Intact weighs in on Alberta auto reform

Canada’s largest insurer is calling the actuarial analysis contained in an Alberta government-commissioned report on auto reform “deeply flawed,” aligning the company with concerns raised by Insurance Bureau of Canada (IBC). 

The Oliver Wyman actuarial report concluded a British Columbia or Manitoba-style public auto insurance regime would lead to more significant premium savings for Alberta drivers than private model reform proposed by IBC.  

A second report from Nous Group found it would cost between $2.4 billion and $2.8 billion to establish a new public insurer in Alberta, including start-up costs and the initial capital investment required to pay auto insurance claims.  

IBC told Canadian Underwriter recently the two reports can’t be viewed separately. The methodology in the Oliver Wyman report contains “major errors and flaws,” says Aaron Sutherland, vice president of IBC’s Pacific and Western regions.  

“They’re assuming everyone today purchases the maximum coverage available, which is simply not the case,” Sutherland says. “And so, they come forward with an average price in the market today that is far higher than the reality of what drivers are paying.” 

Intact executives also took issue with the Oliver Wyman report when asked several questions about the two reports during a 2024 Q1 earnings call Wednesday. 

‘Deeply flawed’ analysis 

“The actuarial analysis is deeply flawed, and overstates the benefit of moving to various regimes, especially a public, no-fault regime…” said Guillaume Lamy, Intact’s senior vice president of personal lines (and an actuary by training, according to his LinkedIn profile). “For instance, it totally ignores one-time investments like IT, which any insurer would have to make, even if it’s a public one. 

“It also used an industry premium that is 27% higher than the average premium in Alberta today as a starting point, which obviously then overstates the benefits when compared to other regimes. 

“That being said, the [Nous Group] report also clearly outlines the negative consequences of moving to a government-run insurance monopoly, killing thousands of jobs in the private sectors [and] forcing taxpayers to pay billions to subsidize auto insurance.” 

Intact Financial Corporation CEO Charles Brindamour agrees with Lamy’s assessment. “We looked at the report together, and a bit of a joke from an actuarial point of view,” Brindamour says. “It’s pretty clear in fact that the Alberta marketplace is best served by private industry, and I think everybody recognizes that, so I’m not concerned about that myself.” 

Lamy adds that “our book is in good shape in Alberta — let’s not forget that it’s 5% of IFC [Intact Financial Corporation]. And even in personal auto, we have 70% of our book…in Ontario [and] Quebec…” 

The province’s two reports look at seven auto insurance models ranging from public, private and hybrid auto systems, as well as two different auto insurance models in Australia, but do not endorse any of them. The government has opened public consultations on auto insurance reform and has said no decisions have been made about how to move forward. 

“Oliver Wyman’s calculations predict the lowest required premium [as of July 1, 2024] occurs in a change from the current court model to a care model where the government created a public insurer that offered both bodily injury and vehicle damage coverage,” the consulting firm’s report says. “The required average premium would be around $1,250, rather than an anticipated average premium of $2,015 if no changes are implemented and the current system is maintained. This reduction in average premium is driven by lower anticipated claim costs and lower operational expenses.” 

Job losses predicted 

Looking at job losses, the Nous Group report estimates that under a public insurer model, between 3,200 and 3,900 private insurance sector jobs would be lost if the B.C. model were to be constructed in Alberta. In addition, 550 to 700 private insurance sector broker positions would be lost. 

There would be 4,500 to 5,000 new jobs created in the public sector to staff a B.C.-style public insurer in Alberta, the Nous Group study reports. 

Lamy says the insurer has its own auto insurance reform plan. “We’ve shared a reform plan with the government focused on access to care and removing legal costs out of the system in an effort to find viable solutions for the sustainability of the industry in the province.” 

Lamy says Intact has seen the number of lawyers on a file nearly double in the 24 months after a claim is open. “The severity of litigated claims is about eight times higher than non-litigated,” he says. “The combination of that puts pressure on us, and that’s what we need to take out of the system. 

“So, really looking forward to the next step following that consultation there.” 

Brindamour adds that for a couple of decades, the insurer has been insourcing legal work “to be much better equipped to deal with pressure and liability in provinces like Alberta. And today, it is close to 80% of legal work that is done by our own legal team in-house…which is good both from the loss adjustment point of view as well as from an indemnity point of view. 

“I think there were pressure points in the system,” Brindamour says. “We’ve made them very clear. And I think we have very concrete recommendations looking forward to work with the government on that.” 

Feature image by iStock.com/Jinda Noipho