If the Liberals return to power this fall in British Columbia after a three-year hiatus, and if they keep their election promises, the province’s auto insurance system may look similar to the auto insurance systems in both Quebec and Saskatchewan, the Insurance Bureau of Canada suggests.
“What the Liberals put forward sounds a little bit like what you see in Saskatchewan, which is that you can choose between no-fault and tort,” said Aaron Sutherland, IBC’s vice president Pacific, in an interview Thursday with Canadian Underwriter. “The difference being, in B.C., the tort product would be open to competition.”
The NDP became B.C.’s ruling party in 2017, replacing the Liberals after a non-confidence motion.
In a press release Oct. 6, the Liberals said if they are elected to power, they would give motorists the choice to purchase vehicle damage coverage (collision, comprehensive, specified perils and liability insurance for property damage) from the private market. Drivers would have the choice to buy coverage in a tort system from the private market or no-fault from Insurance Corporation of B.C.
The election is scheduled Oct. 24.
At the moment, basic auto coverage in British Columbia is only written by Insurance Corporation of B.C., a crown corporation founded in 1973. The public insurer monopoly is controversial because because of the average auto insurance rates compared to elsewhere in Canada (LowestRates.Ca says B.C. has the second highest rates in Canada) while at the same time ICBC is losing money.
The Liberals kept the ICBC monopoly on basic auto while they were in power from 2001 through 2017. But in 2019, the Liberals changed their tune and started calling for competition.
For its part, the NDP government announced in February 2020 that it intends to reform auto by creating a “care-based system” with accident benefit limits of $7.5 million.
Under the NDP government’s proposed system, which is scheduled to take effect in May 2021, claimants would only have the right to sue in rare circumstance, though the exact details are still being worked on, Insurance Brokers Association of B.C. CEO Chuck Byrne said Tuesday in an interview.
Under the care-based system proposed by the NDP, claimants who are not satisfied with what they get from ICBC would have recourse through the Civil Resolution Tribunal, the B.C. ombudsperson or an ICBC fairness officer.
IBABC is not calling for more competition. A 2001 review (when Liberal Premier Gordon Campbell was in power) did a “deep dive” into B.C. auto insurance, Byrne recounted.
“We gave our feedback and the then-B.C. Liberal government decided, as they did subsequently for every election until recently, that ICBC was the smartest system for British Columbians,” Byrne told Canadian Underwriter Wednesday. “The devil is in the details. It’s easy to make election promises.”
For its part, IBC has been calling for competition in B.C. auto for years.
Introducing a no-fault system offered by ICBC and damage coverages provided by the private market would make B.C. “remarkably similar” to Quebec, IBC said Oct. 6 in a press release.
In Quebec, motorists must buy accident benefits coverage from SAAQ.
“If ICBC is the best game in town, so be it. Nothing changes,” Sutherland said Thursday of the Liberal proposal to allow more competition. “But if they are not, then drivers can shop around and find savings. And that’s really what this is all about: How do we deliver the most affordable auto insurance possible?”
ICBC was the subject of a 2017 report commissioned by the provincial government to EY Canada.
In Affordable and Effective Auto Insurance – a New Road Forward for British Columbia, EY warned that ICBC does not charge high enough premiums to cover claims. In 2016, legal costs accounted for 24% of the costs of ICBC’s basic product, while claimant benefits accounted for another 58%, EY said in 2017.
In the year ending Mar. 31, 2020, ICBC had a net loss of $376 million and an underwriting loss of $983 million on earned premiums of $6.27 billion, ICBC said in its latest annual report. In 2018-19, the underwriting loss was $1.58 billion.
The minimum capital test ratio stood at negative 30% this past March. In 2018, the government temporarily suspended a provincial requirement for ICBC to have an MCT ratio of 100%.
The combined ratio in 2019-20 was 120%, eight points higher than the target combined ratio of 112%.
“British Columbians think, ‘Well, if we are paying the second-highest car insurance premiums in Canada, at the very least this should be…a money-making venture for the government, and yet ICBC is hemorrhaging money,” said Justin Thouin, co-founder and CEO of LowestRates.Ca, in an interview Tuesday.
“So most British Columbians are saying, ‘Why does the government have a monopoly on car insurance, something they are not experts at, and why should we be relegated to having no choice and there only being one company offering us car insurance? In what other commercial vertical is there only one choice?”
The B.C. government is not making any comments about ICBC during the election period.