Canadian Underwriter

Intact’s latest observations on driving habits during pandemic

July 29, 2021   by Greg Meckbach

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While more than 100,000 Canadians a day are getting their COVID-19 shots, Canada’s biggest auto insurer is noticing an increase in driving activity but things are not quite back to normal.

“Driving activity has been on the rise since early May,” said Isabelle Girard, senior vice president of personal lines at Toronto-based Intact Financial Corp. “We are now sitting just 5 points below pre-COVID levels of driving. So as vaccination continues to progress, we expect that driving will also continue to rise in the coming weeks,” Girard said Wednesday during an Intact earnings call.

The Canadian Press reported Thursday that 89,157 COVID-19 vaccine doses were administered Wednesday in Ontario alone. This means one of three conditions the province has set, for moving beyond Step 3 of its reopening plan, has now been met. In Quebec, CP reports 83.8% of residents aged 12 and older have now received a first dose of a COVID-19 vaccine and 65.1% are considered adequately vaccinated.

Driving is not completely back to normal, Girard suggested Wednesday during a conference call discussing Intact’s financial results for the three months ending June 30. She was commenting on driving habits that Intact observes, from its usage-based insurance clients. The telematics data shows when, where and how people are driving.

“When we look at the weekends, we are pretty much at historic levels, but when we are looking at the weekdays, especially for the morning rush hour, we see that we are still below historic levels,” said Girard.

Intact reported Tuesday its underlying current year loss ratio, in personal auto, was 59.6% in the most recent quarter. This is up 5.9 points from 53.7% in Q2 2020. Intact attributed that deterioration mainly to increased driving activity. But personal auto claims frequency remains below historical levels, Intact said Tuesday in its management discussion and analysis for Q2 2021.

During Wednesday’s earnings call, an analyst asked Intact officials whether they are worried about the “optics” from consumers if driving gets back to normal and auto insurance rates rise but the combined ratio in auto remains better than before the pandemic.

“I am not worried about that,” CEO Charles Brindamour replied. “The industry entered the crisis with a meaningful amount of work left to be done, to deal with the things [Intact was] focused on [in auto] since 2016.”

Brindamour was alluding to a number of measures intact started taking in 2017 to improve its auto insurance results. Those measures included “meaningful rate increases” across Canada, as well as measures to reduce the claims cycle times on auto repairs. At that time, Intact attributed rising auto loss ratios both to claims inflation for bodily injury and psychological damage, as well as increases in repair costs due to technologies like cameras and sensors. Intact had reported an underwriting loss of $9 million in personal auto in Q4 2016.

“If you think about [auto claims] inflation on the liability side of things and inflation on physical damage, [Intact itself] put much of that work behind us,” Brindamour said Wednesday of the measures the firm put in place after Q4 2016. “I don’t think that’s the case at the industry level. You don’t need to go back too far to see that the industry, even in 2020, had adverse development and poor results in the first half. What people should be focused on mind is to make sure that prices are adequate when driving returns to normal, taking into account the pressure that existed in the system before COVID.”

On Tuesday, Intact reported direct written premiums of $4.297 billion in the three months ending June 30, 2021. This is up 29% from $3.389 billion in Q2 2020. Of the increase, $734 million was from the RSA plc operations that Intact recently acquired. This is the result of a three-way deal, with Tryg A/S, that closed June 1, 2021. In that deal, Intact acquired RSA’s operations in Canada, Britain, Ireland and the Middle East.

Intact’s combined ratio improved 2.8 points from 89.5% in Q2 2020 to 86.7% in the most recent quarter.

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