Motor Insurance Without Averaging: How Free Pricing Changes Policy Costs for Drivers
The mandatory motor third-party liability insurance market is going through one of its biggest transformations in recent years. Since 2025, free pricing has been introduced in motor liability insurance, and this is gradually changing the very logic of how a policy price is formed. What previously looked like a single “flat rate for everyone” is beginning to turn into an individual calculation, where a driver’s actual behavior matters more and more.
Previously, the system worked simply, but unfairly. There was a centrally set maximum policy price and a limited list of coefficients that insurers were allowed to use. An insurance company could not really say: this driver is careful and creates little risk, while another regularly gets into accidents and should cost more. As a result, everyone paid roughly the same, and safe drivers effectively “subsidized” those who caused losses more often. From 2025, this model began to change. Insurance companies received the right to develop their own tariff calculation methodologies. This means they are no longer obliged to rely on a single base payment and rigidly defined coefficients. Now each policy is the result of a risk assessment: who drives the car, where and how it is used, how often similar vehicles are involved in accidents, and what the owner’s insurance history looks like.
Put very simply, the logic has become similar to everyday life. A person who has not broken anything for years and behaves carefully is trusted more. Someone who constantly runs into problems is treated more cautiously, with a larger “safety margin.” In insurance, that margin is the price of the policy. Insurers today look at a whole set of factors. The type of vehicle matters passenger car, truck, motorcycle, or special equipment. Brand and model are taken into account, because repair costs directly affect the size of potential payouts. The region of registration and actual use is important: in large cities with heavy traffic, the risk of accidents is higher than in smaller towns. The driver’s age is considered, as well as how the car is used privately or commercially and the duration of insurance coverage.
But the key new element is insurance history. If a driver has been driving for years without accidents and has not created losses for the insurer, this gradually begins to be reflected in the policy price. Conversely, previous insurance claims signal increased risk and push the price upward. Importantly, decisions are not made based on a single parameter: the assessment is always comprehensive, to avoid mechanical and unfair conclusions. At the same time, not all drivers immediately felt a reduction in price. In 2025, insurance companies still lacked sufficient accumulated statistics to introduce mass, automatic discounts for accident-free driving. However, the principle itself is already embedded in tariff models, and in the future it is expected to become a real financial incentive for responsible behavior on the road.
At the same time, the market has faced higher motor liability insurance prices for certain categories of clients. This is due not only to the new pricing logic, but also to changes in claims settlement rules. Liability limits for property damage and personal injury have increased significantly. Payouts are now made without taking depreciation of parts into account, deductibles have been abolished, and the limit under the European Accident Statement has been aligned with the general property damage limit. For victims, this means better protection, but for insurers it means higher costs in the event of an accident costs that cannot be ignored when setting prices. The sharpest price increases were felt by segments that had long been under-tariffed. Passenger carriers, especially in the regions, young drivers, owners of electric vehicles, and legal entities with large vehicle fleets often showed high loss ratios, but insurers previously had no tools to properly reflect this risk in pricing. Free pricing made it possible to reassess these segments and bring tariffs in line with real statistics.
Post List
Changes have affected not only prices, but also competition between insurance companies. Under fixed tariffs, competition focused on the number of contracts, while service quality played a secondary role. The situation began to change with the introduction of direct settlement, when the insurer works with its own client immediately after an accident. Now it is the claims experience, speed, and transparency of payouts that influence loyalty and repeat choice. Free pricing has strengthened this effect, allowing insurers to combine different service levels with different prices for different driver profiles. As a result, motor liability insurance is gradually moving away from the logic of “everyone pays the same.” The market is shifting toward a model where the policy price increasingly reflects the real level of risk. For drivers, this means a simple, though not always pleasant, truth: how a person drives today increasingly determines how much they will pay tomorrow. For the insurance market, it is a chance to reduce chronic loss-making and make the system more fair and understandable for all participants.
About the Author
Related posts:
New Rules After an Accident: How Motor Insurance Works with Direct Settlement 
Direct settlement of MTPL as a new norm for drivers and insurers 
“Code 95”: How New European Requirements Are Changing the Rules for Ukrainian International Drivers 
Insurance of Housing Against War Risks: Between Limited Protection and Growing Demand
