The cost of hull insurance has increased significantly. For example, a compact car owner who paid €264 for annual comprehensive car insurance last year received offers starting at €328 this year, with the majority of insurers requesting prices above €360.

Insurance companies confirm price increases. Meelis Tara, product manager for comprehensive car insurance at If Kindlustus, told ERR that repairs and spare parts have become much more expensive, which means that repairing a vehicle in the event of damage also costs more.

"Unfortunately, this has a knock-on effect on insurance premiums," he said.

Kaido Naarits, head of the vehicle insurance portfolio at ERGO, also said that overall inflation affects insurance rates. In addition, the effects of the Covid pandemic are reflected in prices:

"The pandemic and the measures taken to manage it, such as movement restrictions, reduced both traffic and the frequency of claims, allowing us to reduce both third-party and comprehensive insurance premiums by 20 to 30 percent in the first half of 2020, depending on the vehicle and its user's risk profile," he explained.

The insurance price level has returned to the level it was at the start of 2020, Naarits said, because traffic and accident frequency have also rebounded and payouts have climbed.

The number of road accidents and total damage hit new records

Meelis Tara, citing data from the Estonian Motor Insurance Bureau (LKF), said that the number of traffic accidents reached a record high of over 38,000 last year. Damages of more than €80 million were likewise the largest ever recorded.

Progressive inflation, Naarits continued, skyrocketed the cost of repairing vehicles and the cost of services associated to insured occurrences, such as towing a vehicle or renting a substitute vehicle during repairs.

The rising cost of a replacement vehicle is exacerbated by the difficulty in obtaining necessary spare parts.

Naarits used the example of ostensibly simple repairs in which a replacement part for a broken light must be purchased and shipped, resulting in a several-week delay. During this time, the broken car is rendered useless, and a replacement vehicle is required.

Vehicle prices have increased substantially as well. All of these factors influence the cost of comprehensive and third-party car insurance.

Claude Kaasik, vehicle insurance product manager at PZU Estonia, said that compensation for insurance claims has increased by more than 20 percent. He also mentioned inflation and an increase in the frequency of claims.

"In addition, the increasing use of technology in modern vehicles has a significant impact on repair costs, which in turn affects insurance premiums. This is just one component of the insurance premium.

"We cannot predict future price fluctuations now; only time will tell," Kaasik added.

If this year's inflation estimates are accurate, we can expect a slowing in price growth, Meelis Tara said.

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