Allstate posted its second quarter financials this week, and in doing so, revealed that its U.S. earnings suffered as the result of an “increased frequency and severity of auto accidents.”
It’s not alone.
In the article “American drivers are becoming an insurance nightmare
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Business Insider suggests that this trend may be attributed to low oil prices acting as a catalyst for drivers to rack up many more miles on the road. But while that could spell trouble for insurance premiums in the U.S. for the foreseeable future, Allstate Canada warns that it’s too early to tell what it means for brokers north of the border.
“What we’re seeing as an industry phenomenon is that there is a rise in collisions that have occurred this year relative to years past,” said Ryan Michel, senior vice president and chief risk officer, enterprise risk management, Allstate Canada. “But a lot of the volatility that happens year to year can be due to weather or other factors that could have an impact.”
He points out that many regions in Canada suffered severe winter storms in the first three months of this year, which could have been behind the spike in auto collisions.
But while Michel is able to foresee how an improving economy and lower fuel prices could encourage travel by automobile, there is not sufficient data to link the two quite yet. In fact, he argues that the drop in fossil fuel prices could have an inverse effect in Canada.
“There are localities where many people are not in the workforce anymore as the result of low oil prices, and that could serve to decrease the number of drivers on the road,” he said.
In addition, he feels that advancements in telematics and other behavioral tools could counteract many losses in the long-run and possibly even result in premium savings. In the meantime, if Canada does start to become an “insurance nightmare” like the U.S., the market will correct itself before any substantial damages are sustained.
“The industry will respond and we will, too,” Michel said. “If some premiums are driven upward, we’re thankful that Ontario has some good reforms being implemented in its system and that could offset the trend and lead to cost savings.”
