ICBC’s costs continue to rise in 2006 1Q

ICBC has reported net income of CD$85 million for 2006 1Q, compared to CD$93 million for the same period last year.
“Increases in the amount ICBC is paying out to customers with injury claims have continued into the new year,” ICBC president and CEO Paul Taylor said. “Unfortunately, in the past few months, this has been compounded by an increase in the number of crashes and increases in the cost of property damage claims.
“However, in this latest quarter, these cost increases have been mostly offset by increased investment income.”
ICBC investment income for the quarter increased to CD$154 million, from CD$117 million for the same period in 2005. Income produced by ICBC’s investments lowered the average premium by approximately $200 in 2005.
Insurance premiums earned for the first three months of the year increased slightly to CD$765 million, from CD$754 million in 2005. ICBC says this is the result of an increase in the number of basic policies sold and higher sales of optional coverages, offset by the rate reduction on optional coverage that was implemented mid-2005.
“Rates for optional coverage were reduced by CD$100 million annually, providing savings for 1.6 million better-risk customers,” the ICBC says in a release. “The interim rate increase for basic coverage of 6.5 per cent, which took effect on March 15, 2006 and affects all policyholders, is also included in the first-quarter results.
Net claims costs for the quarter increased by approximately 10% to CD$634 million, which compares to CD$577 million for the same period in 2005.
ICBC says its average cost-per-claim “has continued to rise over the past few years, but this was offset by slight decreases in the number of claims. However, with the wet road conditions in the beginning of the year, there was an increase in the number of claims, while the average claim cost also continued to increase.”
Increases in the average cost of injury claims are of particular concern, ICBC says.
“ICBC continues to focus on keeping rates low and stable, however we know that significant challenges are ahead,” said Taylor. “We will continue to work with customers and the community to find ways to deal with building cost pressures. Individuals can play their part by driving safely to help keep premiums low.”
Operating costs for the first three months of 2006 were CD$123 million, compared to CD$119 million for the first three months of 2005. ICBC attributed the increase to investments in road safety, fraud and auto crime prevention, and additional resources at ICBC’s 24-hour call centres to improve customer service.