With the Insurance Corporation of BC (ICBC) teetering on the edge of bankruptcy, one former government senior manager says he has a couple of ideas on how the troubled insurer can be saved.
According to Richard McCandless, a former senior executive with ICBC, the entire issue revolves around the public insurer’s willingness to spend more than it earns, and he warned that drastic action is needed if the company wants to continue operating.
“Well, it’s on a downward slope financially, and the slope is getting steeper each year,” McCandless said.
McCandless told CKNW that mounting claims costs are to blame for the ICBC’s current woes. He argues that the problem was made worse by the previous BC Liberal government keeping premiums at an artificially low rate, which led to increased deficits in recent years.
Although out-of-control claims costs are a major issue for the ICBC, it is not a problem the insurer is facing alone, he pointed out.
The NDP has accused the Liberals of mismanaging the ICBC’s money, by withdrawing $1.2 billion in “excess capital” from the company while transferring another $1.4 billion from the insurer’s optional insurance program to cover the less-profitable mandatory basic insurance side.
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McCandless likened the money to funds kept in savings. Using that analogy, he explained that even if the funds were still there, the ICBC would burn through it quickly due to its precarious deficit situation.
“You can stand by the ocean and order the tide not to come in… but it’s coming in,” he said.
There is no easy solution for the ICBC’s current predicament, McCandless admitted.
“The problem with ICBC is that their revenues, mainly from premiums, aren’t keeping up with their cost increases. You’ve either got to increase the revenue — we’re back to rates again — or reduce the expenditures,” he told CKNW.
If the insurer planned to go through with its proposed 30% rate hike (as suggested in a leaked E&Y report), McCandless said that still would not be enough.
Alternatively, he suggests that BC will have to take notes from other jurisdictions – Saskatchewan and Manitoba, in particular. Both provinces have a mandatory public insurer and offer low rates. But both have optional no-fault insurance, which could be just the thing that ICBC needs to put a stop to its spiking injury costs.
“Other provinces have also capped the pain and suffering for minor damages,” he said, referring to Ontario’s $30,000 deductible and Alberta’s $5,000 cap on minor claims like whiplash.
Another solution McCandless proposed was that the province could look into getting the ICBC’s current costs written off the books.
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