Canadian Underwriter

“Drastic action” needed to address ICBC ails, remedy hefty rate hikes

September 6, 2017   by Canadian Underwriter

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The British Columbia government has taken the reins to protect drivers and address mounting financial concerns at the Insurance Corporation of B.C. (ICBC), including by limiting rate increases that threatened to reach double-digits.

“Drastic action is needed to fix ICBC’s devastating financial crisis, but B.C. drivers should not be forced to pay 20% basic rate hikes today because of mismanagement that goes back years,” B.C. attorney general David Eby argues in a statement Tuesday.

The rise in the basic-rate will still be substantial, at 6.4% this year. However, this is far lower than “the 20% rate hike that was recommended by the report commissioned by the previous government and released in July 2017,” Eby, also minister responsible for ICBC, says in the statement from B.C.’s Ministry of the Attorney General.

The commissioned report by Ernst & Young LLP concluded, among other things, that the premiums charged by ICBC are not high enough to cover claims, the system is not sustainable and the cost of the average minor bodily injury claim has risen well beyond the rate of inflation since 2000.

Beyond the bas-rate increase, the overall optional rate is set to rise 3.1% “in the first quarter with subsequent quarterly increases of 2.2%, to a maximum of 9.6%.”

Although individual rates will depend on the age of the vehicle, value and use of a vehicle, and where it is being driven, “for an average driver, this is an annual blended increase between basic and optional of 8%, or $130,” the ministry reports.

David Eby, B.C. Attorney General and minister responsible for the ICBC

David Eby, B.C. Attorney General and minister responsible for the ICBC

“Our commitment to British Columbians is to make life more affordable for them – forcing 20% rate increases on drivers is a non-starter,” Eby says.

At the end of August, Eby (pictured right) announced he had extended by two weeks the deadline for ICBC to file its revenue requirements application for 2017 to the British Columbia Utilities Commission. The additional time, the minister noted, would give the new provincial government “an opportunity to assess ICBC’s financial challenges with the goal of keeping rates at the lowest possible level.”

Related: B.C. attorney general extends ICBC’s rate filing deadline by two weeks

Pointing out that legislation passed in 2010 allowed the provincial government to take unprecedented levels of cash out of ICBC, Eby reports $1.2 billion was removed from the public insurer and put into government’s general revenue.

“It’s unacceptable for government to treat ICBC like an ATM machine – and it cost B.C. drivers more than a billion dollars,” the minister contends. “Our priority is to make sure that affordability for good drivers always comes first.”

In mid-August, ICBC reported that more vehicle crashes, increased injury payouts and higher vehicle repair costs were all contributing to the increase in proposed insurance rates for drivers in the province.

Related: More vehicle crashes, increased injury payouts and higher vehicle repair costs contributing to proposed rate hike: ICBC

With regard to vehicle crashes, there are about 875 on an average day in the province, with the number of collisions having increased 23% between 2013 and 2016, ICBC spokesperson Joanna Linsangan told Canadian Underwriter at the time.

“Based on the 2016 calendar, we spent over $5 billion on claims and related costs,” Linsangan said.

Eby’s announcement to limit rate hikes this year is just part of a multi-year plan to fix ICBC’s financial crisis. The public insurer posted its largest-ever financial loss in 2016, amounting to more than a half-billion dollars in 12 months.

As part of the plan to improve ICBC operations and reduce accident rates, the provincial government notes immediate measures include the following:

  • launching an operational audit of ICBC, the goal of which is to ensure this type of mismanagement can never happen again;
  • rolling out a pilot project to evaluate distracted driving reduction technology;
  • activating red-light cameras 24 hours a day, up from the six hours per day;
  • increasing public awareness of the risks of distracted driving through a new advertising campaign; and
  • introducing a dangerous roads initiative to identify and rapidly retrofit infrastructure, regulations and signage at dangerous roads and intersections.

Related: ICBC examines anti-distracted driving technology

“We already have an evidence-based, taxpayer-funded report with proposals for reforms,” Andrew Weaver, leader of the B.C. Green caucus, said Tuesday in response to Eby’s announcement of the plan moving forward.

Andrew Weaver, Leader of the B.C. Green Caucus

Andrew Weaver, Leader of the B.C. Green Caucus

“While I am glad that the government has adopted the Ernst and Young report’s recommendation to turn on red light cameras, with ICBC in such a perilous financial situation, the time to implement changes is now,” Weaver (pictured left) maintains.

Beyond that immediate action, “it is essential that we not take any options that would reduce rates off the table,” pointing out that “every other public insurance system in Canada either limits certain types of claims or operates as a no-fault model,” he says.

“As the business audit of ICBC proceeds, the B.C. Green caucus will advocate for bold, evidence-based solutions that will ensure the best possible outcome for B.C. ratepayers,” Weaver adds.

Related: ICBC board finalizes terms of reference for independent review of insurance rates

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2 Comments » for “Drastic action” needed to address ICBC ails, remedy hefty rate hikes
  1. Sophia says:

    1. government should return the $1.2billion plus interest to ICBC
    2. Stop wasting money to do auditing
    3. Private insurers are taking the best clients (drivers with excellent claim history and not driving expensive to fix cars) from ICBC. The most expensive to maintain is the basic coverage because of all these benefits and the first $200,000 third party liability.
    4. ICBC has to pay for all the signal light upgrades and programs to alert safe driving. How much are they spending as opposed to other private insurers?
    5. How much is ICBC spending in investigation because people claim they are injured and cannot go to work, or can no longer enjoy life so as that their lawyer can claim an inflated amount of liability? I don’t think private insurers need to spend much because ICBC is the one paying for the benefits and the basic $200,000 liability.

  2. Barb says:

    Quit with senseless money squandering into the advertising campaigns. The advertising dollars and cost of pamphlets could go into the awards, and not increase rates.
    What does a single TV advertisement on Global BC cost?

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