Canadian Underwriter

B.C. government will no longer insure luxury cars to help eliminate pressures on basic insurance rates

November 24, 2016   by Canadian Underwriter

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The government of British Columbia announced on Wednesday that it will no longer insure the high-end luxury car rate class – cars worth $150,000 and over – “so that the broader ratepayer is not subsidizing these cars.”

Due to rising costs of repair and increased pressures from high-end luxury cars on rates, BC is taking action to help ensure insurance rates remain affordable for families. ICBC (

The owners of these cars will have to go to private insurance instead, Minister of Transportation and Infrastructure Todd Stone said in a press release.

The high-end luxury car market is a growing market, with 3,000 cars insured this past year, a 30% increase compared to three years ago, the Ministry of Transportation and Infrastructure said in the release. “Government is acting now to address the rising costs to repair these cars and to eliminate any pressures they cause on basic rates,” the ministry said.

The government said it will work on the necessary legislative changes to have the Insurance Corporation of British Columbia (ICBC) no longer insure these vehicles. Drivers will still be required to carry a certain amount of coverage to protect themselves and other drivers, but it will not be provided through ICBC’s public insurance plan, the ministry clarified.

While this work is underway, government will immediately take steps so high-end luxury car owners will pay more than double for their basic insurance and ensure their premiums fully cover all costs of any repairs. These interim changes will be formally implemented as soon as possible, the ministry said.

“Right now, whether a person drives a $15,000 Honda Civic or a $300,000 Ferrari – their basic insurance premiums are similar,” Stone explained. “If owners of high-end luxury cars can afford a high-priced car, they certainly can afford to pay higher premiums to cover the real cost for their repairs. This policy needs to be fair for all British Columbian ratepayers, and we want to ensure that the regular everyday driver is not paying for the additional repair costs of these cars through their insurance rate.”

The average private passenger car in B.C. is worth approximately $15,000 – 10 times less than the growing number of luxury high-end cars on the road. When these more expensive cars get into a crash, it costs approximately six times more to fix them because they are rare, and they are built using high-end technologies and more expensive materials. However, until now, the owner has paid similar rates for their basic insurance.

BC is moving forward to no longer insure the high-end luxury car rate class (cars worth $150,000 and over) so that the broader ratepayer is not subsidizing these cars. The owners of these cars will have to go to private insurance instead. Photo: Government of British Columbia flickr.

Last year, for example, the average repair cost for a high-value luxury car was approximately $13,000, compared to the average repair cost of approximately $2,500 for a typical private vehicle, the release said. For example, the cost for parts to repair the fender, grille, headlight and intercooler on a 2015 Bentley Flying Spur W12 was approximately $38,000 alone. While the cost to repair this car is substantially more than the everyday car, the basic insurance rates of about $1,000 per car are about the same.

The highest repair cost to date was $93,574 for a 2015 McLaren model 6505 with a declared value of $405,697.

The new rates will apply to private passenger cars only, and not commercial trucks, pick-up trucks, collector cars or limousines, the ministry reported. The new rule also will not apply to RVs.

This measure is in addition to several other measures the government and ICBC have already taken to help address rising cost pressures, including the following:

  • Rate smoothing model – which restricts basic rate increases to plus/minus 1.5% of the prior rate adjustment;
  • Tougher enforcement for distracted drivers – with significantly higher fines, more penalty points, higher levels of enforcement and more education; and
  • Mitigating fraudulent claims – working to combat fraud and exaggerated ICBC claims through more public education and better fraud analytics tools, which will target fraudulent claims and ultimately lower ICBC rates for all drivers.

Related: ICBC asks for 4.9% increase to basic insurance rates, lower than last year’s 5.5% increase

“This is one of a number of actions that government and ICBC will be rolling out over the coming weeks and months to continue to address cost pressures on rates,” the release said, but did not provide further details.

Media reports have suggested that basic insurance premiums for B.C. drivers could increase by as much as 42% over the next five years. But in a statement in response to an information request from the British Columbia Utilities Commission (BCUC), ICBC said that it “remains concerned about the publication of the purely hypothetical scenarios requested by the Commission and the potentially misleading impression they convey.”

“The request from the BCUC directed ICBC to assume that no efforts are being made by the corporation and government to expand on our current initiatives or to implement new initiatives designed to alleviate the pressures being put on insurance rates – this is far from the case,” the statement added. “Nor did the request consider any future improvements to the various rate mitigation initiatives already underway.”

ICBC concluded that “none of these speculative scenarios are a real forecast. ICBC’s 2016 rate application is asking for a 4.9 per cent increase to basic insurance rates and we remain committed to keeping rates as affordable as possible for our customers.”

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6 Comments » for B.C. government will no longer insure luxury cars to help eliminate pressures on basic insurance rates
  1. Lorien says:

    This is a red herring. ‘Basic insurance ‘ doesn’t actually cover any physical damage on the vehicle at all — it only covers the $200,000 basic Third Party Liability that the vehicle owner is required to purchase from ICBC. So long as their driving history and claims experience is the same, of course the cost for basic liability would be the same for a driver of a regular vehicle as a high-end vehicle! It’s the optional coverages for collision and comprehensive that cover the vehicle itself and those are naturally going to be higher for a high-end vehicle… which they already are. If ICBC wants regular drivers to not subsidize the high-end vehicle repair costs, all they have to do is increase rates for collision and comprehensive for those vehicles. If they feel there is a higher risk of a claim on the basic liability coverage in a high-end vehicle (which there may be, given their speed capability), then they just have to increase the rates for those vehicles for basic coverage.

    To say this change is somehow going to reduce rates for everyone is pretty ridiculous and to change legislation instead of a simple rate change for affected drivers is the legislative equivalent hitting a gnat with a 2×4. Do the Liberals not understand insurance? I’m betting they are hoping the average BCer doesn’t.

  2. michael says:

    Really . The govt is discriminatory in nature so all high end car owners will unite and launch a lawsuit against ICBC ,

  3. Paul M says:

    Actually Collision insurance will apply if you caused the accident. If the fault is somebody else, then the accident would be covered by basic insurance.

  4. Aleks says:

    ICBC should just leave the insurance market, it is the best thing it can do for BC drivers. Why am I forced to go through ICBC and pay $300/m for the full coverage, while my sister pays $70/m in Montreal? Isn’t this ridiculous that I must cut out collision coverage in order to make it around $160/m so it is more affordable? If you are cutting $150k luxury cars, at least lower the rates for the rest of us…

  5. Jason Prescott says:

    Privatize, privatize, privatize!!!
    Want to make payments cheaper – PRIVATIZE!!!!
    Bring in competition. End the monopoly.

  6. TBA says:

    I read these comments and most of you obviously don’t understand how insurance does work, nor are you considering all the facts.

    Lorien: If you are at fault in an accident, then you will pay your deductible to get “your” car repaired (under the physical damage), HOWEVER, if you cause damage to a Lamborghini (you are at fault), then “your liability” coverage will pay to have the Lamborghini repaired, hence, the reason the government is making this change, not to insure the high value vehicles. Hope this clears that up.

    Michael: Discrimination is against people, not things ! Insurance rates are generated by Values, area, terrain, etc and therefore, there is no discrimination. Let’s take a classic car, 1957 Buick Special in mint condition. This vehicle on the market (actual cash value) could get $25,000 and upwards, however, someone could pay more insurance for a basic 2006 Honda Civic that doesn’t come close to the value (about $6,000) of the 1957. WHY WOULD THAT BE, unfortunately the government hasn’t tapped into that one yet.

    Aleks: Well, obviously you don’t understand the BC Auto market. BC has one of the most difficult terrains to navigate (mountains, etc). Terrain, vandalism, concentration of populations are all factors, but terrain is a big one. Just take a look at the private insurers back east, they are having major problems. The problems ICBC is currently having stems from the misuse of the Liberal Government over the last 15 years, taking money from ICBC to balance the budget. ICBC, when it first came into this province in 1974 was a non-profit crown corporation and work well up until the Liberals (formerly Socreds), decided to use it for their own greed and literally destroyed affordable insurance. If we are going to state information in a public forum, please state it factually. You cannot compare to another province that doesn’t have the same characteristics, such as terrain, populations, etc.

    Jason: Privatizing just will not happen in BC, that is, if you want affordable insurance, then you do want ICBC to be a player. It will be extremely difficult for any private insurer to come into the BC market. It will be a losing proposition for them. We don’t have a large enough population to support the claims this province has for the risks to be spread among a large number of insurers. We had private before 1974 and it was not affordable back then, what makes you think it would be affordable now? Think before you speak, or please, at least gather some facts !

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