Among the many changes to BC’s auto insurance system introduced by the province over the past year is coverage for occasional drivers who don’t meet the minimum threshold to be listed on policies.
Unlisted Driver Protection, or UDP, was created for anyone driving a vehicle up to 12 times per year — frequent enough to be accounted for in terms of risk, but infrequent enough that naming them on the policy isn’t necessarily justifiable, based on the unpredictability of use.
The plan was for policyholders to pay an additional $50 at renewal time, and UDP would kick in, covering the risk of a crash happening “that one time” you loaned your vehicle to your friend or neighbour.
However, following further review by the Attorney General, the BC Utilities Commission, and ICBC, earlier this month, the government announced some changes to UDP, as well as other aspects of the new insurance system.
Most prominently, the government waived the $50 premium for UDP, while still providing coverage for unlisted drivers up to and including a first crash.
The announcement included an acknowledgement that not only is unlisted driver protection a new concept, but so is listing other drivers on a policy. (The latter is perhaps the biggest change to land this year).
The Province suggested that waiving the $50 UDP premium will help the overall transition, and likely this is true. Eliminating this extra cost for policyholders could help spark some conversations between policyholder and insurance broker at renewal time about who is (and is not) a secondary driver, and this in turn could contribute to more people being covered by UDP across the province.
And while that in itself would be a big win for ICBC in this year of change, it also seems, on its face, counterintuitive.
Free insurance seems to run counter to this new age of driver accountability and fiscal responsibility, especially if, as a result, it means ICBC is absorbing more driver risk.
That being said, the costs of ‘first-time’ UDP-related claims are actually quite small when considered on a proportional basis, compared to occasional, unlisted drivers’ share of vehicle use overall.
No doubt ICBC’s actuaries have looked at the past few decades of province-wide crash data and determined that the actual financial impact of absorbing these claims costs will be more than made up for by their low numbers, as well as other changes made to the rating system overall.
Still, public perception could indeed be a problem. Case in point — use of the term “one free crash” in the news coverage of this tweak. It’s not what ICBC is saying, nor the intent.
Instead, there’s a more obvious upside to first crash forgiveness — the immediate opting-in to this coverage by the majority of British Columbians who need it.
This equates to ‘grandfathering in’ drivers to UDP when many might otherwise have opted not to pay the $50, even if they were prime candidates for such coverage in the first place.
Only when there’s a crash by an unlisted driver will the policyholder pay a $50 premium at time of renewal, and every year thereafter that they choose this coverage. (Plus, the cost for this protection will rise if unlisted drivers continue to cause crashes.)
And so, despite the perception associated with “one free crash”, unlisted drivers will actually contribute to their share of risk within the overall pool of insureds in BC.
Either way, the bottom line is that as of September 1, 2019, unlisted drivers will be able to occasionally use someone else’s vehicle at no immediate cost to the principle owner.
Next post, we’ll discuss two other auto insurance ‘tweaks’ that announced by the province in early May — who will qualify as a low-risk driver on a policy, and the new limitation period for repaying previous insurance claims.