Two auto insurance companies announce plans to leave Alberta

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An Aviva subsidiary and Sonnet both announced they were leaving Alberta

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S&Y Insurance Company — a subsidiary of Aviva — has become the third auto insurer to declare its intention to leave Alberta within the last year and the second within three weeks.

On Wednesday, Aviva announced it would be phasing out its home and auto business in Alberta starting in January 2025.

“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, managing director of Aviva Canada, said in a statement.

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Aviva said litigation costs were the biggest factor in driving up insurance premiums, noting claim costs have exceeded premiums collected in Alberta “for many years.”

“We want to continue to offer Albertans choice and affordable auto insurance. But auto insurance in Alberta has not been profitable for many years,” Aviva said

Twenty days earlier, Sonnet Insurance announced its intention to withdraw from the Alberta auto insurance market, effective Dec. 13.

“Sonnet will continue to focus its efforts to profitably grow its auto insurance business in other regions in Canada,” said executive vice-president Paul MacDonald.

“Limited opportunities for Sonnet to grow profitably in the current auto insurance operating environment in Alberta were a key consideration in making this decision,” the company’s statement read.

Sonnet will continue to offer property and pet insurance in the province.

Both Sonnet and S&Y will provide auto insurance to their existing customers until their respective withdrawal dates.

Last July, an unnamed insurance company — later revealed to be Zenith Insurance, which was sold through Costco — announced it would withdraw from the province in November 2023, affecting around 16,000 drivers. At the time, Premier Danielle Smith said she was skeptical other insurers would leave the province.

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“I’ll believe it when I see it,” she said.

‘Working on long-term reforms’

Alberta Finance Minister Nate Horner was on vacation this week and not available for an interview.

His office issued a statement Thursday, saying it was unaware of other companies planning to exit the province. It said three companies collectively represented around one per cent of vehicles in Alberta.

“We recognize Albertans are struggling with rates and acknowledge (the) industry’s concerns about increasing cost pressures,” the statement read.

“We are working on long-term reforms to make sure Albertans have access to affordable insurance and to stabilize and sustain the auto insurance industry.”

In May, the province launched an online survey to seek public feedback on the future of insurance in Alberta. More than 16,000 Albertans filled out the survey, which closed June 26.

Addressing ‘underlying cost pressures’

Last November, the government announced it would limit rate increases to the province’s September 2023 inflation rate — 3.7 per cent — for “good drivers,” estimated to be about 75 per cent of Alberta motorists.

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The Insurance Bureau of Canada (IBC) — the national industry association representing most insurance companies — is calling on the province to drop those rate caps to reduce insurance costs.

“Everybody wants more affordable auto insurance, but the only way to achieve that is by addressing the underlying cost pressures impacting driver premiums. Rate caps, rate pauses, rate interventions — they don’t do that,” said Aaron Sutherland, vice-president of IBC.

He said legal bills are also a driver of insurance costs and called for more market competition to reduce premiums.

“We think the best way we can do that is give Albertans more choice and let them decide if they want coverage that includes the ability to sue for something like a minor injury,” he said.

Others have argued that the right to sue must be maintained and trimming insurers’ profits is a better way to reduce costs for drivers.

Sutherland pointed to the province’s report that claimed 17 companies lost money on the sale of auto insurance but agreed that something needed to be done.

“Any change is going to take time. It’s going to require legislation. It’s going to require regulation, and then the industry is going to need time to implement it and reflect it in driver premiums,” Sutherland said.

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