Intact’s game plan in personal auto

Intact’s personal auto insurance premiums grew by 28% in 2022 Q2, but the company says its auto game plan is “not only pricing-driven,” the CEO reported during Intact’s recent earnings call. 

“Equally important is how we manage claims and our supply chain,” Intact CEO Charles Brindamour reported in a 2022 Q2 IFC earnings call. “Our capabilities on this front have generated one-third of our ROE advantage and really helped mitigate inflation.” 

Intact’s partnerships with auto repair service centers, coupled with their parts purchasing activities has been “important,” Brindamour says. “We also clearly benefitted from our salvage disposals as an increasingly important source of income, as the cost of parts and scrap metal increased.” 

As inflationary cost pressures have persisted, Intact has been taking additional actions in claims. “For instance, we’ve deployed machine learning applications to the frontlines to make smarter decisions between repairing and declaring total losses,” Brindamour says. “We’re also seeing more volume to our growing number of dedicated service centers, which provide courtesy car fleets and lower repair costs.” 

Brindamour reported the company’s 28% auto premium growth was mostly driven by the RSA acquisition and “muted” organic growth. 

“Organic growth remained relatively muted at 1%, as units were under pressure given our cautious stance on rates,” he says. “We expect this pressure to be temporary, as the market is actually catching up and gradually reflecting headwinds in its prices.” 

At 89.8%, Intact’s operating combined ratio is 7.4 points higher than it was over the same period last year, “despite 8% inflation on claims costs and higher driving activity,” Brindamour says. Although driving activity was up from the prior year, claims frequency remained below pre-pandemic levels. 

Global supply chain disruptions drove inflation in Q2, leading to higher market value for used cars and repair costs. “We’ve been anticipating these trends and proactively managing them for some time now,” Brindamour says. “First, there’s a high degree of caution already embedded in our reserves for both short and long tail points. 

“It certainly helps we don’t see cost increases on 40% of our claims that are not physical damage in nature,” he says, adding that past product reforms on accident benefits and bodily injury have helped provide stability in auto. 

Intact’s auto rates have also become higher as the pandemic rate relief has been rolled back. 

“Note that unlike many of our competitors, a large portion of our relief was provided as one-time rebates. Further rate increases to deal with inflation were deployed also earlier this year,” Brindamour says. “At the same time, the gradual shift of the car pool to newer car models is automatically reflected in our pricing, which is yielding additional premium over and above our rate increases.” 

In aggregate, written rates and insured values generated close to four points in Q2, Intact reports. “I expect that to increase to close to nine points by Q4. That alone anticipates and, in my view, covers prospective inflation and driving activity,” Brindamour says. 

In terms of outlook for the rest of the year, Intact expects their personal auto business to run at a sub-95 combined ratio in the next 12 months. 

Intact predicts the overall industry’s auto premium growth to progress towards the mid-single-digit range over the next twelve months, reflective of inflation and evolving driving patterns. 

 

Feature image by iStock.com/Kameleon007