B.C.’s auto insurer commits to consulting with brokers about risk-based pricing

British Columbia’s public auto insurer, the Insurance Corporation of B.C. (ICBC), has committed to consulting with the province’s brokers about a proposed shift to risk-based auto insurance pricing. The move represents one peg of ICBC’s much broader plan to modernize its service model over the next six to eight years.

ICBC’s commitment is contained in Accord 2020, an eight-year strategic agreement signed by the Insurance Brokers Association of B.C. (IBABC), ICBC and the Credit Union Insurance Services Association (CUISA).

“Really, the important element is to ensure the broker remain the sole distributor of Autoplan and the right choice for B.C. auto insurance consumers,” IBABC president Maurice Poulin said during a presentation to the IBABC’s annual general meeting in Kelowna, B.C. on May 9.

In its 2014 Transformation Program, ICBC states its intention to make a $400-million “reinvestment” towards a revamped service model, which will include shifting to a risk-based pricing model, replacing aging technology, adopting new claims handling procedures and introducing more ways for consumers to interact with the insurer. The last will include both paperless and electronic methods of communicating.

Of particular interest is the stated intention to shift to a risk-based pricing model from the Claims-Rated Scale (CRS), which the ICBC has used since 1982. Under the CRS, all new drivers pay a base rate for auto insurance and their premiums are adjusted up or down on the scale depending on their number of claims.

Some argue the CRS system does not differentiate effectively between high-risk and low risk drivers. But under a risk-based pricing model, low-risk drivers would be offered lower premiums and higher-risk drivers would pay higher premiums.

Accord 2020 commits the ICBC to consulting with brokers on any future risk-based pricing model.

Also, it introduces a new “hold harmless” clause for brokers under limited circumstances. These rules will be introduced as a prototype for the first year, and ICBC will review them at least annually.

Under the hold harmless rules, ICBC will hold brokers harmless for errors or alleged errors committed while generating the Autoplan certificate or policy, assuming brokers can demonstrate to ICBC that they fulfilled all of their obligations under the Autoplan Agency Agreement. This protection is important to brokers as ICBC commits to overhauling its service model.

Accord 2020 – which follows previous accords signed by ICBC, IBABC and CUISA – is effective Mar. 1, 2012 to Jan. 1, 2020. Previous accords ran over five-year terms, but Accord 2020 was extended to eight years in consideration of the projected length of ICBC’s planned transformation. 

Other new elements in Accord 2020 include the following:

• a commitment to improving the design of performance awards for brokers;
• a strategy for commercial customers; and
• continued commitment to broker education and training as ICBC introduces new systems and technologies.