In the first half of this year, insurance companies compensated a total of €41 million in traffic insurance claims, marking a 13 percent increase compared to the same period last year. The number of traffic insurance cases also rose by 3 percent, reaching 17,000 incidents.

Andres Piirsalu, member of the board of the Estonian Motor Insurance Bureau (LKF), expressed concern over the increase in compensation payouts. "The economic downturn has been ongoing for several consecutive quarters and shows no signs of ending," he said.

According to Piirsalu, crises typically result in fewer traffic accidents because there are fewer vehicles on the roads and fewer kilometers traveled.

"This was the case during previous crises, with a particularly sharp decline during the COVID-19 pandemic. Traffic became so sparse that the number of traffic-related claims dropped drastically, leading to a nearly 40 percent decrease in the cost of both traffic and comprehensive insurance during specific observation periods," Piirsalu explained.

"But this time, for some reason, things are different: despite the economic downturn, traffic volume remains high, and persistently high inflation is pushing up claim amounts," he noted.

Piirsalu also pointed out that weather conditions add further uncertainty about the future. "In some years, there are more so-called bad weather days than usual, particularly during very snowy winters, leading to more accidents and higher claim amounts," he observed.

"For example, in Estonia, there are usually an average of 100 accidents per day, but on some snowy winter days, the number of such incidents can exceed 400. When there are many such days in a year, it significantly impacts the overall claims," Piirsalu said.

He added that given this backdrop, it is difficult to predict the future, as the current economic cycle is different from what is typically seen from an insurance perspective.

Average claim hits record level

Average damage from a traffic accident increased by 6 percent compared to the previous year, now standing at €2,328, marking an all-time record in Estonian traffic insurance.

"In short, the cost of traffic and comprehensive insurance claims is influenced by weather and inflation, while the frequency of claims is similarly affected by weather conditions and the level of traffic on our roads and streets," explained Piirsalu.

At the same time, Piirsalu pointed out that there has been a decline in the truck and bus segment for some time, which likely indicates that companies are scaling back their operations.

"But since nearly 70 percent of all motor vehicles are passenger cars, most of which are used by private individuals, we do not see an overall decline at this time," he added.

How to curb number of traffic collisions?

According to Piirsalu, there are many solutions, both immediate and long-term, to alleviate the current situation. One long-term but challenging solution he mentioned is changing traffic culture.

Piirsalu pointed out that the differences and areas for improvement in Estonia's traffic culture become particularly evident when compared to Finland. However, he acknowledged that Estonia's traffic culture is gradually improving.

"In the 1990s and early 2000s, it wasn't considered a big deal if someone was caught without a seatbelt or driving under the influence. Today, society no longer tolerates such behavior. However, cultural changes are slow to manifest and require significant resources. Issues like 'smartphone intoxication,' ignoring speed limits, or general rudeness remain prevalent on our streets and are not yet widely condemned," Piirsalu explained.

When it comes to improving safety in parking and broader traffic management, Piirsalu suggested that infrastructure managers and parking organizers could benefit from using accident data mapped to identify traffic accident hotspots. This information, in his opinion, could help in reorganizing traffic to enhance safety.

"In organizing parking, it's worth reviewing the width of parking spaces. Car sizes have increased, but unfortunately, the standards for parking lots have not kept pace," he noted.

Piirsalu mentioned that accidents in parking lots account for up to 40 percent of traffic insurance claims in some years, with the average parking lot damage exceeding €1,000.

Annual motor third-party liability and casco insurance premiums growing

As compensation payouts and claim amounts increase, the annual premiums for both traffic, or motor third-party liability, and comprehensive insurance are also rising. Last year, the average annual traffic insurance premium was €143 during the first half of the year, whereas this year, it has risen to €154 during the same period.

According to Piirsalu, this higher amount should not be overwhelming for someone who can afford to own and maintain a car in the first place. "The costs of maintaining a car can be several times higher than the average annual traffic insurance premium," he said.

Although fewer new cars are being bought and sold due to the car tax and the tougher economic situation, Piirsalu noted a trend of increasing traffic insurance purchases.

"If fewer cars are being bought but more are being insured, it simply means that the existing vehicles are being used more actively compared to before," he explained.

From an insurance perspective, Piirsalu does not see this as a problem. "When more claims are compensated, a price increase follows, and vice versa. This is standard insurance practice. Insurance simply adapts to the new situation, and the change is usually reflected in the customer's insurance premium," he noted.

"Estonia's advantage is that adjustments happen quickly under competitive pressure, as we saw during the pandemic: prices dropped massively within a few months because there were fewer claims. The current situation is the opposite: claim frequency is high, and consequently, the average insurance premium is also higher than usual," Piirsalu observed.

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