Why Inflation Is Driving Up Car Insurance Premiums in Spain

How car insurance premiums are actually calculated in Spain

A common assumption is that your premium is based on what your car is worth. In Spain, that is not how it works. Premiums are built around the average cost of a claim — the typical amount the insurer expects to pay when something goes wrong.

The key is what “a claim” usually means in practice. The overwhelming majority of motor claims are repairs — a bumper, a wing, a door, a panel, some paintwork — not the total loss of a vehicle. Write-offs are rare by comparison. So Spanish insurers do not price your policy around the total-loss value of your car; they price it around the cost of the everyday repair that is far more likely to happen.

That single fact is why repair-cost inflation feeds straight through to your premium. If the average repair gets more expensive, the average claim gets more expensive, and the premium has to follow.

The average repair claim has risen from about €800 to €1,050

In our own claims experience, the average cost of a repair claim has climbed from around €800 before the pandemic to about €1,050 today — an increase of roughly 30%. That rise is the engine behind almost every premium increase we are now seeing.

The causes are well understood across the industry:

• Parts manufacturers have put prices up. Since Covid, supply-chain disruption and component shortages pushed up the cost of spare parts — and those increases have stuck.
• Garages and labour cost more. Workshop labour rates, energy and materials such as paint and consumables have all risen with general inflation.
• Modern cars are dearer to fix. Bumpers and windscreens now carry sensors, cameras and radar for parking and driver-assistance systems. A knock that used to be a simple repair can now mean recalibrating expensive electronics.
• It is market-wide. Across Spain the average price of motor cover rose by close to 10% during 2025 alone — insurers everywhere are reacting to the same repair-cost pressure.

Why we can no longer hold your renewal at last year’s price

For a long time we kept most renewals broadly flat, year after year. We worked the market, used our position as Generali agents, and absorbed small movements so you barely noticed them. We took real pride in that.

What has changed is the relationship between renewal prices and new-business prices. In the past, if a renewal crept up, we had a simple lever: cancel the old policy and rewrite it as a new one, because new-business prices were lower. That option has gone.

Today the opposite is true. New-business premiums are now higher than existing renewal premiums. Insurers have repriced new policies to reflect the new cost of claims, so cancelling and replacing your cover would not reduce the price — it would usually increase it. In most cases the renewal you are offered is already the better deal.

We want to be straight with you: we expect these increases to continue while repair-cost inflation persists. We will always shop your cover and find the most competitive option we can — but we can no longer promise a flat renewal, because the underlying cost of claims has moved.

Brexit and the expat car insurance market

There is a second factor that affects expats specifically: Brexit. Since the UK left the EU, the number of British residents settling in Spain has changed, and with it the size of the expat motor market.

For insurers, a large, stable, good-quality book of expat drivers was attractive business. As that pool has thinned, some insurers have become less keen to compete for it. Fewer Brits means fewer of the quality premiums insurers used to chase — and less competition between insurers generally means less downward pressure on price. It is not the main driver of the increases, but it has shaped insurers’ attitude to the expat market.

How claims are settled in Spain — the part that surprises people

There is one more piece that explains why Spanish premiums track the average claim so closely: the way Spanish insurers settle claims between themselves. We will cover this properly in a separate article, because it deserves one — but here is the short version.

Spanish insurers settle most claims with each other on a module basis, under an industry agreement (a convenio). Rather than billing each other the exact cost of every repair, they exchange fixed, agreed amounts per claim. It keeps the system fast and avoids endless arguments over individual invoices.

Here is the part that surprises people. Imagine you are hit by another driver who is entirely at fault, and your brand-new car is written off. Under this system, your insurer recovers from the other driver’s insurer the same fixed module amount it would recover if their client had simply left a 5 cm scratch on your wing. The recovery is based on the agreed module — not on what your car was actually worth.