Intact CEO hopes B.C. is ‘starting to think about introducing more competition’ in auto insurance

Nine days after Insurance Corporation of British Columbia released a report it commissioned to Ernst & Young LLP on reforming auto insurance, the chief executive officer of Intact Financial Corp. suggested it is “better to have a competitive marketplace” in B.C.

During a conference call Wednesday in which Intact discussed its financial results from the three months ending June 30, CEO Charles Brindamour was asked about the EY report, titled Affordable and Effective Auto Insurance – a New Road Forward for British Columbia.

In its 195-page report, EY noted that B.C.’s Basic Autoplan had a net loss of $280 million in 2016 and suggested that the average B.C. driver could have to pay almost $2,000 in annual premiums by 2019, an increase of 30% over today’s rates, unless there is “significant” reform.

“The first observation I would make is that if you let the government run what the private sector can do, you end up with shocks – like all of a sudden there is a 30% gap in premiums,” Brindamour said Wednesday during the Intact conference call. “Therefore, I think the first message would be it is better to have a competitive marketplace.”

ICBC, a provincial crown corporation, has a monopoly on basic compulsory auto coverage in B.C. Through Basic Autoplan, ICBC writes third party liability, under-insured motorist protection and accident benefits, among others. B.C. motorists can buy optional additional coverage from ICBC or from private-sector auto insurers.

Related: Insurance Corporation of B.C. financial condition ‘seriously compromised,’ Basic Autoplan needs redesign: EY

“Rates are approved through an annual rate filing process governed by the BC Utilities Commission,” EY said in the report, adding that ICBC’s loss ratios were 106.5% in 2014, 115.6% in 2015 and 110.3% in 2016.

“Due to the high levels of claims, ICBC’s near- and long-term financial condition is being seriously compromised,” EY stated in the report. “A redesign of the current product is required.”

The objective of the report was “obtaining a range of options for ICBC and the B.C. government to consider that would increase fairness and affordability related to Basic Insurance, with the goal of keeping future Basic rate increase in line with the rate of inflation,” EY noted, adding that the review “was based on the premise that ICBC would remain publicly owned, with the mandate to provide affordable Basic auto insurance for all B.C. motorists.”

In its report, EY described the auto insurance systems elsewhere in Canada as well as in New Zealand, four U.S. states (Michigan, Pennsylvania, Illinois and Massachusetts) and the Australian states of Victoria, Queensland and New South Wales.

For example a “key feature” of the new scheme in New South Wales “is a restriction on benefits for minor injury claims (where a minor injury is defined as a soft-tissue or psychiatric or psychological injury only),” EY said in the report.

In B.C. the cost of lawsuits – including settlements – is significant, EY noted in the report.

“The care-based model, as in place in Manitoba and Saskatchewan, provides comprehensive benefits for those injured in accidents, and the right to sue for excess economic loss and pain and suffering is allowed only in limited circumstances,” EY said, adding some Canadian jurisdictions have moved away from ‘unrestricted” litigation-based models.

“Even when there is cost pressure going up you have options to find ways to get a better deal -which in this case will be tough, I think, for drivers in British Columbia,” Brindamour said Aug. 2. “I hope that in B.C. we are starting to think about introducing more competition in the marketplace.”