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Rate pressures

The significant external pressures on ICBC’s insurance rates continued to escalate in 2016.

Replicating trends across much of North America, the rapid increase in the number of crashes on B.C. roads continued in 2016, leading to a subsequent increase in the number of vehicle damage and injury claims being reported to ICBC, compounded by higher vehicle repair and injury claims costs. These pressures, which necessitated an increase in basic insurance rates last year, show no signs of easing.

ICBC 2016 claims data: Continued increase in crashes, claims and costs

More crashes

 

More injury and vehicle damage claims

 

Increase in injury claims costs

 

Increase in vehicle damage claims costs

 

Injury claim settlement trends

 

What ICBC is doing

ICBC’s current rates framework limits subsequent rate changes to within 1.5 percentage points of the prior year’s rate change and the current ICBC Service Plan forecasts a 4.9 per cent increase in basic insurance rates for each of the next two years. However, government and ICBC are working on various initiatives to lower those forecasts by alleviating the escalating pressures on auto insurance rates in British Columbia:

 

  • An independent third-party review to help keep rates affordable: Government has directed ICBC’s board of directors to commission an independent review to look at a range of options and make recommendations to keep insurance rates affordable and align future rate increases with inflation. The review will look at everything from underlying trends to opportunities for policy or operational changes which have proven potential to reduce costs and pressures on rates.

  • Continuing the fight against distracted driving: Distracted driving is now responsible for approximately one quarter of all fatal crashes in B.C. and that’s why government, police and ICBC last week announced a significant enforcement crackdown on distracted driving, supported by a new public awareness campaign.

  • Changes to increase the fairness of basic insurance rates: ICBC is making changes to increase the accountability of drivers who cause crashes by changing how much an at-fault crash affects their basic insurance rates, helping to alleviate the pressure on the rates of those customers who don’t cause crashes. Going forward, drivers who cause multiple at-fault crashes will lose their safe driving discounts faster than they do today.

  • Stepping up efforts to combat fraud: With growing concerns over exaggerated and fraudulent claims, ICBC completed close to 10,000 investigations into potential fraud in 2016 while also introducing a new high-tech analytics tool which is helping to identify and target fraudulent activity early in the claims process. ICBC expects its fraud detection and enforcement activities to reduce basic insurance claims costs by $44 million a year by 2019 – savings which will directly help to mitigate the pressure on insurance rates.

  • Doubling the premiums of luxury vehicles: Owners of luxury vehicles valued at more than $150,000 now pay double for their basic premiums – a move that ensures the insurance coverage for these high-value vehicles is not being subsidized by the average customer.

  • A business transformation with major savings: ICBC has now completed its major, multi-year business transformation program which has modernized its business – including a new claims-handling and insurance sales systems – all paid for through optional capital, and with forecasted savings of approximately $90 million every year.

  • Government-directed transfers and no optional dividend: Government has directed ICBC to transfer hundreds of millions of income and capital from the full competitive and profitable optional side of the business to the basic side to help alleviate the increasing pressure on basic rates. Government has also chosen to forgo an optional capital dividend for each of the three fiscal years: 2016/17, 2017/18 and 2018/19.

  • Increasing front-line customer service: ICBC’s addressed the challenge of the increasing number of injury claims being reported head-on by hiring approximately 260 claims frontline staff in 2016 with a further 80 to follow this year. This is in addition to improving customers’ access to benefits, including access to the medical treatments they need immediately after they report their claim.

  • Reducing management numbers and compensation: ICBC’s executive team has decreased from 11 members in 2012 to just eight today, along with significant other staffing and compensation cuts from its management group. In 2016, total executive compensation was 48 per cent lower than it was in 2011, while ICBC also saw significant decreases in those earning more than $100,000.