Intact CEO’s forecast for auto rate relief in 2021

It could be up to a year before driving habits return to normal, but don’t expect many of your clients to pay less for auto insurance.

Those were a couple of key takeaways from a recent Intact earnings call.

“It is hard to tell how soon the return-to-normal will be,” Intact Financial CEO Charles Brindamour said during a Q&A discussing Intact’s 2020 financial results. “I suspect we have a least a year of [less driving due to the pandemic.]”

The industry-wide auto insurance results are not promising.

“We are in a tight marketplace. The industry’s combined ratio was 100% at the end of Q3 [2020]. Automobile insurance was around 100% [combined ratio] for the industry,” Brindamour said during the Feb. 10 conference call, the day after Intact released its 2020 financials.

Industry-wide, some carriers are raising their auto rates, he observed.

“My view is, you are probably in a flat environment in auto from a rate point of view,” said Brindamour.

Intact itself reported a huge improvement in the profitability of its personal auto insurance results. Its combined ratio in personal auto was 82.6% in 2020 Q4, down from 96.5% in 2019 Q4.

Intact says it provided $530-million worth of relief in 2020, offering payment flexibility and premium reductions of $439 million to more than 1.2 million customers. Part of this happened because of changing driving behaviours: Driving frequency is down because of government lockdowns intended to stop the spread of COVID-19. The $530 million was on all lines including but not limited to auto.

Brindamour was asked by an analyst whether Intact clients could expect to see similar rate relief in 2021.

“No. I don’t think so,” replied Brindamour. “I would be very very surprised if we would be in that range. First of all, the difference in driving in the second wave is very different from the driving in the first wave.”

Brindamour was alluding to different phases of infection intensity in Canada. The first wave happened roughly during the spring of 2020, while the second wave picked up in the fall and winter.  COVID-19 was declared a pandemic Mar. 11, 2020 by the World Health Organization and resulted in millions of employees being told to work from home.

“Driving in the first wave, at one point in time, was down 50%,” said Brindamour. “Driving in the second wave has dropped, but nowhere near these [50%] levels. As such, I don’t see the logic for relief to that same extent. Second point is, far more people have embraced [usage-based insurance]. And rate reflects, to a certain extent, an expectation of less driving, so I just don’t see relief to that extent in 2021.”

Feature image via iStock.com/dusanpetkovic