ICBC makes changes to basic and optional rates
Average impact of less than a dollar a month for vast majority of customers
August 30, 2013
ICBC will file a basic insurance rate application with the British Columbia Utilities Commission (BCUC) today. If the application is approved, the average impact on the vast majority of customers will be less than a dollar a month when combined with changes to ICBC’s optional insurance rates.
The basic insurance rate application will ask BCUC to approve a 4.9 per cent increase to basic insurance rates, effective November 1 on an interim basis. BCUC’s full review of the basic insurance rate application will likely not be complete until a later date.
ICBC will also be lowering its optional rates by 4 per cent, also effective November 1, which will lessen the impact on customers. About 80 per cent of customers – those who purchase their full personal vehicle insurance coverage with ICBC – will see a combined average increase of about $11 a year or 92¢ per month.
The pressure on basic insurance rates is coming from bodily injury claims costs, which cover payouts for pain and suffering, future care and loss of wages. ICBC’s bodily injury claims costs totalled $1.9 billion in 2012 – up by more than $165 million from the previous year and more than $400 million from just five years ago. The majority of these payments are made under ICBC’s basic insurance coverage.
“For the last few years we’ve seen our injury claims costs increase substantially which has put a great deal of pressure on basic insurance rates,” said Mark Blucher, ICBC’s interim president and CEO. “While we need to file for a rate change, we’re very aware of the daily financial pressures our customers are facing so we have done everything we can to keep this increase to a minimum.”
The rising number and cost of injury claims is commonly the biggest single factor driving rates for all auto insurers across North America and beyond. While many external factors are driving these increases, ICBC is continuing to look for ways to help stem the current sharp upward trend.
“We believe the most effective way to address the issue is to focus on helping our customers get access to medical treatments and we’re making several improvements to help achieve this,” said Blucher. “We’re also continuing to invest in road safety programs to help make our roads safer and to prevent crashes from happening in the first place.”
Despite the fact that ICBC’s administrative costs have always been low compared to the industry average, there have also been a number of changes in recent months to aggressively reduce these costs even further. Most prominently, in late 2012, ICBC reduced its workforce by more than 260 positions – most of which came from management ranks.
“We don’t think it would be right to be asking our customers for even a single dollar more per year if we hadn’t already done what we could to cut back on our own costs,” said Blucher. “With our staffing reductions and a heightened focus on cost efficiencies throughout the company, we have reduced our operating budget by $50 million.”
ICBC’s prudent management of administrative costs, along with the continued decline in auto crime in B.C., are both playing a role in helping to reduce optional insurance rates.
Beyond the need for a rate change in 2013, ICBC has implemented a new framework to help prevent year-to-year volatility in insurance rates. Going forward, any changes to basic insurance rates will be limited to within plus-or-minus 1.5 percentage points of the prior year’s rate change.
“We know our customers’ main concern is in how much they pay for their insurance and we hope this new approach to setting our rates will help make our rates more predictable,” said Blucher. “Without this kind of forward-looking framework, we would be required to apply for a higher rate increase this year.”