But even that rate hike won’t put ICBC in the black. That would require a 20% hike, said B.C. Attorney General David Eby.
In what is shaping up to be a fiscal triage of a Crown corporation that is bleeding red ink, Eby announced measures Tuesday, Sept. 5 aimed at addressing a financial “crisis” with B.C. public insurer.
The immediate measures include car insurance hikes, increased activation of red-light cameras, a pilot project that will use technology to restrict the use of mobile phones by drivers, and an operational audit of ICBC.
But Eby said ICBC is in such dire financial shape, that it will take years to get the Crown corporation back in financial balance.
“I’m assuming responsibility for getting ICBC back on the right track,” Eby vowed. “We will fix this problem.”
The insurance premium hikes announced Tuesday include a 6.4% increase to the basic insurance rates, plus increases to the optional rates that start at 3.1% in the first quarter, with further quarterly increases of 2.2% to a maximum of 9.6%.
Generally, the blended rate works out to an 8% increase for the average B.C. driver.
“We need to take drastic action to fix ICBC’s devastating current financial situation,” Eby said. “But B.C. drivers should not be made to pay for the mismanagement of this critically important public asset.”
ICBC is facing a shortfall of $454 million in the current fiscal year, Eby said. The premium hikes being forwarded by ICBC to the BC Utilities Commission and supported by the NDP government will not come close to covering that funding shortfall.
“Last year alone, ICBC lost more than half a billion dollars in just 12 months,” Eby said. “That loss is the largest loss in ICBC’s history. ICBC’s annual losses, if no changes are made, are projected to increase to almost $1 billion in the next three years if we don’t take action now.”
An EY report commissioned by the previous government showed that the revenue ICBC brings in from car insurance does not come close to covering the costs of accident claims. But Eby said that recent spike in claims costs appears to have been artificially created.
In a cost-cutting exercise in 2012, ICBC started deferring the payout of “legitimate claims,” Eby said.
“This meant that ICBC’s claims costs were reduced in the short-term, but in the long-term there was a significant and growing backlog of claims that now has come home to roost and must be paid. This backlog of unpaid claims is part of the explanation of a sudden spike in claims costs.”
The previous Liberal government also added to ICBC’s financial burden by using it “like an ATM machine,” Eby said. Between 2010 and 2016, ICBC was required to pay the provincial government $1.2 billion in dividends.
Asked if his government would implement a law that would forbid the current or future governments from similarly raiding ICBC reserves, if it ever starts making money again, Eby suggested it would not be necessary because ICBC no longer has any reserves for the government to raid.
"The cupboard is bare," he said. "There is no more money for any government to take from ICBC. That option is over. In fact, we need to be looking at how we are going to repay some of that capital because there are rules currently in place in British Columbia around the minimum amount of capital that ICBC is required to have."
Eby said British Columbians were “deceived” by the previous Liberal government, prior to the election, on ICBC’s finances. The 2017 budget, for example, projected next year’s losses for ICBC to be just $25 million.
“The revised projection for next year’s losses…is almost half a billion dollars,” Eby said. “That’s a loss that is 18 times higher than projected in the Budget 2017 documents.”
Even with the increases being implemented this year, ICBC’s losses for next year is still projected to be $360 million.
Eby reiterated that photo radar, no-fault insurance or privatizing ICBC are not part of the NDP government’s long-term plan to get ICBC back in the black.
However, the government does plan to increase the use of red-light cameras. Currently, they operate only six hours per day, during peak hours. They will expanded first to operate 12 hours a day, and eventually to 24 hours per day.
Eby also put ICBC on notice that it has to get its own house in order by ordering an audit of ICBC’s operations and practices.
“We are not satisfied with the lack of detail behind the alarming trends identified in the Ernst and Young report, so we are doing a full internal audit,” Eby said.
That audit will include a random sample of 100 claims, a full review of ICBC’s salvage and payment processes and settlement and litigation strategies, as well as a review of the claims backlog.
Green Party Leader Andrew Weaver said dismissing no-fault insurance out-of-hand is a mistake, and urged the NDP to act on the recommendations in the EY report, rather than commission another study.
“We already have an evidence-based, taxpayer-funded report with proposals for reforms,” Weaver said in a written statement. “While I am glad that the government has adopted the Ernst and Young report’s recommendation to turn on red light cameras, with ICBC in such a perilous financial situation, the time to implement changes is now.
“Furthermore, it is essential that we not take any options that would reduce rates off the table. The current system is overly litigious and adversarial. Payouts for minor bodily injuries have increased 365% since 2000. Every other public insurance system in Canada either limits certain types of claims or operates as a no-fault model. Option 4 in the Ernst and Young report projected that such a system would reduce vehicle premiums by $630, or 13.5%, by 2019."
Eby said he has also ordered ICBC to introduce a pilot project that will use available technology that will prevent people from using mobile phones while driving.
“Our aim is to restrict high-risk drivers – like new drivers, or repeat distracted driving offenders – from using cell phones through technological interventions.”
