Aviva Insurance Company of Canada has changed its decline rules for optional physical damage coverage for private passenger vehicles in Alberta.

Announced to brokers in May in a bulletin obtained by Canadian Underwriter, the new underwriting rules for this optional physical damage coverage restrict eligibility for some new business and renewals.

It comes at a time when all of the province’s auto insurers are increasingly feeling squeezed by Alberta’s auto rate cap, which prohibits premium increases for good drivers to cover off the rate of inflation (3.7%).

“We’ve lost $250 million in Alberta since 2018,” Tracy Garrad, CEO of Aviva Canada told brokers at the Insurance Brokers Association of Alberta’s Convention in May. “Our purpose is to be there for customers when they need us. We want to write insurance, and we want to fulfill claims.

“But that is a very big number. So, we have had to make some difficult decisions because frankly, we don’t have any levers left to pull.”

Per the bulletin, entitled Section C: Loss or Damage to Insured Automobile Decline Rules, Aviva and its subsidiary Traders General Insurance Company have introduced new physical damage decline rules that tighten eligibility for:

New business with one at-fault loss.
Renewal policies with one at-fault loss if the customer has been insured with the company for three years or less. (Section C eligibility will only be impacted if the at-fault loss occurred within the policy term prior to renewal).

Also, some rules are triggered by “not-at-fault losses (DCPD)” and another that “combines vehicle value and driver experience.” Aviva advises brokers to refer to its underwriting manuals for full details, per the bulletin.

The changes are effective from May 1, 2024. “We don’t think we can relax those measures unless and until the rate cap is done away with and that we do start to see some reforms,” said Garrad.

The United Conservative Party first announced its universal auto insurance rate cap in 2023. And then, in 2024, the government renewed the rate cap for good drivers for an indeterminate length of time. This is only the latest in a string of rate interventions in Alberta, which began in 2016, according to the Insurance Bureau of Canada.

And though the UCP is parsing out its long-term reform options, insurers are feeling the burn now.

Insurers bleeding in Alberta

Aviva is not the only auto insurer affected by the government’s cap. Canada’s insurer association has warned that carriers in Alberta would have to make decisions about underwriting capacity to opera te sustainably under the current rate cap.

In 2023, 17 insurance companies lost money and one left the market, says a recent release by IBC, and “some insurers have now reduced the number of policies they sell and tightened policy conditions.”

Insurers lost seven cents for every dollar of auto insurance premium sold in Alberta between 2012 to 2022, according to IBC. Even when counting investment income, insurers lost 0.6% overall.

“Rate intervention in the market only serves to kick issues within the auto insurance system down the road, and consumers ultimately end up paying the cost,” writes IBC’s communications manager, Mark Cripps, in its recent release.

Feature image by iStock.com/Perawit Boonchu