Auto insurance rates have generally softened thanks to the COVID-19 pandemic. But as vaccines offer a glimmer of hope for a return to something similar to the pre-crisis normal, it is in the air what will happen to car premiums in the future.
In the fall, Justin Thouin, co-founder and CEO of LowestRates.ca, told me Canadian Underwriter that his website’s price index showed that car insurance prices in Ontario, for example decreased about 4% compared to the previous year.
But if an appearance of normal returns, will driving go up again and thus push rates up again?
“That’s one of the main questions that investors and insurers are grappling with – what will the driving curve be like next year?” said Mike Zaremski, P&C and insurtech investment analyst at Credit Suisse.
An important aspect to find out is whether the vaccines have widespread success in reducing and even eliminating a virus that has locked up many parts of the world for long periods of time.
But perhaps a more important determination might be what happens to the work-from-home environment, Zaremski said during the recent Cambridge Mobile Telematics webinar, P&C in 2021 – Market catalysts.
“I think these insurers are trying to figure out what percentage of the population is more likely to work from home,” he added. “Will that bend the miles traveled and the frequency curve of accidents?”
In terms of prices to customers, he estimated that rates will remain low for the foreseeable future without dramatic swings in some way.
“Insurers are reticent in their approach. Aside from the first few months of the pandemic, you don’t see insurers just cutting premium rates… 10-15%. They are more careful because they are uncertain about the driving level and 2021, ”explained Zaremski.
Accident severity and medical severity are other areas of uncertainty – insurers don’t want to lower rates so much that it affects their ability to pay claims. “So that’s why auto insurers are more cautious in their approach to rate cuts,” he said.
Ryan McMahon, vice president of insurance and global affairs at Cambridge Mobile Telematics, said his team found that the severity of the crash during the pandemic increased by 10% – meaning they have had more crashes with more force in the last 10 months. seen.
“That also applies to a 10% increase in strength [of a collision] translate into an increase of 1% or 30% for the settlement of that claim? he wondered. “It’s so dependent on factors that’s a little bit downstream from that.”
In addition, the decrease in vehicle journeys means that competition for those low-mileage drivers is expected to increase.
“I think this is going to be a major marketing campaign, driven by many different insurers trying to market products that serve that person,” McMahon predicted. “For me personally, my car doesn’t run from Monday to Friday, and I’m sure there are many more like me. Whether that continues will be very interesting to see as the culture catches up with the pandemic. “
Apple’s Mobility Trends Report shows that, after a steady increase from May, driving levels have been on a downward trend since its peak in September. As of January 9, driving will remain below Apple’s established base level (set in January 2020), where it has been since the end of December.
CAA MyPace is an example of auto insurance targeting low mileage drivers, especially those who drive less than 9,000 miles per year. Drivers buy insurance in a pay-as-you-go formula in steps of 1,000 km. It launched in Ontario in 2018 and expanded to Nova Scotia in 2020.
One thing is for sure, McMahon added, competition is not slowing down. There will be plenty on the market. “I would say there will probably be more competitors in 2021 [that will be] looking for that [low-mileage] car policy. It doesn’t seem like it is going the other way. “
Feature image from iStock.com/takasuu