AIG Insurance is getting out of the Canadian home and auto insurance business.
AIG Insurance, a Toronto-based division of American International Group Inc., says it made the decision earlier this year and going forward, will not renew clients’ home and auto insurance policies as they continue to expire over the next 12 months.
AIG has 37,000 customers here in Canada. And, according to the Globe and Mail, which cited a report from AIG’s New York-based division, AIG’s global clients “typically own nine homes, 19 automobiles, US$19-million of art and US$1.7-million of jewellery. The annual cost of insuring these possessions runs to US$250,000 or more.”
Still, that wasn’t enough market segment to justify staying.
AIG is not the first international insurer to leave the Canadian market, either. Esurance, which is owned by AllState, left the market in 2018 after three years. Insurance companies have been struggling with profitability of late because of government price caps in two of the largest private insurance markets in Canada: Ontario and Alberta. These caps limit the amount insurers can raise auto insurance rates, hurting their profit and leading them to exit certain markets.
It’s unclear if this was a factor behind AIG’s exit — the company simply said the Canadian market was small and they decided to pull out.
“The individual personal insurance line of business represents a small percentage of our portfolio in Canada and based on market conditions, we have decided not to underwrite new policies in this area,” AIG Canada spokesperson Lynn Woodburn told the Globe. “This decision does not affect the rest of AIG Canada’s portfolio.”
The bulk of AIG’s business comes from the commercial sector. AIG is still expected to offer products like liability insurance for its corporate clients here in Canada as well as accident and health policies for individuals.
AIG is the country’s 13th-largest property and casualty insurer. According to the Insurance Bureau of Canada, it owns 2.23% of that market. Intact reigns supreme as the country’s largest property and casualty insurer, followed by Aviva and Desjardins.
The Globe speculated that AIG’s departure from the auto and home insurance sphere is a result of a larger consolidation trend at play.
For a while now, behemoth insurers like Intact have been acquiring the smaller players in the industry. Some of the major acquisitions within the last decade include:
2011: Intact buys AXA Canada for $2.6 billion.
2013: New York-based Travelers Co. Inc. acquires Dominion of Canada General Insurance Co. for $1.1-billion.
2015: Desjardins buys out the Canadian property and casualty side of State Farm Life Insurance Co. for $1.3 billion.
2016: Aviva Canada Inc. pays $582-million to acquire Royal Bank of Canada’s property and casualty insurance business.
Consolidation has many effects, and one that’s expected as the number of auto insurers in this country continues to shrink is rising premiums. In the fourth quarter of 2018, the Financial Services Commission of Ontario, which regulates insurance in the province, approved Ontario auto insurers to raise rates on average by 3.35%. Meanwhile, the rates consumers paid rose anywhere from 10.05% in Alberta to 3.75% in Atlantic Canada during the same period, based on our latest Auto Insurance Price Index.