Is the personal lines hard market abating?

Personal lines in Canada’s property and casualty insurance industry still appear to be in the grip of a hard market cycle, with both personal auto and property premium rates generally showing high, single-digit rate increases.

On average, personal auto quoted premium rates in Canada increased 9.4% in the second quarter of 2022 compared to 2021 Q2, according to the results of the latest Applied Rating Index from tech vendor Applied Systems. Average personal property (homeowners) increased 6.5% year-over-year.

Quarter-over-quarter, however, average personal auto and property premium rate increases were muted, at 0.9% and 1.8%, respectively.

“While we saw some reductions in the personal auto market last quarter, rates have increased again compared to last quarter’s and last year’s average premiums,” said Steve Whitelaw, Applied System Canada’s vice president and general manager.

Personal property showed high single-digit, year-over-year rate increases in the following regions:

Alberta, 8%
B.C., 8.7%
the Atlantic provinces, 5.5%
and Saskatchewan and Manitoba (together as one), 6.5%.

The same was true for personal auto, with all regions experiencing the following increased quoted rate changes:

Alberta, 6.3%
Ontario, 7.7%
Quebec, 9.6%
the Atlantic provinces, 9.5%

Applied’s rating index analyzes more than 1.3 billion completed quotes, representing more than 80% of the brokerage market and 675 insurer rating plans written by brokers. The tool does not give reasons for rate changes (for personal property or auto).

So, what’s contributing to this increase?

“Across Canada, driving levels have rebounded to pre-pandemic levels,” Insurance Bureau of Canada (IBC) told Canadian Underwriter.

Inflation is also playing a big role in escalating claims costs for insurers.

In general, record levels of inflation combined with rising interest rates are contributing to economic uncertainty in Canada. The country’s inflation rate hit 8.1% in June – a level not seen in nearly 40 years. “The insurance industry is not immune to the pressures that are increasing the costs for goods and services,” IBC said.

IBC and the P&C industry are educating consumers, governments and regulators about the impact inflation is having on auto and property insurance.

“Accelerating costs to repair or replace vehicles are converging with the increasing cost for new and used vehicles and a shortage of parts,” IBC reports. “Home replacement costs are also rising, putting pressure on property insurance claims.”

Catastrophic weather losses are another contributing factor, and “$2 billion in annual natural catastrophe losses appears to now be the norm, rather than an exception,” IBC said. This year has already experienced a number of insured loss events, including the destructive and deadly storm that swept through southern Ontario and parts of Quebec on May 21, causing more than $875 million in insured damage, according to initial estimates from Catastrophe Indices and Quantification Inc. (CatIQ).

Feature image by iStock.com/pamspix