How Aviva Canada is handling personal lines’ pressures

Aviva Canada’s overall combined ratio for 2023 stood at 95.3% (undiscounted) but there was a difference between the year-end combined ratios for personal versus commercial lines. 

The insurer’s personal lines combined ratio (COR) last year came in at 99.5%, up 4.3 points from 95.2% in 2022. Commercial lines’ COR was 88% in 2023, down 2.9 points from the previous year. 

Aviva Canada CEO Tracy Garrad told Canadian Underwriter on Thursday that auto theft was one of the biggest drivers. Supply chain inflation across auto and home restoration as well as unprecedented weather events (especially wildfire) also contributed, she said. 

Aviva Canada also attributed the personal lines COR to a variety of factors, including “heightened weather-related losses, higher reinsurance costs, claims frequency returning to more normal levels, and elevated Ontario auto theft.”

But the insurer is looking at a few options to help bring down the personal lines COR, Garrad told CU in an interview following the release of Aviva’s 2023 full-year results. 

Garrad said the insurer has “played quite a leading role, I would say, in the auto theft summit.” The National Summit on Combatting Auto Theft ended in Ottawa on Feb. 8 with a commitment to develop a detailed plan by this winter. 

The Government of Canada convened the meeting between government officials of all levels, industry leaders — including several P&C insurance organizations — and law enforcement representatives to discuss solutions to the alarming rise of auto theft in Canada.  

Auto theft cost insurers $1.2 billion, the costliest year on record, according to Équité Association’s latest tally in 2022. 

“I spoke quite passionately about the impact on customers because behind every one of those numbers is somebody’s life turned upside down when you hear their vehicle is stolen,” Garrad said. “And, of course, the funding of organized crime and it stems from that on a massive scale. 

Converting words into action 

“We are absolutely playing our part to convert words into action.” 

The insurer has rolled out close to 11,000 Tag devices to customers over the last few months, Garrad reported. Tag devices are anti-theft vehicle tracking and recovery systems.  

“We are getting a really good engagement from customers about how they understand the importance of that, and that so far has driven about $9 million of vehicle recoveries that, without those devices, we never would have been able to do so,” Garrad said. “As we continue that rollout, we hope there’ll be a series of other measures from the yet-to-be stood-up task force that the government talked about, and we’ll play our part in that.” 

Supply chain inflation has also affected personal auto. Among the challenges are inflated prices for vehicles and vehicle parts, along with difficulties in getting parts.  

“Which means that the car is in the shop for longer, which means that we’re also paying [more] for replacement vehicles… for longer,” Garrad says. “And then, of course, property restoration, construction and labour costs are also up.” 

Aviva is taking measures to take more control of the supply chain, Garrad says, noting that the insurer has had great success with partnered body shops that are dedicated to capacity for Aviva. The insurer has internalized large amounts of auto claims through those shops already. 

“Because the customer actually gets a much more streamlined experience and process, they’re generally getting their vehicle back quicker, so they’re more satisfied, and it costs us less,” Garrad says. “So, that’s a real win because we compile that back into our pricing. 

“We’re looking to do the same on our property restoration as well… We hope we can achieve the same outcomes in terms of repair times, dedicated capacity, to give over to the customers and keep those turnaround times shorter.” 

When it comes to understanding flood risk, Aviva is also starting to adopt geocoding to be able to better identify and accurately price risk. For example, traditional postal codes can take up a big territory with dramatically different geographies — a person could live at the top of a hill where they’re unlikely to get flooding, but may get a wildfire. Or they could be at the bottom of the hill where they’re likely to get flooded. 

“Geocoding narrows that down to a certain square meterage and the property is placed within a geocode that has certain parameters and you can assess that risk much more accurately.” 

Feature image by iStock.com/Natee Meepian