by the increasing risks and challenges faced by insurance companies. With the rise of natural disasters, cyber attacks, and other unpredictable events, insurance companies are facing higher claims and payouts. In order to maintain their financial stability and meet the growing demand for insurance, they are looking to increase insurance sums.
One of the main benefits of higher insurance sums is that it provides better protection for policyholders. In the event of a catastrophic loss, a higher insurance sum can cover the cost of damages and help rebuild or replace assets. This can be especially beneficial for small businesses and individuals who may not have enough resources to cover these costs on their own.
Moreover, higher insurance sums can also help mitigate the impact of inflation. As the cost of living increases, so does the cost of replacing or repairing damaged assets. By increasing insurance sums, policyholders can ensure that they are adequately covered for these rising costs.
Another important factor driving the push for higher insurance sums is the EU’s Insurance Distribution Directive (IDD), which came into effect in 2018. This directive aims to harmonize insurance regulations across the EU and promote fair treatment of policyholders. One of the key requirements of the IDD is that insurance sums should be sufficient to cover the potential risks faced by policyholders. This means that insurance companies operating in the EU are already required to provide higher insurance sums compared to non-EU countries.
By gradually increasing insurance sums, non-EU countries can align their insurance regulations with those of the EU and provide better protection for their policyholders. This will also make it easier for insurance companies to operate across borders and provide consistent coverage to their clients.
However, some may argue that higher insurance sums could lead to increased premiums for policyholders. While this may be true to some extent, insurance companies are also exploring other ways to manage their risks and keep premiums affordable. This includes implementing risk management strategies, leveraging technology to streamline processes, and diversifying their product offerings.
In fact, higher insurance sums can also lead to more competitive pricing in the long run. By providing better protection for policyholders, insurance companies can attract more customers and increase their market share. This can help them spread their risks and reduce their overall costs, resulting in more competitive premiums for policyholders.
In conclusion, the move to increase insurance sums in non-EU countries is a positive step towards providing better protection for policyholders. It aligns with the EU’s efforts to promote fair treatment of policyholders and can also help insurance companies manage their risks. While there may be some initial concerns about increased premiums, the long-term benefits of higher insurance sums far outweigh the costs. By working together, insurance companies, regulators, and policyholders can create a more secure and stable insurance market for all.
