ICBC could go bankrupt, suggests retired public servant
Posted November 12, 2017 8:13 am.
Last Updated November 12, 2017 7:07 pm.
This article is more than 5 years old.
NORTH VANCOUVER (NEWS 1130) – The recent announcement of a wide-ranging audit at ICBC has a retired government insider recommending a new operation model to make the Crown Corporation viable again.
Richard McCandless blames creative accounting for profits being raided by past governments to cover budget shortfalls, so he’s not surprised ICBC lost more than half $1 billion last year.
“They have to have a certain amount of dollars sitting in their capital reserve. The previous government has pulled down those capital reserves such that a good auditor would go in and say, ‘You are not in a healthy financial condition.’ Corrective action must be taken to make sure it doesn’t get far worse than it already is. It’s already in a crisis situation.”
McCandless adds a fox running the hen house situation may have also been created when 200 estimators were laid off and so-called Express Shops were given the power to write their own invoices. “They’ve said, ‘Here are the rules. You follow the rules and we’ll do spot audits.’ The union at ICBC’s claiming there weren’t enough people to deal with the workloads, so they just let things go through.”
He also says so-called pain and suffering claims could be reduced if BC had no-fault optional insurance — much like they have in Saskatchewan where 97 per cent of the drivers choose that. “We could save easily $800 million and no fault gives you much higher immediate benefits if you’re in an accident. The coverage limits are much higher than they are in BC.”
McCandless says the current model in this province is failing because past governments have used ICBC profits to cover off deficits elsewhere. “They will be out of money. They will be bankrupt in three to four years. ICBC doesn’t have enough capital reserves to meet even the government’s minimum standards.”
McCandless adds costs linked to injury claims keep climbing.
“The cost per claim and the number of claims have been going up, especially in the last two to three years, but there are definitely more soft-tissue injuries — better known as whiplash — which are costing policy holders a lot more money in recent years. Every other province in Canada either caps the pay and suffering or doesn’t allow it at all. It’s making a lot of lawyers a pretty good income.”
He is responding to concerns raised by a long-time estimator about body shops over-billing ICBC for collision repairs.
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Attorney General David Eby, who has repeatedly said he won’t make BC a no-fault province, hasn’t changed his mind.
“No. We’re not looking at no fault insurance, but we are having important conversations with lawyers and with other stakeholders in the industry to let them know these difficult conversations that should have been had a while ago. Everyone is going to have to tighten their belts if we want to get ICBC turned around…. We’re looking at working with certainly the lawyers who are involved in the system. They’re driving a lot of the costs to the system — it’s 25 per cent of the premium dollar goes to legal-related expenses.”
Former Transportation Minister Todd Stone, who’s now seeking the leadership of the BC Liberals, is not saying no to no-fault, but he agrees crash-related costs keep going up. “The number of collisions across BC, particularly in urban centres, are increasing steadily. The cost of repairs, both for the vehicles themselves, but also the bodily injury costs are escalating rapidly and that’s a phenomenon taking place in jurisdictions all over North America.”
An Ernst & Young report ordered by Stone last year, but wasn’t made public until July, has recommended ICBC adopt some form of no-fault insurance because this province is the only one in Canada which does not limit payouts for minor injuries.
“The independent report that we commissioned actually provides a broad range of options that would have the effect of constraining costs and therefore, applying as much downward pressure on rates for BC’s drivers as possible.”
Read the full report below:
As for why ICBC lost more than half $1 billion under his watch last year, Stone insists that’s not his fault.
“I’m proud of the fact that over four-and-a-half years through a wide variety of measures — reducing the number of managers by 500, cutting executive compensation by 50 per cent, cracking down on fraud, getting tougher on distracted driving — we were able to keep rate increases lower than they otherwise would have been.”
On November 1st, ICBC rates rose another 6.4 per cent.
Please note: An earlier version of this story describes Rick McCandless as an ICBC employee. Mr. McCandless did not work for ICBC. We regret the error.
