VANCOUVER (NEWS 1130) – How would you handle a 20 per cent increase in your basic auto insurance rates? A report from the Fraser Institute says ICBC’s financial mess can be blamed on the previous provincial government failing to make difficult decisions.
The right-leaning policy group says that led to stalled revenues and runaway costs at the public auto insurer, which is facing a $1.3 billion loss this fiscal year.
“What we found is that costs have been soaring for several years now at ICBC. For example, the total claims costs have increased by 61 per cent over the last five years and the average cost per policy has jumped 40 per cent over the same period,” says Charles Lammam, director of fiscal studies at the Fraser Institute.
“To cover these escalating costs, ICBC would have had to raise insurance rates dramatically on British Columbians with double digit annual rate hikes. Obviously, the public would not like that, so rather than raise rates, ICBC moved money around between its different lines of business to cover the shortfall,” he tells NEWS 1130.
The report claims rate increases of 11.2 per cent in 2015, 13.6 per cent in 2016 and 20 per cent last year would have been required to offset the rising costs at ICBC, but instead basic insurance rates only rose between 4.9 per cent and 6.4 per cent over the same period.
The Fraser Institute says to cover basic insurance losses, between 2010 and 2017, ICBC transferred $1.4 billion from its profitable optional insurance business, which competes with other insurance providers, to the basic business, which has a monopoly over mandatory coverage. It adds ICBC also transferred an additional $1.2 billion to the BC government itself over the same time.
The report asserts that faced with exploding costs, the previous BC government had a choice: contain the costs, take the unpopular decision to increase rates substantially, or enact large-scale reform of the basic auto insurance system in the province.
In the end, it claims the government chose to do nothing.
“Clearly, ICBC now finds itself in an unsustainable financial position and these band-aid solutions are not going to be enough going forward,” says Lammam.
Meanwhile, today is the deadline for the public to give the provincial government some input on potential changes to ICBC.
The public consultation process was launched after Attorney General David Eby reviewed the financial status of the public insurer and described it as a “dumpster fire.”
Eby isn’t making any promises but says the goal is to make sure good drivers pay less for their coverage, and bad drivers pay more for their bad decisions behind the wheel.