How individual insurers have responded to challenges in Ontario auto

Despite a consensus in the industry that auto insurance rates are inadequate in Ontario, not all insurers are trying to diversify their business to reduce their exposure to this particular line.

The Co-operators Group Ltd. “does not intend to reduce its market share in Ontario auto,” a spokesperson told Canadian Underwriter Monday.

For its part, Gore Mutual is “not necessarily planning to decrease” its exposure to Ontario auto, wrote Paul Jackson, chief marketing and distribution officer for Cambridge, Ont.-based Gore Mutual, on Monday in an email.

Aviva Canada is looking to diversify its business to reduce its exposure to Ontario auto, the insurer’s CEO, Colm Homes, told Canadian Underwriter earlier this month. Aviva was the Number 2 player by direct premiums written in 2017 in the overall Canadian property and casualty insurance market. Aviva ranks second in the Canadian auto insurance market and in the Ontario P&C market, according to the 2018 Canadian Underwriter Statistical Guide.

A diversification strategy does not necessarily entail writing less auto. It may mean selling more product in other lines of business to dilute the concentration of auto in the insurer’s book of business.

Canada’s largest insurer, Intact, is prepared to lose market share in auto insurance in order to fix its short-term challenges, said Darren Godfrey, Intact’s senior vice president of personal lines, during the firm’s investor day in March. Intact’s challenges include the cost to repair vehicles with more expensive parts and newer technologies.

Godfrey was asked about the auto market during a conference call discussing Intact’s financial results for the quarter ending June 30. There is “inadequacy” in rates in the personal auto market in Canada, he said. “When you look at the industry results, the combined ratio is well in excess of 100%.”

Godfrey said he expects further rate increases in the auto line. “That takes time, obviously. There are filing processes to go through, so while that process continues from an approval standpoint, we expect to see that that that firming up will continue very much in the near term.”

For The Co-operators, “it has been a challenge to secure approval from the Financial Services Commission of Ontario (FSCO) for adequate rate increases to reflect the risks in today’s environment, which include rising costs of auto claims,” the company said in its management discussion and analysis of its financial results for the quarter ending June 30. “Such restrictions are concerning, as an inadequate rate level limits our ability to remediate poor underwriting performance and places further pressure on the profitability of our auto line of business in this province.”

FSCO allowed Gore Mutual to raise its average rate this past January by 9%. This change was effective for new business as of Feb. 1, 2018, and renewal business as of Apr. 1, 2018. “Undoubtedly more rate (increases) will be needed unless government and the industry can take meaningful action on product reform,” Jackson wrote Monday.

The Insurance Bureau of Canada is reaching out to the newly elected Ontario government, as well as opposition MPPs, to highlight some of the issues in auto insurance, said Pete Karageorgos, IBC’s director of consumer and industry relations, for Ontario, earlier this month. One issue to be highlighted could include Ontario’s discount-only model for usage-based insurance, which does not let carriers increase a motorist’s rate if risky behaviour is detected by telematics.

In British Columbia, the province-run insurer announced this past Thursday it is proposing several reforms to the B.C. Utilities Commission, which has the power to approve or deny auto rate changes filed by the Insurance Corporation of B.C. Among the proposed reforms announced Aug. 9 were to make at-fault crashes tied to the driver and not the person who owns the vehicle, and to make at-fault crashes have a greater impact on the premium a driver pays.