Intact sounds alarm on escalating collision repair costs

Escalating collision repair costs have commended the attention of Intact Insurance, as company officials continue to express disappointment with the Toronto-based insurer’s financial results in personal auto.

Company officials said they had “unsatisfactory” performance in personal auto, with the chief culprits being new vehicle technologies and more expensive vehicle parts. Intact’s combined ratio in personal auto was 101.2% for the three months ending Dec. 31, 2017, up 0.3 points from 100.9% in Q4 2016. For the full year, the combined ratio in personal auto was 101.7% in personal auto, up 1.8 points from 99.9% in 2016.

“Physical damage inflation remains the main driver of our current under-performance [in the most recent quarter], but severe weather was also a factor,” Intact Financial Corporation CEO Charles Brindamour said in a conference call with investors on February 7. This was “largely driven by costs of repairs, largely driven by technology,” he said. “Parts are more costly, [and] the repairs are more complex and take more time.”

Intact has an action plan to reduce the severity of auto physical damage claims, Brindamour said, including a “faster determination” of whether a car is repairable or whether it is a total loss. This way, the insurer can  reduce the number of times the car has to be towed, and also reduce storage costs.

“A lot of costs in physical damage are outside the actual repairs,” including rentals and towing, Patrick Barbeau, Intact’s senior vice president of claims, said Feb. 7, 2018. “When you are able to be more efficient in the repair process itself, you save significant portions of the costs on the rentals.”

Increasing specialization in collision repair is helping to increase the efficiency of the repair process, he added. “We see body shops getting more specialized in some types of repairs than others,” Barbeau said. “And when you can deploy to the front line clear indications of where to guide our clients to get their car repaired, depending on the model, depending on the type of accident, you get significant savings. That has evolved over time. A few years ago, body shops were more generalist.”

The new shift in focus does not take away from the fact that bodily injury and accident benefits claims costs are still a concern. “Eighteen months ago, in the third quarter of 2016, the results in automobile insurance took a turn in a direction we didn’t like,” Brindamour said. “This was primarily driven by bodily injury as well as accident benefits. Part of it was reporting of larger claims from years 2013-14.”