December 17, 2018 by Greg Meckbach
The Insurance Corporation of British Columbia said Friday it is seeking to raise rates by 6.3%, a move that prompted the Insurance Bureau of Canada to reiterate its call for competition in the province.
Unlike in most Canadian provinces, B.C.’s basic mandatory auto insurance is written by a provincial crown corporation.
ICBC has been losing money for a few years. The insurer reported Nov. 23 it has lost $582 million during the six months ending Sept. 30.
ICBC cannot raise rates without approval from the B.C. Utilities Commission. If the 6.3% increase that ICBC is requesting is approved, the new basic insurance rate would be effective April 1.
The proposed rate increase “is yet more evidence that the solution to the challenges in BC’s auto insurance system must be found outside our Crown insurer,” IBC vice president, Pacific Aaron Sutherland said Monday in a release.
The B.C. government has made several changes aimed at reducing ICBC’s loss costs.
In early 2018, Attorney General David Eby announced the province would impose a $5,500 limit on pain and suffering awards for minor injury claims. That cap takes effect April 1, 2019.
Then in June, the government announced a doubling of accident benefits. This means that for accidents taking place on or after Jan. 1, 2018, claimants can now get up to $300,000 for medical care and recovery.
Increasing first-party accidents benefits – and therefore reducing the incentive to sue at-fault drivers – was one recommendation made by Ernst & Young in a report released in 2017.
“Litigated claims, including those that settle before trial, are costing ICBC significant amounts in costs, disbursements and legal fees – in 2015 this amounted to over $150 million for claims that resolved for less than $100,000,” EY said in the report, Affordable and Effective Auto Insurance – a New Road Forward for British Columbia.
Motorists in B.C. may buy optional additional coverage from private-sector insurers but ICBC has a monopoly on the Basic Autoplan.
IBC released earlier this year a report it commissioned to MNP LLP.
In that report, MNP estimated that B.C. motorists who are older than 44 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 auto insurance in B.C. was opened up to competition.
Charles Brindamour, chief executive officer of Intact Financial, told securities analysts earlier this year that B.C. auto insurance clients would benefit from competition.
“If you have five, 10, 15 companies – or even 20 companies – like it is in private markets, the odds of finding a better deal if you are a consumer is very high,” Brindamour said in February, 2018 during a conference call discussing Intact’s financial results for 2017.