Alberta might see further auto insurer exits unless the province comes up with a long-term solution to unprofitability.
According to Morningstar DBRS, the regulatory and operating environment in Alberta remains unfavourable for auto insurers due to a fixed rate cap in place and a lack of a clear solution.
A report by The Canadian Press cited the credit rating agency, which said: “We believe that others may follow. Even those who do not have plans to withdraw from the market per se may be implementing cost savings measures that are reducing the accessibility and availability of auto insurance.”
Definity-owned Sonnet Insurance Company is withdrawing from the auto insurance market in Alberta due to “limited” growth opportunities, while Aviva Canada recently disclosed the “difficult decision to exit” given the same reasoning.
“Sonnet will continue to focus its efforts to profitably grow its auto insurance business in other regions in Canada,” the company said in June.
As for Aviva – whose Aviva Direct home and auto products in Alberta are underwritten by S&Y Insurance Company and distributed by Aviva Agency Services – it lamented the “many years” of unprofitability.
Morningstar DBRS senior vice president and sector lead for North American insurance ratings Nadja Dreff noted: “Until a couple of weeks ago, the Government of Alberta contemplated introducing a public insurance system but has since indicated that it will likely not be pursuing that option.
“Nonetheless, the province needs to find a long-term solution to its auto insurance challenges or risk further capacity constraints, thereby making it more difficult for Albertans to get adequate coverage at an affordable price.”
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