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Where Canadian insurers are feeling the pinch of inflation

The insurance industry is not immune to these challenging macroeconomic trends. In particular, insurers are feeling the pinch with auto physical damage inflation well above Canadian consumer price inflation.

“We all know how hard it is to get a new car, and buying a used one is [pre-pandemic], the latency for both is significantly longer,” said Jason Storah (pictured), CEO of Aviva Canada. “Add supply chain pressure that rental companies cannot have the same number of cars available as before, and the fact that customers’ cars are in garages where repairs take longer, and physical damage to cars creates inflation. .”

Read the following: Aviva Canada CEO Reveals First Half 2022 Results

As of August 2022, Aviva Canada has not seen the same surge in personal injury inflation, in part due to court-mandated damages caps. Canada’s Supreme Court imposed a cap on recoverable damages for pain and suffering in 1978, which increased over time with inflation and is now worth about $414,689. Some states have minor injury caps or deductibles that limit the amount a person can claim for minor injuries resulting from a car accident.

Stoller told Insurance Business:

Statistics Canada reported that the homeowner replacement cost index increased 10% year-over-year in June, following an annual increase of 11.1% in May. In general, property inflation has hovered in line with his CPI, Storah said, but he shared the following caveats. It doesn’t take long for CAT activity to spike. Suddenly there aren’t enough roofing contractors and builders coming and going. That would put serious pressure on real estate inflation.”

read more: Aviva Announces First Half Results

In 2021, Aviva Canada established an Inflation Task Force to analyze different inflation scenarios and their potential impact on business. Stora explains: What might change consumer behavior when affordability becomes an issue? What might happen to billing trends depending on inflation, reserves, frequency, and severity?

“We are always in control of the cost basis of our business […] We know where our spending goes and how we manage inflation. One of the hottest areas in all industries right now is wage inflation. So we model a few different scenarios and look at the market. Within Aviva, there’s a lot of focus on different scenarios for the economic outlook, whether it’s recession, inflation, the housing market, the construction industry, or our segment. “

According to Strah, this is a “complex operational environment,” one in which Aviva Canada’s broker partners play a key role. CEO explains:Overall, they play a very important role in helping consumers understand [the market and economic pressures] You can be reassured about what is happening to premiums, some of the challenges they face and concerns about the recession. As these trends continue to unfold, the broker’s role will become even more important in the second half of the year. “

Where Canadian insurers are feeling the pinch of inflation

Source link Where Canadian insurers are feeling the pinch of inflation

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