Insurance companies have paid out an exceptionally high amount in damage claims to customers this year.
Insurance company Lähi-Tapiola paid out 511 million euros in claims from January to June, nearly 14 percent more than the same period last year. Pohjola Insurance saw its payout expenses rise by 11 percent to 597 million euros, the highest amount for this period in five years.
Insurance firm If’s claims costs increased by 9 percent across the Nordic countries. While Fennia's payout amount did not increase from the previous year, it remained high at 221.6 million euros.
Insurance company executives have identified three key factors driving the increase in expenses.
Harsh winter
The substantial damage claims early this year can be largely attributed to the harsh winter — January's severe frosts and fluctuating milder weather caused numerous pipe bursts across Finland.
Vesa Aho, CEO of Pohjola Insurance, observed a significant rise in freezing damages at the start of the year, with building damage claims increasing by up to 92 percent compared to the previous year.
Severe frosts and high electricity prices drove households to use wood for heating, leading to a significant spike in building fires. Emergency services reported over a 70 percent increase in such fires compared to previous years, Aho noted.
If Insurance also experienced a higher-than-average number of vehicle accidents, slip-related injuries, and property frost damages in the early part of the year, according to the firm's Head of Product, Tommi Palmu.
Poor driving conditions also led to car battery problems, which in turn heightened the demand for towing services. In January, Pohjola Insurance saw more than double the number of towings compared to the previous year
Health insurance boom
The increased use of health and sickness insurance has significantly raised compensation costs in recent years, according to Pekka Puustinen, Deputy CEO of Pohjola Insurance. The company’s health insurance claims rose by 10 percent from January to June compared to last year.
During the Covid pandemic years of 2020-2021, there was a decline in the use of private health services, but now demand has surged as people are seeking medical care more frequently.
“Simultaneously, demand for health insurance has risen significantly, and usage has increased,” said Puustinen.
He speculates that people are using their insurance for medical services even for relatively minor issues.
“When people have the flu or a fever, they often seek private medical attention quickly, even though rest might be sufficient. This contributes to increased use of health services and consequently higher compensation costs for insurance companies.”
One reason for the increased use of health insurance is a growing mistrust in public healthcare, according to Antti Määtänen, Director of Claims and Business Support at Lähi-Tapiola for the Pirkanmaa region.
“Public confidence in the ability of the public sector to provide health services has been tested. Medical costs for both people and animals have risen sharply, by over 10 percent in Pirkanmaa," he said.
People are increasingly turning to private doctors partly because the public healthcare system's service promises are not always clear, said Päivi Luna, Research and Development Manager at Finance Finland (FFI).
"People may not know what and where public health services are available, and what is their responsibility. People apply for services in many places at the same time. This is also reflected in the use of private services and health insurance," she said.
Impact of inflation
The amount of compensation payments by insurance companies has been increasing significantly for the third consecutive year, according to the Financial Supervisory Authority's damage insurance statistics.
The statistics reveal that by the end of March, compensation costs for damage insurance were nearly eight percent higher than at the same time last year.
This rise in costs is also influenced by general price increases or inflation. As prices rise, compensation payments for damages also increase, noted Sanna Elg, Chief of Claims and Legal Services at Fennia.
Puustinen from Pohjola Insurance reassures that short-term damage spikes from weather conditions don’t currently lead to price increases for customers. However, long-term changes like increased health insurance use or more extreme weather due to climate change could eventually impact costs.
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