ICBC seeks basic insurance rate increase for the first time in four years

Citing diminishing investment returns and escalating bodily injury claims costs, the Insurance Corporation of B.C. (ICBC) intends to apply to the British Columbia Utilities Commission (BCUC) for a basic insurance rate increase.
If approved, it would be the first time in four years ICBC’s basic insurance rates would increase. Based on a reduction in optional rates, ICBC says the majority of its customers purchasing full personal vehicle insurance coverage would see an average increase of less than $30 a year.
ICBC president and CEO Jon Schubert explained the rationale for the increase in an open letter to customers, posted on the B.C. public insurer’s Web site on Nov. 29.
Schubert said two factors are pointing toward the need for a rate increase: investment income results and rising claims costs, particularly in bodily injury.
“Our best estimate is that our investment income at year-end will be $90 million less than in 2010,” Schubert writes. “We are not alone – other insurers are also suffering from declines in their investment income.
“In past years, we’ve been able to rely on our investment income to help keep rates down but we can no longer do so to the same extent.”
An even more concerning development, Schubert said, is that ICBC has seen a $200-million increase in claims costs, which he attributes mainly to bodily injury claims costs growing at a much higher rate than anticipated.
“This year, our bodily injury costs will be approximately $1.7 billion – $350 million more than five years ago,” he writes.
The net result of diminishing investment income and rising claims costs was a $279-million drop in ICBC’s net income for the first nine months of 2011, the insurer reported.