Days after the Insurance Corporation of British Columbia (ICBC) released the results of its quarterly report, the Insurance Bureau of Canada (IBC) issued its own release commenting on the insurer’s precarious financial situation.
ICBC projected that its annual internal operating expenses will grow to more than $1 billion next year. IBC pointed out that this is an increase of over 25% since 2018 – the year when ICBC was first called a “financial dumpster fire.” ICBC’s operating expenses support employee salaries, benefits and the insurer’s other costs.
For every dollar collected in premiums by ICBC last year (including commissions and premium taxes), 34 cents went to its operating expenses, IBC noted citing the insurer’s financials. This works out to $407 per driver on average. But IBC also cited data from the General Insurance Statistical Agency (GISA), which found that private auto insurers report operating expenses averaging 26 cents per premium dollar.
IBC also pointed out that the growth in ICBC’s operating expenses is alarming given the insurer’s projections earlier this week that it is set to lose $298 million this year.
A lower expense ratio would mean less of customers’ premiums are used for operating expenses, IBC stresses. Because of this, the bureau believes that drivers in BC could benefit from more savings if ICBC was open to the idea of competition with private insurers.
"ICBC's significant financial challenges seem to be repeating themselves, yet it appears the monopoly insurer has not looked under the hood to find cost savings they could pass on to drivers," said IBC Pacific and Western vice president Aaron Sutherland. "ICBC's internal costs have grown and British Columbians are paying more to support its operations as a result. With its operating expenses far exceeding the private sector average, drivers could find significant savings if given more choice and the ability to shop around for their coverage."
IBC additionally explained that private insurers use an operating expense ratio that compares their total operating expenses – which includes internal costs, premium taxes and commissions – to their total premium volume. By comparison, ICBC excludes premium taxes and commissions when projecting its own expense ratio.
