Let the private market compete in British Columbia: IBC
January 31, 2018 by Greg Meckbach
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Insurance Corporation of British Columbia’s monopoly should end, Insurance Bureau of Canada said this week, but the province’s attorney general contends that competition will not result in lower premiums for B.C. vehicle owners.
Opening up auto insurance to competition “does not guarantee lower insurance rates, as Ontario shows,” Attorney General David Eby stated Wednesday in an email to Canadian Underwriter. “While there are significant financial and operational challenges to be addressed, we believe that public automobile insurance offers British Columbians excellent protection and access.”
The average auto premium in B.C. is $1,680 per year, compared to about $1,437 in Ontario and $1209 in Alberta, said Aaron Sutherland, IBC’s vice president, Pacific, in an interview Tuesday.
ICBC announced this week that is lost $935 million during the first nine months of the year. The insurer had net losses of $257 million in 2015 and $280 million in 2016, Ernst and Young noted in a B.C. government-commissioned report released this past July
“ICBC is on the fast track towards insolvency with rapidly rising premiums,” Sutherland said Tuesday.
ICBC has a monopoly on mandatory auto insurance in B.C. With its Basic Autoplan product, ICBC writes third party liability, under-insured motorist protection and accident benefits, among other coverages. Private for-profit insurers can write optional additional auto coverage (such as collision and upset) in B.C.
IBC released this week a report – The Benefits of Competition in the Provision of Automobile Insurance in BC – that IBC commissioned to MNP LLP. In it, MNP estimated how premiums could change for different groups of drivers. MNP gathered quotes from Alberta and Ontario for 33 driver profiles and for 13 driver profiles in B.C.
MNP referred to what EY called “required premiums” in EY’s report – Affordable and Effective Auto Insurance – a New Road Forward for British Columbia – released in July, 2017. In essence, EY calculated how much ICBC would have to charge in order to be financially viable.
In the report released Monday by IBC, MNP listed EY’s “required premiums,” by age group and compared them to what MNP estimates private-sector insurers would charge for the same age groups. About 60% of ICBC policyholders are 45 or older and these people would pay less if the market were opened to competition and insurers based rates on age, which ICBC does not do. MNP estimated the 40% of drivers younger than 45 would pay higher rates if competition were opened up.
“Some considerations should be given to change B.C.’s rating system to one that focuses premiums more closely with risk, so that high risk drivers pay premiums that better reflect the risk that they bring and low risk drivers would then pay a reduced premium,” Sutherland said.
IBC is not going so far as to advocate age-based ratings.
If private insurers were allowed to compete with IBCB, it would be up to the B.C. regulator to decide whether they could use age as a rating factor, Sutherland said.
MNP “simply pointed out” that other provinces do use rating factors not used in B.C., he added.
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In writing new clients moving to Ontario from B.C. it is entirely normal for them to be amazed at how inexpensive the Ontario premiums are compared to what they have heard.
How can the BC attorney general David Eby criticize Ontario when the same article shows Ontario’s pricing to be lower than theirs AND not running a Billion dollar deficit on the backs of the taxpayer? It’s time for ICBC to realize that however well intentioned, in the end, a crown run monopoly will always under-perform the private sector and stop slamming other provinces to misinform the electorate.
Scott is missing the point that the insurance product in BC, which is a full tort system, results in much higher settlements than in Ontario. This is the root cause of the higher premiums, not that fact that basic auto insurance in BC is delivered by a monopoly-model crown corp.
“If private insurers were allowed to compete with IBCB, it would be up to the B.C. regulator to decide whether they could use age as a rating factor, Sutherland said.”
ICBC is more sophisticated than using age as a rating factor. They use a full 20 years driving history which is less discriminatory than age. This allows a 20 year old with a clean driving history for her whole 5 year driving time to have a decent discount, while the 40 year old with 4 accidents will be paying substantially more.
Age is a silent factor in the 20 year scale as the whole scale is based on years driving (aka age licensed) and accident frequency.
Higher settlements are more to blame for the current deficit and the lawyers are the winners. More claims could be settled quicker with a bit more going to the injured party and a lot less going to both the plaintive and defendant lawyers.
Let’s remember that the attorney general works for the BC government . BC’s government, regardless of political affiliation, regularly siphons off hundreds of millions of $$ from ICBC each year to bolster general revenues. So, this is a mess that the BC governments created : first, a poorly run public auto scheme is doomed to fail when the government artificially suppresses justifiable rate increases to curry favor with the voting public and second, not collecting enough in premium and then sucking money out to cover irresponsible spending elsewhere.
I have often heard it said that you get the government you deserve. Wake up BC, it’s time you started paying attention! This is YOUR money.
Why is nobody talking about ways to solve the real issue, which is high BI claim costs? Capping BI claims (as in some other provinces) will have an enormous impact here and also make it more viable for competitors. Improving driving conditions (better lighting at night is worth a look as well (it gets very dark in the lower mainland during the winter, no sun, no moonlight, no snow shine, making it difficult to see lines on the roads at night in most areas with all the glare from traffic and wet roads). ICBC should also consider becoming the only driver training option in the province, and introduce interim driving tests for all persons with a drivers license.
I think some history is required before comments are made.
ICBC was brought in by NDP in 73/74 as a non profit Crown Corp. During the years, the Socred/Liberal Governments continually complained about this crown corp, but never dissolved it. Why, because it actually worked, paid its bills and continually did what it was set out to do, make Vehicle Insurance Premiums affordable. Funds were never syphoned from this crown corp to balance budgets, HOWEVER, in the last dozen or so years, the Liberal (Socred) Government decided they will syphon any profits from this Crown Corp to BALANCE THE BUDGET, and this is why they continually were re-elected as Government, because the public doesn’t realize initially the funds were being taking from ICBC to Balance the Budget.
NOW Privatizing in BC. Ask any Private Insurer whether or not they want to take on the Liability Risk BC has over any other province and you will find wide spread hesitation. The liability risk in BC is vast, not because of poor drivers necessarily, but because of the terrain.
The private insurer doesn’t mind taking on the excess liability from the basic $200,000 ICBC offers, because that will take away most of their risk, and they certainly don’t mind taking on the physical damage because with picking the CREAM OF THE CROP a private insurer can make a profit.
There are not enough insured vehicles in BC for each Private Insurer to only take on a few and cover the liability risks, this is why they have never pushed to take on the entire liability portion.
Recalling back to the 70’s, private Insurers rates were excessive for any driver in BC at the time, hence, ICBC the Crown Corp was born.
When commenting, please make certain it’s based on all the fact and not just certain side.
In British Columbia, we need to go back to the Basics with the type of driving people do, charge for the people/business out on the road constantly, based distance driven per year and the highest rated territory (premium wise), charge less for people who drive there vehicle to/from work and park their vehicles in a parking lot the entire day while working. KISS method may get us back to where we were.
ICBC should have never been given authorization to spend hundreds of millions of dollar for a new System with the financial climate it was in, only to be able to sell renewals on line in the near future. They went about it incorrectly without thought, other than a GREED driven Liberal (Socred) Government
When government runs insurance, its no better than social insurance like workers comp. private insurance ensures competitive understanding standards with pricing to reflect the risk.
ICBC, like any company, needs the proper person(s) running it. It also needs the government to keep their hands off the funds and let it run as a non-profit organization or allow it to make a certain percentage profit and put the extra money into fixing lights at accident prone intersections, etc. When the claims cause it to run a deficit it can make an offsetting profit in other years as long as over a specific period it is basically non-profit.
DITTO ! Well said !
ICBC WILL NOT PROVIDE THE SENIOR’S DISCOUNT IF A PERSON CONTINUES TO WORK PAST THE AGE OF 65. THE MAJORITY OF SENIORS ARE WORKING PAST THE AGE OF 65 AND UP TO THE AGE OF 70 DUE TO THE HIGH COSTS OF EVERYTHING IN BRITISH COLUMBIA.
IT IS TIME TO RETHINK ICBC AND HOW THE GOVERNMENT IS TREATING SENIORS IN ALL ASPECTS!!