B.C.’s provincial auto insurer to pay back $39 million in overcharged fees

VANCOUVER – The Insurance Corporation of British Columbia was scrambling Sunday to explain why thousands of its customers were wrongly billed, a mistake that is expected to cost the Crown corporation $110 million to fix.

ICBC will reimburse with interest the approximately 240,000 optional insurance customers who have been overcharged by mid-July, says Mark Blucher the Crown corporation’s CEO.

The average overpayment was $21 each year per customer and ICBC estimates that it will be paying back $36 million plus an additional $3 million in interest.

Blucher blamed errors in ICBC’s database for the billing mess.

ICBC became aware of the errors in 2009 after new computer systems were approved for installation a year earlier, but the scale of the problem only became apparent last year, Blucher said in an interview.

“That’s when this issue first came up to say ‘hey there’s a potential issue here, we need to start looking at that issue,'” said Blucher. “The scale and the scope of this really didn’t become apparent until I put focus on this as the new CEO in 2013.”

Customer data was entered in the computer manually, making it easier for mistakes to occur, he said.

However the company is switching to a system where data will be entered automatically, reducing chances of human error. Blucher expects it will be in place mid-July.

The company only archives six years worth of data, it is impossible to tell if the problem had existed prior to 2008, he said.

Although ICBC has been aware of a problem for months, it only became public on Sunday after a story appeared in the Vancouver Province.

Blucher defended the secrecy, saying the company wanted to keep a low profile until it had understood the situation and was ready to pay back clients.

“We were desirous of reducing the anxiety and stress for our customers by informing them about this issue in July when we had finalized all of the work on this,” he said.

In addition to the overpayments, some 350,000 optional insurance customers were not billed for as much as they should have been over the last six years.

The underpayments total about $71 million and they work out to about $34 each year per customer, but ICBC won’t be allowed to raise rates to recoup the money or require those who were undercharged to pay retroactively, Transportation Minister Todd Stone said Sunday.

“Anyone who has underpaid will not be retroactively charged,” said Stone. “This was not their error so they should not be asked to pay retroactively.”

Stone says he was angry when he found out about the issue in February and told the public auto insurer it had to repay those who were overcharged with interest.

Optional insurance coverage includes collision coverage, comprehensive coverage, specified perils, new vehicle replacement plus, replacement cost endorsement and limited depreciation policy.

Blucher says that rates and service will not be affected by the shortfall.

He says that it is a small amount in comparison to the $4 billion in premiums that the company collects each year.

“We certainly have the capability to absorb this amount into the capital of the company without having to make any adjustments to rates,” he said. “And that’s exactly what we’re going to do.”

The company must undergo a third party audit to make sure the problem has been fixed, Stone said.

“I expect the system to be fixed so this never happens again,” he said.