Aviva Direct to be phased out of Alberta market

Citing unprofitability in Alberta’s auto insurance market, Aviva Canada is planning to phase out Aviva Direct, its direct-to-consumer home and auto business, from Alberta in early January 2025.

Aviva Direct customers in Alberta will be receiving letters in the mail to inform them of the change.

The vast majority of Aviva Canada insurance coverage remains in place in the province through brokers and partners, the company announced Wednesday.

“After careful review of our direct-to-consumer business, we had to make the difficult decision to exit as the current environment in Alberta doesn’t foster growth,” Susan Penwarden, Aviva Canada’s managing director of personal lines, commented. “Customers have the option of getting insurance coverage through brokers or other direct channels.”

In Alberta, Aviva Direct products are underwritten by S&Y Insurance Company, a subsidiary of Aviva Canada.

The move follows an Aviva bulletin to its brokers in May, which announced Aviva would be introducing new physical damage decline rules. The move would tighten eligibility for new business with one at-fault loss in Alberta, as well as renewal policies with one at-fault loss if the customer had been insured with Alberta for fewer than three years.

Aviva Canada has lost $250 million in Alberta since 2018, Aviva Canada CEO Tracy Garrad told brokers attending the Insurance Brokers Association of Alberta in May. “…[T]hat is a very big number,” she said. “So, we have had to make some difficult decisions because frankly, we don’t have any levers left to pull.”

And it’s not just Aviva Canada. Sonnet, the direct arm of Definity, is also pulling out of the Alberta auto market. Intact Financial Corporation president and CEO Charles Brindamour said in May Intact was able to endure the turbulence in Alberta’s auto market largely because the company started pricing for rising inflation costs early, eight years before the government paused auto rate increases in 2023.

Insurance Bureau of Canada says legal expenses related to auto insurance claims in Alberta have been rising for some time, and are a main contributor to insurers’ cost pressures.

Starting in January 2024, Alberta extended its pause on increased auto insurance rates for “good” drivers, which the government estimates to be 80% of the province’s drivers. That decision has led to auto insurers withdrawing capacity from the Alberta market, as Brindamour observed in May.

Alberta Premier Danielle Smith’s government just closed public consultations on proposed long-term fixes to the Alberta auto insurance product. Average annual auto insurance premiums could rise to more than $2,000 without auto reforms, an actuarial report commissioned by the government says.

Smith has publicly stated she isn’t in favour of starting up a public insurer in Alberta; some form of no-fault insurance has not been ruled out.

“We acknowledge that the Albertan government has launched a consultation on auto insurance reforms, and we are committed to work with the government to find solutions for Albertans and insurers,” said Penwarden.

Meanwhile, Alberta regulators told brokers the P&C industry can expect to see changes to the Insurance Act as early as fall 2024. Regulations would follow sometime around Spring 2025, if the government meets its aggressive timelines on auto reform.

Feature image courtesy of iStock.com/fad1986