British Columbia’s publicly owned and managed auto insurer, the Insurance Corp. of B.C. (ICBC), is about to experience a financial head-on collision that could result in huge basic rate increases for drivers, thanks in part to a provincial government that has been practising a “borrow from Peter to pay Paul” principle.
The crown corporation’s financial troubles are expected to be a front-and-centre campaign issue leading up to B.C.’s May 9 provincial election. Already, the Opposition, the New Democratic Party, is calling for a full review of the ICBC by the B.C. auditor general – especially the governing Liberals’ $1.2 billion in withdrawals of “profits” from the ICBC since 2010 for use as general revenue.
The ICBC has withdrawn $1.4 billion since 2012 from its optional auto insurance side – through which ICBC competes with the private sector in areas such as collision coverage – to beef up basic insurance in order to offset rising claims costs. The ICBC states the number of crashes alone in B.C. has jumped by 15% over one year, while the number of injury claims per 100 crashes has increased by 32% over the past six years.
In the face of this financial challenge, the re-election-minded Premier Christy Clark has set a cap on increases to basic insurance of 4.9% for this year. That is so, even though it’s generally acknowledged that, without the ICBC’s cross-subsidization, a rate hike of 15% would be required. The situation could get worse: another worst-case scenario released recently by the ICBC has rates potentially rising by as much as 42% by 2020.
Other stories of ICBC incompetence are surfacing. For example, litigation over minor injury claims appears to be out of control. As an unnamed former ICBC claims officer told the Vancouver Sun recently: “One of the major factors driving up rates are the significant number of injury claims made simply because the ICBC is widely known to pay something to close down a file.”
It’s reached the point, the Vancouver Sun notes, where the ICBC is the most frequent litigant in B.C.’s civil court system. And, unlike other provinces, B.C. has no cap on the amount for which claimants can sue in minor injury cases.
Settling claims in 2015 alone cost $2.4 billion, which represented an increase of about $900 million. Over the past seven years, claims costs have jumped by 60%, the ICBC states.
No wonder NDP critic Adrian Dix has written to B.C. Auditor General Carol Bellringer asking her to launch a financial review of the ICBC, which is regulated by the B.C. Utilities Commission (BCUC), so that ratepayers are protected and political interference from Victoria is prevented.
In practice, the Liberal government has been using the ICBC as a cash cow. And with an election just around the corner, Victoria is bending over backward to downplay the ICBC’s very serious financial situation.
According to Richard McCandless, formerly a senior manager with the B.C. government and intervenor in the BCUC’s rate reviews of the ICBC, the insurer is only a few years away from not being able to cover its liabilities if nothing changes.
If the ICBC is to deliver realistically priced basic auto insurance, the insurer’s pool of money cannot be used simultaneously for Victoria’s political convenience. A full review by B.C.’s auditor general would be an excellent start in fixing the mess.
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