How Intact plans to approach auto pricing in 2024

Intact delivered a combined ratio of 94.7% in its auto insurance business in 2023, and the company expects to post a similar auto result in 2024 as well, Intact Financial Corporation CEO Charles Brindamour said today in a virtual fireside chat with TD Securities.

“At this stage, we’ve delivered exactly what we set in terms of guidance [in 2023], which is [a COR in auto lines of] mid 90s, 95-ish percent [and] we expect we will be in that zone [in 2024],” he said.

Intact expects inflation rates to continue to remain an issue into 2024. Higher inflation rates play a role in higher auto parts prices and repair costs for insurers.

“Overall, you’re seeing mid-single-digit inflation at this stage and [we] expect it’ll fluctuate around that in 2024,” Brindamour told Mario Mendonca, managing director of equity research at TD Cowen. “And, as a result, we’re comfortable with our pricing position [in auto lines].”

Brindamour said pricing was an important factor in the company’s 12% premium growth in the auto line in 2023.

“That’s the starting point,” he said. “It’s adequate pricing, okay. And we do that faster than most. It’s part of our DNA…

“If [competitors] are slow to price for inflation, we lose market share. We’re fine with that. But then, when people [in the P&C insurance industry] realize that there’s inflation in the system, and they start correcting, it takes awhile [to see the result], and our competitive position improves. I think that’s what you’ve seen in the last six months — a dramatic shift in the growth profile of the organization’s [auto portfolio] as others have started to move.”

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This is happening when Canadians are shopping around for deals. Brindamour cited figures suggesting 30% of Canadians are shopping around to find bargains during a tough economy. He said this is more of a “cost of living” issue than a specific insurance issue, but Intact was able to pull some [non-pricing] levers to take advantage of this environment.

“I wouldn’t say automobile insurance is a top of mind issue for consumers at the moment,” Brindamour said. “The broader [issue is] cost of living. We’re seeing [this] shopping behaviour — not just in our industry, but also in other industries — shoot up meaningfully. So this is a point in time where our competitive position improves.”

Non-price levers include investments Intact has made in marketing and digital sales. Brindamour said Intact’s digital sales doubled last year.

“It’s really a function of not using the price lever to compete and wait out for the rest of the market to react to the trends [i.e. pricing higher to account for higher inflation],” he said.

Intact is carefully watching inflation’s impact on the bodily injury side of the auto business, which Brindamour said accounted for 40% of the company’s auto business.

“Injuries in the last two quarters have picked up a bit,” he said. “That is the 40% of the equation that saw no inflation in the past few years…..This has picked up in [2023] Q4 in the mid-ish, single-digit zone. It’s priced for, reserved for, and is the thing to watch.

“As far as I’m concerned…We’re not seeing inflation [impacting auto injuries], but this is what one needs to watch, because when you miss inflation on injuries, it takes a while to fix.”

Feature image courtesy of iStock.com/Jinda Noipho