Changes and reforms are coming for the financially beleaguered Insurance Corporation of British Columbia (ICBC), the provincial government announced today.
“ICBC is in real trouble, and what we need to do is get ICBC under control,” said BC Attorney General David Eby in the announcement.
The changes come in the wake of the latest report by ICBC in which it forecasted a “sizeable” and “significant” net loss by the end of its fiscal year, to the tune of $1.3 billion.
“For too long, difficult decisions have been put off and growing financial problems at ICBC hidden from the public,” he said. “The changes we’re initiating today will reduce ICBC’s claims costs by more than $1 billion every year, helping make it sustainable for decades to come.”
And while ICBC was created to “provide affordable insurance to all BC drivers, years of reckless decisions by the previous government have thrown the corporation into financial chaos,” he added.
“Today we start making the tough decisions that will stem ICBC’s losses, keep insurance affordable and provide enhanced care for people injured in automobile accidents.”
Taking effect April 1, 2019, the changes include:
- A new limit of $5,500 on pain and suffering for minor injury claims. The cost of those claims has increased 265% since 2000. British Columbia is the last province in Canada to take this kind of action.
- The first major improvements in accident benefits in 25 years, dramatically increasing the care available for anyone injured in a crash, regardless of fault. The overall medical care and recovery cost allowance will be doubled to $300,000. This change will be made retroactive to Jan. 1, 2018, so it will effectively be in place to protect injured drivers and passengers immediately. See more on this benefit below.
- An independent dispute resolution process for certain motor vehicle injury claims.
Together, said Eby, these changes will reduce the amount ICBC spends on legal fees and expenses, which have grown to consume 24% of ICBC’s budget.
“The savings from this change – when coupled with other planned initiatives – will restore ICBC to financial sustainability and finance the planned accident benefit improvements,” he furthered.
In addition, disputes over certain motor vehicle injury claims, including the classification of an injury, will be adjudicated by BC’s Civil Resolution Tribunal, an independent body that already adjudicates strata and small claims disputes in the province.
“We’re putting ICBC’s priority back where it should be: providing fair, affordable rates for British Columbians, and giving drivers peace of mind with appropriate care if they are in a collision,” Eby said.
ICBC on board with plan
ICBC board chair Joy MacPhail expressed her support for the decision.
“British Columbians can no longer afford to keep paying more and more for their auto insurance every year, and this is the decisive and immediate action which is needed to relieve the pressure on ICBC’s rates,” she said.
In his announcement on Tuesday, Eby noted that injury claims totalled $2.7 billion in 2016, – an increase of 80% in the last seven years.
The average claim paid out for minor injuries in that time, he said, “has risen from $8,200 in the year 2000 to $30,038 in 2016, an increase of 265%.”
At the same time, the average pain and suffering awards paid out for minor injuries have risen from $5,004 in 2000 to more than $16,499 in 2016. Finally, vehicle damage claims costs have increased 30% in just two years, to a total of $1.5 billion in 2016.
The changes announced by the province “make the injured customer our top priority, by redirecting payments away from legal costs into significantly enhancing the care and treatments for anyone who is injured in a crash” said MacPhail.
Eby also announced that ICBC will be consulting with customers on major revisions to the corporation’s rate structure with the goal of ensuring good drivers pay less, and bad drivers pay more.
The consultation will ensure rate structure changes are responsive to the interests of British Columbians and done with full transparency.
This plan is the result of numerous letters Eby said he has received from people with clean driving records, wondering why they are being financially penalized for the driving habits and mistakes of others.
What he’s generally heard from the public, Eby said, “is that the system is disconnected from driver behaviour to the point of it being a problem… so we want to fix that and connect the driver to the rates that people pay.”
What about privatization?
But what if the reforms don’t work and ICBC’s debt continues to grow? Could privatization of insurance be a future possibility in the province?
The short answer, Eby said, is no.
“There is a lot of conversation about the model of insurance in BC and the fact we have a public insurer; we are not the only province where that is the case,” he said, citing Saskatchewan and Manitoba.
“We see absolutely no reason why BC cannot go back to a place where we used to be, where our public insurer was providing significant benefits to British Columbians,” he said.
“It’s important to reflect on why ICBC was brought in in the first place: Many people were paying astronomical rates for insurance, people were not able to access insurance and there was a call for a public insurer.”
Eby said that when he looks at places like Ontario – which does not have a public insurer – “they have an out-of-control insurance system and I don’t think that privatization is the answer here.”
And regardless of whether people believe public or private insurance is the way to go, “I think everybody agrees that this is a reform that is long overdue and BC is the last province in Canada to make these reforms.”