ICBC reports record profit, consumer association requests reduced auto rates

The Consumers’ Association of Canada recently called on Insurance Corporation of British Columbia (ICBC) to make further cuts to auto insurance rates for BC drivers.
“ICBC again announced record profits,” Bruce Cran, president of the association, says. “By the end of this year ICBC will be sitting onmore than a billion dollars.”
ICBC recently reported a net income of $164 million for the first half of 2005, down from $167 million for the same period last year. Claims and related costs for the first six months of 2005 were $1.34 billion, a 6% increase over the first six months of 2004. Insurance premiums earned in the first half of 2005 were $1.54 billion, compared to $1.48 billion for the same period in 2004. This increase is primarily due to increased sales of optional coverage and an increase in the number of vehicles on BC’s roadways.
ICBC’s investments significantly contributed to net income in the first six months of 2005, increasing to $255 million from $215 million.
Cran says the reason the ICBC is holding a billion dollars rather than use the money to reduce rates is because the association is because the BC Government ordered ICBC to generate profits and retain the money rather than immediately lowering rates in order to build up its financial reserves to a level on par with private insurers. According to Cran, BC is the only province with a public auto insurance system requiring this same level of reserves, which will ultimately result in “excessively high rates for consumers and businesses.” He adds that the BC Government decided to ‘level the playing field’ by fixing ICBC’s rates artificially high in order to enable private insurers to compete.”
In an announcement associated to its rate release, Paul Taylor, ICBC president and CEO, says, “ICBC’s net income stays in the company as retained earnings to absorb unexpected spikes in claims costs or unanticipated declines in investment income.”He adds that the ICBC invests its retained earnings and reserves to help keep insurance rates low and stable.
Although the overall number of claims in the first half of 2005 is slightly lower than claims for the same time period in 2004 and the number of comprehensive claims declined by 3.7%, auto theft is a growing cost for ICBC policyholders. “It is too early to say if the increase in overall claims and related costs marks a changing trend,” Yaylor says, “but it is an example of the volatility of the costs of claims and their impact on ICBC’s bottom line.”
ICBC recently indicated that its filing with the BCUC later this summer will propose no change to its basic insurance rates for 2006. After a public process, the BCUC will determine if basic rates should remain the same, increase or decrease.