Mexican auto insurance legislation to cause premium increase

Monday, April 7, 2014

Auto insurance premiums in Mexico are projected to increase between 8% and 12% in the next five years following the passage of legislation requiring third-party insurance coverage for all vehicles using the nation's highways.

In a report, Moody's said the insurance requirement, effective September 2014, should have a positive impact on the insurance industry, as 20% of industry premiums come from automobile insurance.

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Specialized auto insurers with large market shares, extensive distribution and claims servicing systems will benefit most.

The resolution, which passed in September, mandates insurance for vehicles model year 2011 and later with a value exceeding 186,700 pesos (US$14,300).

The required third-party insurance must cover a minimum of 50,000 pesos for auto damage and 100,000 pesos for personal injuries and death. Average yearly auto insurance premium will be US$35-40.

Some 85% of Mexican vehicles (between 22mn and 25mn units) are estimated to carry this insurance protection after five years. Currently, just 28% of vehicles have some kind of insurance protection.

Auto insurance premiums are expected to increase some 10% as a result of projected growth in the number of policies sold and the incremental cost per insured vehicle.