The personal auto insurance market will continue to see elevated rates and decreased capacity over the next 12 months, according to Aviva Canada CEO Tracy Garrad (pictured).
Garrad shared her forecast with Insurance Business Canada, noting that personal auto remains unprofitable largely due to auto theft, higher claims costs, and challenges in Alberta.
“We’ve emphasized the need for reforms and are working to support them,” said Garrad. “We expect the personal auto market to remain hard for the next 12 months until the industry returns to profitability.”
Aviva Canada is the latest insurer to lament challenges in the personal auto space. Last month, it joined several auto carriers in pulling out of Alberta, where a fixed rate cap has prevented firms from raising auto insurance rates above 3.7%.
Aviva Canada’s direct-to-consumer business, Aviva Direct, will phase out its home and auto insurance business from January 2025.
Garrad stressed that the decision was not made lightly. “Firstly, let me reiterate that this was a difficult decision made after careful consideration,” she said. “Unfortunately, the Alberta market no longer fosters growth, and we’re not alone in saying this. Claims costs have exceeded premiums in Alberta for many years, particularly due to litigation costs for bodily injury, which is the primary factor driving up auto insurance premiums.
“We want to continue offering Albertans choice and affordable auto insurance, but it hasn’t been profitable, and reforms are necessary.”
Apart from Aviva Direct’s exit, Garrad said she doesn’t anticipate further actions to manage the insurer’s personal auto book. She also assured Albertans that Aviva Canada remains committed to helping the government find solutions.
“This decision does not diminish in any way our commitment and the hard work that we’re putting in to play our part in the consultations that the Albertan government are doing on auto insurance reforms,” she said.
“We continue to offer insurance through our broker arm and RBC business, and I hope further actions won’t be necessary. I do believe that the government are committed to making changes. We have to make sure that they happen at pace because [the challenges have] persisted for too long already.”
Aviva Canada’s half-year 2024 results showed its combined operating ratio (COR) worsened to 94.7% compared to 92.8% in the same period last year, despite gross written premium growth of 10.5%, driven by new business and strong rate actions.
It reported growth of 14% in personal lines and 6% in commercial lines, owing to pricing actions and strong new business growth.
Garrad said she expects the property and commercial lines market to stay firm; the latter seeing more modest growth, with rate increases offset by heightened price competition, especially in large corporate accounts.
Asked where she anticipates growth for Aviva Canada for the rest of the year, Garrad highlighted “new avenues” being paved in commercial lines.
“With our scale, diversified product offerings, and multiple distribution channels, we believe we’re a trusted and preferred insurer for brokers and partners. Our national relationships and ability to span both commercial and personal lines are key strengths,” the CEO said.
“We’re always exploring new avenues for growth, and we see more opportunities in both personal and commercial lines. Recently, we’ve expanded our product offerings, including exploring parametric insurance.
“Additionally, with the appointment of Garth Pepper as our new MD for small business, we’ll be looking at how to capitalize on these opportunities with a more diversified product range. There’s much more to come from us.”
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