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Rate Rage – ICBC has overpromised and underdelivered on rate design

As more and more drivers are hit with higher premiums, it’s getting more difficult not to look outside BC and see the benefits of choice and competition.
Looks even worse in close inspection.

Angry. Outraged. Confused. If you renewed your auto insurance recently, there’s a good chance you might relate to one of these.

Despite promising lower premiums, Insurance Corporation of British Columbia’s (ICBC’s) new rate structure has resulted in exactly the opposite and has left many drivers feeling duped by the Crown insurer.

You may remember ICBC’s past sales pitch – that up to 75% of drivers will be “better off” after September 1. As more and more drivers are seeing their insurance premiums skyrocket, that fantasy pitch has turned into a horror story.

Some drivers are paying a bit less. But in many cases, it’s because they have lowered coverage levels or dropped family members from their policies.

In short, they are buying less insurance – and only under ICBC’s monopoly can that be considered “savings.”

The dramatic increase in insurance premiums for new and young drivers in BC has garnered the most damning media coverage. But drivers with lengthy, safe driving records are also seeing their premiums rise because ICBC’s changes go far beyond how other Canadian insurers operate.

Take driving experience. Other insurers typically give their full discount after 10 years of clean driving experience. But in BC, it now takes 40 years – yes, four zero – to receive ICBC’s full discount. Previously it took nine years, and that difference is a big reason for why drivers with clean records are seeing increases.

This change means that in BC today, if you start driving at 16, you will be 56 before you receive ICBC’s full discount – and that’s assuming you never have an at-fault collision.

In past Orca articles, I warned that ICBC’s pricing changes would lead to price spikes for many drivers – warnings the Crown insurer promptly dismissed.

But as drivers make their anger public, ICBC is scrambling and is now resorting to a misinformation campaign to spread fear about car insurance in other provinces.

For example: As young drivers across the Lower Mainland come forward with insurance premiums above $5,000 and even $6,000, ICBC has retorted that similar coverage would cost $12,000 in other provinces. Such assertions are as misleading as they are ridiculous; a quick online search shows young drivers can find the same coverage for the same vehicles in Calgary for closer to $3,000.

ICBC has the most expensive auto insurance in Canada. It’s an undeniable fact.

Yes, no matter where you live in Canada, the price of insurance is more expensive for new drivers than for those with a history of good driving. But in other provinces, competition means insurers work relentlessly to find new efficiencies and innovate to better price their products.

As a result, some insurers offer discounts and savings for those who enroll in driving schools, use telematics technology to demonstrate their good driving behaviour, or bundle their car insurance with other family members. Taken together, these discounts can lead to substantial savings.

In some provinces, insurers must – by law – offer a First Chance discount that treats all new drivers as if they have three years of driving experience and six years of experience if they successfully complete driver training. This discount has significantly lowered premiums for new drivers with clean records and could easily be applied in ICBC’s new rate design framework.

So why doesn’t ICBC offer these types of savings? Because it doesn’t have to. No fear of losing your business means no incentive to change behaviour. It’s why ICBC’s solutions look outside the organization and rely more on price increases than on payout limits and legal system changes.

The facts speaks for themselves.

ICBC employs twice as many staff as other Canadian insurers, but would have us believe it’s one of the most efficient insurers in the country. It is still “exploring” online renewals, but would have us believe it is nimble and innovative. It says no other insurer could provide British Columbians lower prices, but resists competition at every turn.

ICBC simply hasn’t kept pace with the 21st century. It won’t compete for your business because it can’t. It knows that if drivers were given a choice, they would abandon it and would find the same insurance, elsewhere, for less.

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.