June 2005 News Releases
Road Sense for summer weekends
— June 30
$100m
in rate reductions to customers purchasing ICBC optional insurance -
June 21
ICBC proposes no increase to basic insurance
rates for 2006 — June 7
Backgrounder: Basic and Optional insurance—How
they differ
Road Sense for summer weekends- June 30
Many people will be in the mood to celebrate this Canada Day long weekend. To help keep British Columbians safe on the road, ICBC and the provincial government are reminding drivers to slow down, keep their distance and make sure they never mix alcohol and driving.
“Unsafe speed, aggressive driving and impaired driving cause the majority of fatal crashes in B.C.,” said Solicitor General John Les. “Police across the province will be actively targeting unsafe drivers this holiday weekend.”
“With more vehicles on the road during long weekend, drivers need to use extra caution,” said Laurie Baker, ICBC road safety manager. “You put yourself and others in danger if you choose to drive aggressively or drink and drive.”
Other tips for long weekend driving include:
- Allow plenty of time to reach your destination, and plan your route to avoid traffic congestion. If you're pressed for time, you may be tempted to drive more aggressively.
- Slow down and leave plenty of space between your vehicle and the vehicle in front.
- Be on the look-out for motorcycles, bicycles and pedestrians, as well as other cars.
- Make sure to build frequent rest and stretch breaks into your schedule. Avoid travel between midnight and 6 a.m., when darkness and fatigue can lull the driver to sleep.
- Ensure your vehicle is ready for summer heat and that all the tires, including the spare, are in good condition.
For more road safety tips and other information, go to www.icbc.com.
If you are involved in a crash and need to file a claim, ICBC's Dial-A-Claim service is open 24 hours a day, including holidays, at 604-520-8222 or 1-800-910-4222. You can also file your claim online at www.icbc.com.
For more information contact:
Doug Henderson
604-982-1332
ICBC proposes no increase to basic insurance rates for 2006 — June 7
Optional insurance rates to decrease later in June
ICBC is proposing no increase in basic insurance rates for 2006. If approved by the BC Utilities Commission (BCUC), this would mark three straight years with virtually no change to basic insurance rates.
ICBC's formal filing with BCUC for basic insurance rates will occur this summer. Optional insurance rate reductions will be announced before the end of June.
Basic insurance bears more than 75 per cent of the cost of injury claims. In 2004 and so far in 2005, the average cost of an injury claim has been rising by more than five per cent on an annual basis. ICBC's forecasts call for the average cost to rise by 3.5 per cent in 2006. However, safe driving has led to fewer claims which has helped counteract the increase in the average cost.
“Managing our controllable costs and investing in road safety have helped us continue to keep basic insurance rates low and stable,” said Paul Taylor, ICBC's President and CEO. “A great deal of credit must also go to our customers, whose safe driving has led to fewer claims.”
ICBC's 2004 annual report reveals that basic insurance contributed a small portion of the company's 2004 net income, despite accounting for a larger portion of ICBC's business.
“Our proposal to BCUC is based on forecasts of revenues, claims and other costs,” said Donnie Wing, Senior Vice President, Insurance, Marketing and Underwriting. “Our forecasts leave us confident we can hold the line on basic insurance rates despite cost pressures.”
ICBC operates as an integrated business, which benefits customers through economies of scale, improved customer service and convenience. After a thorough review, a recent BCUC decision confirmed that virtually all of ICBC's costs were properly allocated between basic and optional insurance, confirming there is no cross-subsidization between the two lines of business.
Basic insurance rates are set by BCUC while optional insurance rates are set independently by ICBC's Board of Directors in the context of a competitive marketplace.
For more information contact:
Doug Henderson
604-982-1332
Backgrounder: Basic and Optional Insurance—How they differ
1. ICBC's basic and optional insurance products
- ICBC is the sole provider of basic insurance in BC. ICBC competes with other insurers for customers' business for optional insurance products.
Basic
- Basic insurance is the minimum insurance coverage
legally required to get a vehicle on the road. Basic insurance:
- Provides the minimal required level of coverage against claims from third parties for injury or other losses.
- Protects those involved in a crash, whether they are at fault or not, by providing specified medical, wage replacement and other benefits.
- Basic insurance bears more than 75 per cent of the cost of injury claims.
Optional
- Optional insurance protects the registered owner
and/or operator of the vehicle insured and their assets, including:
- Providing coverage to the registered owner for damage to or theft of the vehicle.
- Additional protection for the registered owner and operator from third party liability.
- Less than a quarter of the cost of injury claims is borne by optional insurance.
Coverages offered under basic and optional insurance:
ICBC's Basic and Optional Insurance Products |
|
| Basic Coverage The minimum amount of insurance any vehicle must carry to legally operate in BC:
|
Optional Coverage Additional coverage to meet customer needs: Vehicle
Equipment
Individual
|
2. How basic and optional insurance rates are set
Basic Insurance
- In 2002, through the core review process, government:
- Affirmed ICBC's mandate to be the sole provider of basic insurance.
- Confirmed that basic insurance would be provided without discrimination on the grounds of age, gender or marital status.
- Appointed the British Columbia Utilities Commission (BCUC) as the regulator of basic insurance rates and service, replacing cabinet as the body that sets basic rates.
- Under this public policy framework, ICBC manages
basic insurance:
- To ensure affordability and accessibility.
- To ensure low and stable rates.
- To make steady progress in achieving its capital target.
The role of BCUC
- BCUC ensures that:
- ICBC's basic insurance rates are just and reasonable.
- ICBC's costs are reasonable in light of the products and services provided.
- Basic and optional insurance costs and revenues are properly allocated in order to guarantee no subsidization between the two.
- BCUC is an independent, quasi-judicial body, ensuring the depoliticization of rate setting.
- The BCUC process is open and transparent.
- To have basic insurance rates approved:
- ICBC submits a proposal by filing with BCUC.
- BCUC holds a public hearing process.
- BCUC renders its decision.
- The process is designed to give ICBC's customers and the public at large the assurance that their interests have been properly represented in deciding basic insurance rates.
Optional Insurance
- ICBC competes with other insurers to provide customers with optional insurance coverage.
Levelling the playing field
- Government has introduced a number of measures designed to level the playing field and increase competition between ICBC and its competitors.
- The goals of these changes are customer choice and reduced premiums.
How ICBC sets optional insurance rates
- The ICBC Board of Directors sets rates for optional products, based upon the forecasted risk represented by customers.
- ICBC's goals are to keep optional insurance rates low and stable and to avoid the kind of rate shock seen in other parts of the country in the early 2000s.
- Optional rates used to be reviewed by cabinet. Since 2002, ICBC has set its optional rates independently, as do its competitors.
Upcoming optional reductions
- ICBC will be providing optional rate reductions to its better-risk customers later in June 2005.
- The majority of customers will see reductions. Some will see significant reductions.
3. Financial details: basic versus optional
Despite accounting for 56 per cent of ICBC's earned premium revenue, basic insurance only generates 13 per cent of total net income.
($ Thousands) |
Basic |
Optional |
| Premiums written | 1,711,703 | 1,377,632 |
| Premiums earned | 1,692,314 | 1,334,167 |
| Claims and operating costs | 1,671,874 | 876,338 |
| Prior years adjustments | (26,505) | (19,758) |
| Net claims incurred and related costs | 1,645,369 | 856,580 |
| Operating expenses, premium taxes and commissions | 152,693 | 274,898 |
| 1,798,062 | 1,131,478 | |
| Underwriting (loss) income | (105,748) | 202,689 |
| Investment income | 260,254 | 135,065 |
| Insurance operations income | 154,506 | 337,754 |
| Non-insurance costs | 105,346 | - |
| Income before the under noted | 49,160 | 337,754 |
| Gain on sale of property and equipment | 1,474 | 907 |
| Net income | 50,634 | 338,661 |
