On the heels of the Insurance Corporation of British Columbia’s (ICBC) $935 million net loss for the recent fiscal year, the Insurance Bureau of Canada (IBC) has released a damning report on the reforms needed in the province’s auto insurance market.
The national insurance association states that at $1,680 per driver each year, premiums are too high in BC when compared to the rest of the country. And, according to IBC, basic insurance rates have increased over 42% since 2011.
The report makes the case that opening up the province’s auto insurance market to competition could lower claim costs that then reduce premiums.
In response, the provincial insurer released a statement to Insurance Business Canada.
“We are not surprised that a report from the Insurance Bureau of Canada – which represents the private insurance industry – once again makes an argument for private insurance in BC,” Joanna Linsangan, spokesperson for ICBC, wrote in an email.“Drivers in B.C. already have access to private auto insurance for their optional coverage through the many independent insurance broker offices across the province.”
The statement goes on to say that “even where there is choice, drivers still overwhelmingly choose ICBC – approximately 80% of customers purchase their full coverage (basic and optional) with ICBC.”
Meanwhile, Al Delwo, a commercial insurance broker at Summit Insurance in BC, said the government-run auto insurance market has been “deplorable” since it was initiated in 1973 by then-premier of BC, Dave Barrett. He’s seen his commercial clients in the province turning to private insurance wherever possible.
The provincial insurer said it’s aware that some changes need to be made.
“That’s why ICBC is working hard alongside government to ensure the necessary steps are taken as quickly as possible to bring about long-term, sustainable improvements to BC’s auto insurance system,” wrote Linsangan, adding that, “None of the actions we can take within the current auto insurance system in B.C. will close the gap between the premiums we are collecting and the cost of the claims we are paying out.”
A major sticking point for Delwo is that ICBC “has always given benefit to the bad drivers, at the detriment of the good drivers.”
The IBC report focused in on this issue, stating that “ICBC’s current basic premiums are primarily based on driving experience, location of use, and driving record.” By comparison, factors like age and kilometres driven that are highly correlated with risk are considered when determining premiums in other provinces.
Delwo sees benefits for customers in revamping how premiums are determined in BC.
“I think we would see a fairer outlook on premium costs whereby those with bad driving records get surcharged and penalized accordingly,” said Delwo. “Likewise, good drivers would receive lower premiums.”
Delwo is not alone in wanting change. IBC states that in a recent poll, “78% of British Columbians say they want more choice in auto insurance.”
At the same time, ICBC touted aspects of its current insurance system in its statement, pointing to the lower numbers of uninsured drivers on the province’s roads.
“Where many jurisdictions in North America see up to 20% of its drivers driving uninsured, BC has an uninsured rate of 1%.”
IBC calls for more auto insurance competition in BC
ICBC posts nearly a billion in net losses