Intact CEO forecasts how high industry auto rates may increase in 2020

Intact projects that Canada’s property and casualty industry will be asking for average auto insurance rate increases on the order of 7% over the upcoming 12 months.

Intact itself is expected to ask for more auto rate during the next year, although the company did not give any exact number during its 2019 Q4 earnings call Wednesday.

“We have seen some improvement in the performance of personal auto in the last 24 to 36 months, following our action plan [implemented three years ago],” Isabelle Girard, Intact’s senior vice president of personal lines, reported during the call. “But I think there is still volatility in that portfolio, given it’s a long-tail line of business, so while we have done a successful job at reducing [auto claims] inflation with our action plan, we know inflation still exists in that portfolio. So that’s why we continue to push for rates in 2020. I think we are in the zone we are shooting for in terms of combined ratio, and I think that’s what we can expect for the future.”

In personal auto lines, Intact reported a combined ratio of 96.5% in 2019 Q4, an improvement over the 97.3% COR it reported during the same quarter last year. That performance was led by a 15% increase in direct premiums written (DPW), driven by a 7% rate increase. Also included in the 15% is a 2% increase in premium growth based on more ‘units’ (i.e. new auto policies) written. The rest of the 15% increase related to the “mix” of the company’s auto business, which takes into account factors such as the premium rates charged for new business compared to premium rates charged within the existing book of business.

Commenting on the company’s auto results, Intact Financial Corporation president and CEO Charles Brindamour said the company was feeling comfortable with the direction of its auto book of business.  “In the hard [market] environment, we are comfortable with the adequacy of pricing, but the mix is changing,” he said. “That’s a function of the fact that we are growing in provinces that have higher average premiums, maybe a little faster than the average, and then the mix itself…And then you look at the units, per se, the [percentage of] units [written] are still in the low single-digit range. So on the one hand, there is a big focus on quality….On the other hand, we think there is still room for upside on the units.”

Brindamour said the company was focused right now on generating new auto business, with an emphasis on quality. “As you do that, as the units of growth are plentiful, you’ve got to keep your eyes on quality. And I would say if you ask the people of Intact in the field, quality is the first word they will talk about.” And if they don’t, he quipped, “give me a call, because somebody didn’t understand.”

In personal property lines, Intact reported a 9% growth in DPW and a COR of 82% in 2019 Q4, driven mainly by rate increases and business growth. In commercial lines, Intact reported a 12% premium growth, led by rate increases, and a 93.5% COR in 2019 Q4.

Overall, Intact projects hard markets in all of the Canadian P&C industry’s major lines — auto, personal, and commercial. The company’s 12-month outlook for the entire P&C industry projects premium growth – driven by rate increases — in the following areas:

• Personal Auto: Premium growth in the “upper single digits” (about 7-10%)
• Personal Property: Premium growth in the “mid-to-upper single digits” (about 5-7%)
• Commercial Lines: Premium growth in “the double digits” (more than 10%)