Car insurance rates not expected to rise this year
REGINA SGI has no plans to hike car insurance premiums, despite facing major investment losses in its Auto Fund as markets collapsed in the last quarter of 2019-20.
Joe Hargrave, minister responsible for SGI, said customers can “breathe a sigh of relief when it comes to insurance rates.” On Thursday, he boasted of another solid year as he presented annual reports for SGI’S Auto Fund and its commercial insurance business, SGI Canada.
“I don’t see any increase in premiums this year at all,” he added. “We sort of survived the COVID -19 downslide in our investment market, and now it’s showing some recovery.”
The market turmoil triggered by the COVID-19 pandemic in February and March cost the Auto Fund close to $200 million in investment losses, erasing earlier gains. The fund’s rate stabilization reserve — which holds premiums steady for drivers — sank by about $46.7 million over 2019-20.
But the balance in the fund remained “quite healthy,” Hargrave said. He noted that markets have largely recovered in the first months of the current fiscal year. That made up for the losses sustained in 2019-20, more or less.
COVID-19 is still weighing on the current fiscal year. It’s putting pressure on premium revenues as some customers deregister vehicles they aren’t driving. But claims are dropping by even more with fewer cars on the road. Hargrave predicted that both trends are likely to be temporary.
“More and more cars are back on the street than there were in the end of March and the first part of April, where a lot of people had de-insured their vehicles because they weren’t driving them,” said Hargrave.
“As far as the claims go, we’re expecting it to generally be a fairly normal year by the end of the fiscal year,” he added.
The Auto Fund, which runs the mandatory car insurance program in Saskatchewan, does not aim to earn any money for the government. But SGI’S other main business does, by offering property and casualty insurance in five provinces. Known as SGI Canada, it also sustained a hit from the markets.
The COVID-19 market downturn cost SGI Canada about $40 million in investment losses, mainly from equity markets. But fixed income securities like bonds still brought in earnings, allowing SGI Canada to earn a small return from its investments of about $23 million. That was down from $54.4 million the year before.
But SGI Canada managed to meet a target of cracking $1 billion in premium revenues as it expanded its business. After other insurers got their cut, revenues outpaced claims and other expenses by about $25 million. All told, that allowed SGI Canada to turn a profit of almost $50 million, roughly on par with the year before.
SGI Canada is still bracing for what it called “shock waves” over the current fiscal year, as COVID -19 adds significant uncertainty to its business. Premiums have been down slightly. Shuttered businesses could open the door for higher thefts, the corporation fears.
But it’s not all bad news. The annual report anticipates that there could be fewer fire and flooding claims as people stay home.
SGI chief financial officer Jeff Stepan said the corporation is not expecting a “significant effect” financially from the pandemic, though he noted it’s still too early to be sure.
Hargrave also highlighted the work SGI has done on road safety, helping to drive road fatalities down to 71 in 2019. That was the lowest level on record, according to data released earlier this year. Injuries also fell, though less steeply.
The frequency of damage claims was down to 119 per 1,000 customers, the lowest since 2016. But that barely affected the value of claims paid out from the Auto Fund, as the cost of repairing vehicles increased.
“New and advanced technology and modern vehicles makes them much more expensive to repair than older ones,” Hargrave explained.
“So the average cost of an accident continues to climb faster than inflation.”
There was no sign that the trend would lead to an increase in premiums, largely thanks to the lower frequency of collisions in Saskatchewan.