So much for the savings associated with public auto insurance.
Brokers in British Columbia may need to prepare now, as they may soon have some angry customers on their hands.
The Insurance Corporation of British Columbia (ICBC) is not required to submit an application to modify basic insurance rates until October 30, but it has cautioned drivers for the worst.
"If we were to file our full application today, we would need to ask for a 6.7% increase in basic insurance rates, in large part due to the unexpected and rapid escalation in the number of injury claims being reported to us in recent months," said Mark Blucher, president and CEO of ICBC.
Under provincial regulations, the ICBC can only alter rates within 1.5% of the previous year’s adjustment. Since ICBC applied for 5.2% in 2014, 6.7% is the maximum it can request this year.
While a spokesperson with the ICBC says that the organization hopes to use these next two months to find “mitigating solutions,” it has several obstacles to overcome before it can do so.
Not only have injury claims expanded by 10% in the past year despite the number of collisions remaining constant, but their associated costs have increased as well. Injury claim costs amounted to $1.40 billion in 2008, but have since skyrocketed 64% to $2.29 billion.
“If we look at the uptick in the past 12 months, there are 7,000 more injury claims compared to the preceding 12 months,” said Adam Grossman, senior media relations advisor, ICBC. “At the same time, costs have been increasing every year, which creates dual pressure on insurance rates.”
ICBC points to soft tissue injury in particular as a main driver behind this upsurge, although it contends that “more exaggerated and more fraudulent claims” are behind it as well.
Grossman also points to external factors that have created an unfavorable auto insurance market, including the Bank of Canada’s recent decision to cut interest rates.
“Our investment portfolio helps to keep rates down for customers, but lowered interest rates have a negative impact on investment income since customers’ premiums are invested at a lower market interest rate,” he said.
Although Grossman has yet to receive widespread feedback about the potential rate hike, he hopes that the ICBC’s transparency on the matter will put consumers’ minds at ease.
“What I hope resonates with people is that this is a very complex issue, and we’re certainly under substantial pressure, which we’ve backed up with numbers,” he said. “We have the same goal as the government, which is to get rates lower than 6.7%, and we’re confident that in the next two months we can get below it.”
