A leaked Ernst & Young (EY) report suggests that BC could see its auto insurance rates increase by nearly 30% in the next two years if the government fails to change the Insurance Corporation of British Columbia’s (ICBC) basic insurance system.
EY’s report concluded that the ICBC is suffering from unsustainable financial pressures and that the provincial government needs to step in to save the failing insurer.
Although ICBC’s premiums are some of the highest in the country, “they are not high enough to cover the true cost of paying claims,” the report noted.
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“More accidents are occurring on BC’s roads, and the number and average settlement of claims are increasing. Only recent government intervention has protected B.C. drivers from the currently required 15-20% price increases. This rate protection has eroded ICBC’s financial situation to a point where it is not sustainable.”
The report warned that subsidizing basic rates with dwindling optional coverage cash is “not a sustainable solution.”
According to the report, the gap between basic premium revenues and rising claims costs is $560 million; the shortfall will hit $1.1 billion by 2019 if it is not addressed.
Ultimately, the report called for drastic measures to help the ailing insurer – measures include putting a cap on payouts for pain and suffering for minor injuries, re-implementing photo radar, modifying red-light cameras so they can also catch speeding motorists, improving police efforts to catch distracted and impaired drivers, and charging high-risk drivers more for insurance.
The report was commissioned by ICBC’s board during the previous Liberal-led government, but it was not made public. Vancouver Sun managed to acquire a leaked copy of the report.
With the NDP government installed since Tuesday, the new administration now has to address the ICBC’s ongoing issues. Some officials have taken the opportunity to criticize the previous administration for poorly handling the situation.
“The report is a damning indictment of the BC Liberals’ management of ICBC over the last 16 years,” NDP Attorney General David Eby said in a statement Friday. “They’ve left a real mess for us to fix.”
Liberals have defended their actions, saying they did what they had to do to improve the situation. They also warned about the NDP possibly reinstating photo radar measures or adopting a no-fault insurance scheme.
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