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Apples to apples – BC drivers are simply paying more

Aaron Sutherland: Despite ICBC’s recent changes, a new study will confirm that drivers in BC still pay more for car insurance.
That’s gonna be pricey.

Last year, the Insurance Corporation of British Columbia (ICBC) undertook the largest set of reforms to auto insurance since it was created almost four decades ago.

ICBC dramatically changed its coverage levels by increasing accident benefits and placing a limit on payouts for minor injuries. It also radically changed the way it prices car insurance by basing its premiums on driver risk, just like every private insurer in Canada.

But as we’ve come to expect with ICBC, the more things change, the more they stay the same.

Auto insurance through the Crown company is still the most expensive in Canada.

BC’s auto insurance system certainly needed reform, but ICBC’s failure to modernize and keep pace with the 21st century leaves it a non-responsive and disconnected organization from a bygone age. It has stalled any move to allow online sales and, despite external reviews encouraging the Crown insurer to automate its processes, it maintains twice as many staff as other Canadian insurers with its market size.

Auto insurance through the Crown company is still the most expensive in Canada.

In short, ICBC is grossly inefficient, with drivers and taxpayers left footing the bill.

My organization, Insurance Bureau of Canada (IBC), warned here in The Orca that when you combined ICBC’s overall rate increases, promises that most drivers would be better off under the new rate design were more pipe dream than reality.

At first, ICBC dismissed our claims, but as renewals rolled in and drivers came forward with negative stories, the truth surfaced.

When confronted with skyrocketing rates – especially for young drivers – ICBC changed tactics. Rather than trying to find solutions, it tried to scare British Columbians about private car insurance in other provinces.

With new drivers paying more for car insurance than university tuition, ICBC’s CEO went so far as to make the outlandish suggestion that new drivers in other provinces pay up to $12,000 a year.

Unfortunately for ICBC, it only takes a quick search online to discover otherwise. The public and media have stopped believing such claims.

Instead, the media sought their own comparative quotes for young drivers and found the price in Alberta was far less.

To further assess the impact of ICBC’s new pricing structure, IBC has commissioned the accounting firm MNP to study the cost of car insurance in BC and Alberta.

Unfortunately for ICBC, it only takes a quick search online to discover otherwise. The public and media have stopped believing such claims.

MNP found that – with the changes introduced in BC last year – the auto insurance systems, coverage levels and average claim sizes are substantially the same on both sides of the Rockies. However, the price drivers pay in BC is a different story.

MNP obtained over a dozen quotes for drivers in BC and Alberta. We will be releasing the apples-to-apples comparisons of the different prices in each province soon, but here is one small preview:

A 35-year-old woman living in Vancouver and driving a 2014 Honda Civic to commute to work would pay $467 more for insurance than she would pay in Calgary.

MNP’s report cuts to the very core of ICBC’s credibility and its claims on how its rates compare.

ICBC will no doubt respond by suggesting that car insurance rates in Alberta are rising and point to IBC’s past characterizations of the challenges occurring in that market. The system in Alberta is not perfect; it’s (also) badly in need of reform. But it’s a far cry from the dumpster fire raging at ICBC.

In response to challenges in the Alberta market, last August the government removed any limits on rate increases in that province.

Since then, more than 92% of companies in Alberta applied for – and received – rate increases, according to the province’s insurance rate regulator. This has led to an average rate increase in Alberta of 10.5%. Despite this, auto insurance still remains much cheaper in Alberta than BC.

In fact, the difference is likely to become even greater. The various quotes MNP use include Alberta’s recent rate increases, and are for policies effective January of this year. ICBC, on the other hand, delayed its rate increase until next month.

Drivers in Alberta can shop around to find the best coverage at the best possible price. It’s a competitive incentive missing in BC that drives prices down and service quality up. Allowing companies to compete with ICBC and to provide drivers with choice would help lower insurance premiums and, importantly, would help extinguish the dumpster fire.

If ICBC is so confident it provides the best coverage at the best possible price, why does it fear competition?

The evidence lies on the other side of the Rockies. Because when it comes to price, ICBC still has a lot of room for improvement.

Aaron Sutherland is Vice-President, Pacific with the Insurance Bureau of Canada (IBC). IBC is the national association representing Canada’s private home, business, and auto insurers.