Soaring claims costs hit ICBC’s bottom line

ICBC says the rising cost of claims accounts for its reported net income of Cdn $195 million for the first nine months of 2005 down from $317 million for the same period last year.
Despite the drop in net income, ICBC’s year-to-date financial results are positive, the company reports. “Earned premium revenue is growing, investment income has been very strong and operating costs continue to be low. However, the rising cost of claims is an area of significant concern.”
ICBC says claims and related costs for the nine months ending Sept. 30 amounted to $2.1 billion including a $70-million negative adjustment for prior years’ claims. Current year claims costs have increased 7.4%, the company says.
“Increases in the average cost of injury claims are an issue,” Paul Taylor, ICBC’s president and CEO, says. “The trend has been emerging for a couple of years, and it is now becoming clear that the rising cost of bodily injury claims is an area of significant concern.
“This affects the basic, compulsory insurance side of ICBC’s business in particular, as more than three-quarters of the cost of all of the injury claims that ICBC handles is covered by basic insurance.”
Actuarial information contained in ICBC’s current filing with the BCUC indicates rates for basic insurance should increase by 4.2% for 2006. However, ICBC is proposing no change in basic rates for 2006.
Instead, the company says it will focus its attention over the next several months on getting a better understanding of this emerging trend and options for mitigating the rising costs. ICBC is able to defer a rate increase for basic insurance due to adequate capital levels being available.