Intact expects auto insurance rates to firm in Canada, where brokers and consumers can expect the company to increase auto rates by single-digit percentages by the end of 2022.
In its personal auto business, Intact’s “combined operating ratio of 93% was 7.9 points higher than a year ago, primarily due to an increase in claims severity due to pressures inflationary”, as Intact indicates in its management reports. regarding its Q3 2022 results.
In personal auto, Intact’s underwriting profit was $98 million in the third quarter of 2022, down from $210 million in the same period last year. Intact’s current year loss ratio was 72.1% in Q3 2022, up 9.6 points from 62.5% compared to the same period last year.
The severity of auto claims costs, driven by inflation, has been higher than initially expected, Intact Financial Corporation CEO Charles Brindamour said in a fireside chat Thursday, discussing the results of the company for the third quarter of 2022.
“Severity increased more than we thought in the third quarter, it’s true,” Brindamour said, adding that the increase in claims severity costs increased from 8% to 13%. But the frequency [of auto claims] was less than we thought. And frankly, it’s been stable now for at least two quarters if not three, given where we are now.
“Between this, the caution and the position we have taken [auto] prices, we are comfortable with our forecast below 95% [e.g. the company’s target for the combined ratio in personal auto].”
Brindamour noted that the company made one-time payments to consumers for pandemic relief, instead of cutting car insurance rates across the board, so it wouldn’t end up with lower premium rates at a when the severity of claims increased significantly due to inflation.
In its MD&A analysis, the company observed that auto premiums fell by 1% between Q3 2022 and Q3 2021. This year, during the third quarter, Intact said it took pricing action before its competitors.
“We increased rates by low to mid-single digits during the quarter and expect to progress to high single-digit increases by the end of the year,” according to the MD&A analysis.
During the fireside chat, Brindamour observed that inflation has a different impact on different types of cars and the composition of automotive portfolio activities. Intact’s forecasts of future rates take into account segmented inflation risks.
“Inflation is not an average problem,” Brindamour said. “It’s a fairly different issue depending on the type of risk [is], types of cars, etc. “This is well reflected in the way we set prices. “There is the price, and then there is the mix. And the mix has changed a lot over time.
“And then there is [the] Supply Chain. Supply chain is not only an area where I think we had an advantage, but we used the pandemic to accelerate some of the things we were doing there. “For all of these reasons, you saw… the combined ratio of 93% [in] car despite inflation. I think we’re in pretty good shape.
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