As British Columbians, we all have concerns about our auto insurance system and with the Insurance Corporation of British Columbia (ICBC). While the government has embarked on a dramatic path of reform – and kudos to them for doing so – as drivers, we should be equally concerned about what is to come.
Last month, ICBC’s annual service plan was released with the BC budget. Included in that document is ICBC’s latest financial statement, which shows that in order to return to solvency, ICBC will be raising its premiums by up to $1.74 billion annually over the next three years.
Factoring in the growth in the number of vehicles on our roads, that represents an increase of nearly 25%, or $384 per driver over the next three years. That this will take the average price of ICBC insurance from an estimated $1,684 today to $2,068 in 2021.
Many of the changes coming to BC’s insurance system – such as the introduction of a limit on pain and suffering awards for minor injury claims – make sense. However, in trying to improve its financial position in the years ahead, ICBC is relying much more on annual rate increases than on any cost savings that have been introduced to date.
Part of the problem is due to matters outside ICBC’s control – like an increase in the cost and complexity of vehicle repairs (a challenge occurring right across the country and around the world). But other challenges have to do with ICBC itself – like the projected increase in ICBC’s internal operating costs in the years ahead, which it estimates to increase by up to $300 million annually.
Think about that. At a time when ICBC is hemorrhaging losses, instead of tightening its belt in a relentless drive for efficiency, it’s letting it out another notch – to the expense of drivers and taxpayers.
When we speak of the challenges with ICBC, the response we often get is that they – and the BC system – are unique and cannot be compared to other companies or provinces.
With the changes coming to the BC market, our system will be remarkably similar to Alberta’s. We will both have limits on payments for minor injuries, limits on the use of expert reports, and similar payouts for injury claims. The main differences will be who sells your insurance and the price you pay – and drivers in Alberta, where they have choice, pay an average of $400 less than BC drivers.
My organization, Insurance Bureau of Canada (IBC), has asked MNP Consulting to review the similarities between the BC and Alberta systems and the prices drivers are paying in each. We will be releasing this report next week. But as a bit of a preview, I can tell you it isn’t pretty for those of us living west of the Rockies.
It’s now clearer than ever that the solution to BC’s auto insurance challenges lies outside our crown corporation, and that the time has come to open ICBC to competition and to give drivers the choice they deserve.
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. Aaron pays too much for auto insurance… and wants to change that.