The Insurance Corporation of British Columbia (ICBC) was thrust into the limelight this week after a leaked Ernst and Young (EY) report suggested British Columbia (BC) auto insurance rates would have to surge by nearly 30% to balance out the corporation’s struggling books.
A copy of the EY report was obtained by Postmedia News, which disclosed its details to the public on Monday (July 24). This was followed by an onslaught of damning media coverage and speculation over what would happen to the already-pricey auto insurance industry in the western province.
But there is no need for such negativity, according to Chuck Byrne, executive director and COO at the Insurance Brokers Association of British Columbia (IBABC). He told Insurance Business
the EY report is “exceptionally accurate, well-written, and very true to the issues” and that the IBABC looks forward to some of the recommendations in the report being implemented.
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The report suggests ICBC is in dire financial straits due to a horrendous trend in road accidents in the province. In the past couple of years, the number of accidents and claims has spiked and so has the cost of vehicle repair and human recovery. This is costing the corporation a great deal of money and is a trend it must now try to kerb.
“Even if ICBC had a crystal ball for this situation and increased rates alongside accident trends, it still would have been a difficult problem,” explained Byrne. “No matter how much rate and premium you throw at the problem, that will never be the definitive solution. It comes down to behavioural change and product reform.”
The actuarial status in the EY report suggests a 30% jump would be required to meet the gap in pricing versus outgo on expenses and claims. According to Byrne, that substantial hike is very unlikely to happen as the BC governments, past and present, have vowed to sustain the affordability of insurance.
But while the BC government and the ICBC can work on product reform and rates, it is up to society to address its problematic driving behaviours – and this is something brokers can help with.
“BC brokers are well in tune with the consumer needs for coverage, the complexities and nuances of the ICBC system and the coverages in BC that are available. They do a great job in advocating and briefing the client in that regard,” said Byrne. “Brokers need to be explaining what the media is covering and educating clients about the decisions made by the Government and ICBC.”
The EY report has suggested a number of solutions that, if implemented in a balanced way, could help to address the issues with the auto insurance industry in the province. One task is to change high-risk driver behaviour. Some systems are far more punitive than BC and therefore encounter fewer reckless drivers.
As well as addressing driver behaviour, the report suggests product reform and redesign to make it more efficient, and short-term solutions like tightening up the forgiveness rules for supposed good drivers having accidents.
“The forgiveness rules are too liberal in BC. They need to be tightened up,” commented Byrne. “But we can’t just pick one of the solutions in the report. We need to get the balance right.”
There is a positive from this situation, according to Byrne. He said: “The ICBC system has really proven its value in a number of ways throughout the years and though the system needs some tweaks right now, that’s really no different to any other jurisdiction in western civilization. It’s just BC’s time and whether this could have been started years ago or not, that’s not the issue.
“Now’s the time to make change happen and IBABC is pretty confident that ICBC will get the sustainability fixed to bring about better affordability on pricing and a more efficient system for the claimants and the victims and that’s good news all around. We’re positive about it and are looking forward to the changes.”
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