Another insurer is backing away from Alberta’s auto insurance market.
Sonnet Insurance Company announced yesterday it will phase out its auto insurance operations in Alberta. The Definity subsidiary said Dec. 13, 2024, will be its intended date of withdrawal, upon which it will no longer issue new or renewal auto policies in Alberta.
“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 said in a press release.
“This decision will allow Sonnet to continue to focus its efforts on profitably growing Sonnet’s auto insurance business in other regions across Canada,” Paul MacDonald, executive vice-president of personal insurance and digital channels, told Canadian Underwriter in a statement.
The company said it will notify its Alberta auto insurance customers impacted by the withdrawal.
“We will also continue to offer insurance through Economical Insurance, provided by Definity Insurance Company, through our valued broker partners,” MacDonald said.
Sonnet says its withdrawal from Alberta’s auto market will not impact its home insurance business in the province.
Rate pressures
Definity president and CEO Rowan Saunders previously explained the company’s auto book is “not rate adequate” in Alberta, during in an earnings call in May 2023.
Saunders made the comment while the previous rate pause, implemented by the United Conservative Party of Alberta, was in effect. That cap prohibited insurers from raising rates until the end of 2023. The UCP has since renewed the rate cap for “good drivers” in Alberta, effective January 2024, for an indeterminate period. (Alberta’s regulator estimates about 75% of Alberta drivers qualify as “good,” per the rate cap qualifications.)
At the time, Saunders said Sonnet’s auto book of business in Alberta, at about $80 million, represents only 2% of Definity’s total portfolio. “We’re very committed to not deploying capital into a line of business where there is a rate freeze and we’re not rate adequate,” he said in the May 2023 earnings call.
The Insurance Bureau of Canada, which represents insurers nationally, has warned government intervention in the auto insurance system would cause insurers to struggle to remain profitable. “Some insurers have now reduced the number of policies they sell and tightened policy conditions,” IBC said in a recent release.
“Claims costs now exceed the amount of money insurers are collecting in premiums because of the auto insurance rate cap in Alberta,” Aaron Sutherland, vice president of IBC’s Western and Pacific regions said.
“As a result, insurers are being forced to scale back their offerings to remain viable, and this is making it more difficult for many drivers to secure the coverage they need. Reform is needed urgently, and as the government considers various solutions to reduce premiums for drivers it’s critical that it addresses these cost pressures.”
Feature photo courtesy of iStock.com/helivideo
Based in New York, Stephen Freeman is a Senior Editor at Trending Insurance News. Previously he has worked for Forbes and The Huffington Post. Steven is a graduate of Risk Management at the University of New York.