By now, you’ve no doubt heard about the changes coming to British Columbia’s auto insurance system — if not from us, than across a variety of media, family, friends and co-workers.
They will indeed be significant, but not just in terms of finally helping overhaul ICBC’s insurance model.
Of all the reforms that will affect ‘Basic’ coverage (as the mandatory public auto insurance model is known), one in particular gets to the heart of the matter from a policy perspective.
It’s the idea that vehicle owners and insurance policyholders are not necessarily always responsible for crashes and motor vehicle infractions,,which ultimately affect rates and insurability. Not all drivers are good drivers, yet in today’s rating model, the vast majority receive the maximum discount available, regardless of traffic fines and at-fault accidents
The implication of this change is that insurance coverage and premiums should be associated with — and follow — all types of drivers, in order to reflect the true risk they each represent on our roads, and for a longer period of time. Meaning, all drivers responsible for accidents will pay more for a longer before their discount levels return.
It’s a premise so obvious, it’s hard to see why it doesn’t make sense. (It’s actually how vehicle insurance is rated in most other jurisdictions in North America.)
Yet, it’s not the way policy premiums have been calculated to date, and so this aspect of change to the insurance system will take some getting used to, especially for drivers who aren’t used to a new level of accountability.
Today in British Columbia, crashes involving your vehicle become your responsibility, even if you weren’t behind the wheel.
Under the current rules, anyone operating your vehicle (like an employee, or household member) or an unlisted driver such as a friend or neighbour could cause multiple crashes driving your vehicle in a single year, and still be eligible for automobile coverage on a separate vehicle, and possibly even receive the top Basic insurance discount.
That’s because the system wasn’t designed to reflect the risk of individual drivers as much as it focused on the vehicles responsible for crashes. Claims payouts have been one example of this — eligible policyholders could pay down the total cost of a claim to retain all driving discounts, and and maintain the current insurance premium. (In fact, a given premium could even go down.)
Individual driving records, and thus risk factors and cost to the system, was never taken into consideration
For policies effective September 1, 2019, when ICBC’s new Insurance Rating Model goes into full effect, the true risk and impact of all drivers will be considered in insurance rates.
So what are the practical implications of the policy shift, and new focus on drivers?
First, unless use of a particular vehicle is truly split evenly amongst all drivers, the the principal operator’s “driver factor” — their driving and claims history, driving fitness, and residency status in BC — will be the factors used to calculate 75% of the total insurance premium.
Based on years of data from ICBC claims files and police records, we now know that repeat claimants, as well as drivers with less experience or knowledge of road rules, present greater risk of crashes and unlawful behaviour on BC’s roads. So they’ll pay more for insurance.
Second, after the principal driver, every other driver of the vehicle will be required to be listed on the same insurance policy; the remaining 25% of the premium will be based on the driver posing the greatest road risk on the basis of these same factors (called the “driver factor”).
Lastly, it won’t just be household members, employees, or other occasional drivers — those using the vehicle more than 12 times in a 12-month period — who must be accounted for; even occasional drivers, no matter how infrequently they may use the vehicle, will need coverage.
Using a new add-on called “Unlisted Driver Protection”, or UDP, the risk posed by infrequent drivers (including those unknown at time of policy renewal) will be covered through payment of a nominal additional fee.
Due to the possibility of a penalty of up to $5,000 for failing to list drivers subsequently found to be behind the wheel as part of a claim, ICBC believes this will be yet another way to insert more fairness into the suite of policy changes landing on September 1.
The bottom line — drivers who cause crashes must be accountable for their actions on the road. Making this connection, and ensuring every driver’s record follows them no matter what vehicle they drive, is key to understanding the driving force behind ICBC’s year of change.
In future posts, we’ll dig deeper into other issues, like how ICBC’s new insurance model actually catches BC up to other provincial auto insurance programs, through a new, more sophisticated definition of vehicle use (and how that will make insurance even more fair).
Plus, we’ll talk about why the focus on risk mitigation, preventative measures and rate fairness is only one side of the equation — not only will injury recovery eventually take centre stage for drivers in the province, it could possibly be the secret to ICBC’s future success as a public institution.
We’re All About You. ®