How Intact is handling commercial insurance relief measures

Canada’s largest property and casualty insurer is renewing some commercial policies with no changes in price, and is making mid-term policy adjustments to reflect changing risk portfolios under the current economic conditions.

The company said in a recent earnings call that it will take a second look, within weeks, of its previously-announced pandemic relief measures for clients. Pandemic relief measures announced Apr. 14 include auto premium reductions for clients who safely store their vehicles, waiving the fees normally charged for missing payments, and premium adjustments for commercial clients who are closed or otherwise severely affected by the pandemic.

“We are enabling customers to come back to us and say, ‘Hey, my revenues are down, my payrolls are down, can I adjust my coverage accordingly? Can I adjust my premium accordingly?’” Darren Godfrey, senior vice president of commercial lines, said Wednesday during the call discussing Intact’s financial results for the three months ending Mar. 31. “So we are making those changes mid-term.”

On the commercial auto side, Godfrey said, when it comes to “parking fleets that are not in use – traditional things that we would tend to do more at the end of the term – we are [now] making adjustments at the middle of the term.

“We are tempering rate increases in commercial lines. And in fact, [for] about a third of our portfolio [of] small to medium businesses that are most impacted by the current crisis, on renewals for those customers, we are going six months as-is. In other words, no change in terms, conditions, pricing. So that’s another form of relief that we are providing on the commercial lines standpoint.”

Intact Financial Corp. CEO Charles Brindamour said Wednesday during the earnings call that “as the weeks advance, we will look at the environment. We will look at people’s behaviour and decide if we need to take a different stance in the marketplace.”

Brindamour was asked by a securities analyst what “headwinds” he foresees that would affect Intact’s earned premiums in the future.

Last month, Intact said its relief measures will be in place up until and including June 30, 2020. “Given our assessment of the situation, we will grant relief until June 30 then re assess depending on where the world is,” Brindamour said during the Q1 earnings call. “And that relief will impact probably Q2 and Q3, quite frankly.”

So far, Intact has provided about $130 million in relief to about 390,000 customers. “We expect the total amount of relief will exceed $200 million by the end of the lockdown,” Brindamour said Wednesday.

Once the economic pressures created by the pandemic situation have abated, the industry can likely expect to see a return of hardening market conditions, Brindamour suggested.

“The prevailing hard market conditions we experienced in Canada in 2019 and into early 2020 will be temporarily impacted by the crisis as we provide relief to small and mid-sized businesses that are going through a hard time,” he said. “Once the impact of the crisis has passed, we do expect corrective measures to resume fully as the industry continues to report [returns on equity] well below historical averages.”

Intact reported Tuesday $2.399 billion in net premiums written in the latest quarter, up from $2.108 billion in the first three months of 2019. Net income was $107 million during the three months ending Mar. 31, 2020, down from $159 million in the same period last year.

Its combined ratio improved 7.2 points, from 101.5% in 2019 Q1 to 95.3% in the most recent quarter.

“The coronavirus pandemic has inflicted immense pain and suffering on communities across the globe and economic activity has slowed to levels not seen in our lifetime,” said Brindamour. “Over past six weeks, Intact has been providing payment flexibility and premium adjustment to impacted customers to recognize financial hardship and changing risk profile.”

Feature image via iStock.com/SIphotography