Zenith Insurance ends broker contract; Alberta Finance Minister cites rate pause

Editor’s Note: On Friday July 21, 2023, Canadian Underwriter sent out an e-newsletter with an incorrect subject heading, implying that Zenith pulled out of auto insurance in Alberta. In fact, Zenith has only cancelled a contract with a brokerage that wrote auto for Zenith, and is still writing auto insurance business in Alberta. Canadian Underwriter apologizes for the error in the subject heading.

Zenith Insurance Company has terminated its relationship with an Alberta brokerage that was selling its auto insurance, with Alberta’s Finance Minister suggesting the move was related to the province’s rate pause. 

“Zenith Insurance Company made the decision to end our relationship with one of our personal lines brokers in Alberta, impacting a small number of customers,” a Zenith Insurance spokesperson told CU. “We remain committed to serving the personal automobile insurance needs of customers within the province and across Canada through our other partners.” 

Due to privacy reasons, the company cannot comment on the name of the broker. 

Zenith has a market share of 0.43% for Alberta private passenger vehicles, according to the Approved Automobile Insurance Rate Board Filings. 

Across Canada, the company’s total auto claims ratio was 85.77% in 2022, although on the personal accident (auto benefits) side, it was 119.52% — meaning the company lost about nineteen cents for every premium dollar it brought in on the personal accident side, according to MSA Research stats published in Canadian Underwriter’s 2023 Annual Stats Guide. 

“We recommend that any questions regarding Alberta’s automobile rate pause or reform efforts be directed to the Insurance Bureau of Canada [IBC],” Zenith Insurance’s spokesperson said.

Insurers are facing increased vehicle repair costs and surges in legal fees. These factors — coupled with the rate pause — are challenging insurers’ ability to remain viable, Aaron Sutherland, IBC’s vice president of the Western and Pacific region explained. 

Other industry voices have been vocal about the pressure the rate pause would put on insurers to continue their operations. 

“If you have an insurer that leaves, you now have a gap in the market, [and] you have consumers that are now left without insurance,” Jhnel Weller-Hannaway, CEO of the Insurance Brokers Association of Alberta told Canadian Underwriter. “What that does is it then puts pressure on other insurers to fill that gap.” 

The rate pause, implemented by the United Conservative Party, is set to remain in place until the end of 2023. Weller-Hannaway says the association is keeping its ears to the ground on whether other insurers may follow suit.

In the meantime, however, IBAA is advising brokers to explain the impact of the rate pause to consumers, and how it may affect them.  

“A lot of them don’t understand that there’s more of an impact that could be detrimental to them than [there is] actually a benefit.” 

The industry is suggesting better means of auto reform to keep premiums affordable and prevent a domino effect of insurers withdrawing. 

IBC has suggested reforms to the Alberta government that could help to lower premiums by an average of $325 per year, including: 

• Instituting the Enhancing Care and Expanding Choice proposal, which would give drivers more choice in their coverage options (about $200 in savings) 
• The removal or restructuring of the provinces’ grid rating framework (another $60 in savings) 
• The removal of the 4% insurance premium tax on all auto insurance policies (another $60 in savings) 

Additionally, the IBAA has suggested an option for consumers to choose a limited right to sue for minor injuries, while maintaining the right to sue for major ones.  

“We also feel strongly that premiums charged should be based on the risk, and that good drivers should not need to subsidise bad drivers. Along with this change, IBAA would like to see an immediate increase in pre-approved treatment provisions for injured motorists, with a ‘care not cash approach’ to minor injuries.” 

Feature image by iStock.com/Kameleon007