With one month to go before the effective launch of the province’s new auto insurance system, it’s worth reflecting on how we got here.
Understanding the reasons for the can help us all feel a little better about some of the changes we’ll experience come renewal time, especially considering how auto insurance works in other provinces.
Simply put, ICBC had been losing money for many years, and no amount of change to the operations or administration of the organization seemed to get to the root of the problem, let alone bring about significant change to the balance sheet.
As can often be the case in insurance, the true problems lay with how the products worked – the financial rationale on which the actual policies themselves were written had become outdated.
Fixing the insurance itself meant at least three things: changing what risks the insurance would cover, changing the premiums that could be charged to the consumer, and changing how different types of claims would be managed.
The only problem was ICBC can’t actually change much about the coverage. Even as the ‘pool’ of insureds grew with population, the types and frequency of risks hadn’t changed much — the same coverage was largely still needed.
More importantly, as a Crown corporation mandated to provide basic insurance to all drivers, ICBC couldn’t cut out the highest risk drivers just because of the financial risk they posed. They knew they had a “numbers problem”.
And so, in addition to changes intended to reduce claims-related losses, ICBC went for the big change — increased premium revenue.
Here’s where it matters that we’re in BC. Most other provinces don’t have a public insurer, one focused not only on providing insurance to all, but doing so with a fair approach to rates.
In Alberta, Ontario, and other provinces with private auto insurance markets, regulation only goes so far in protecting consumers from predatory rate increases. In many cases, insurance companies use ‘big data’ to identify high risk drivers and apply individual rate increases that are far beyond those allowed by the regulators in aggregate. And in many cases, private insurers can choose to not insure certain individuals to protect themselves against a future claim; some companies have gotten out of the auto insurance market altogether in order to protect their bottom line.
This, however, is what tamps down competition, ultimately leading to higher prices. It’s happening in these other provinces — many consumers are seeing premium increases of 15-20%. Even if it’s not a result of predatory or non-competitive practices, one can expect that these corporations are also dealing with the unpredictable nature of the insurance sector – risk and loss can strike quickly, and few companies have enough foresight to rip the bandaid first, and fix the underlying problems with the insurance itself.
British Columbians, meanwhile, benefit from a public mandate, delivered by an organization with access to the same tools used by the private sector to ‘slice and dice’ consumer data, but in this case with the intention of making the system viable rather than profitable, at the same time as making it fairer for all insureds.
Switching to the new driver-based rating approach, combined with analysis of years of licensing, infraction, and claims data, has resulted in a greater ability to identify high risk drivers. ICBC has created an entire new series of rate classes, enabling it to consider all this information and fairly and accurately (and also — perhaps just as important — quickly), in order to determine the premium to charge any given driver based on the risk they represent.
Based on this approach, if you’re a good driver and you still experience a rate increase, you can be assured it’s less of an increase than if you had a lengthy claims history.
Compared to other years when you paid less, it may not seem right. And in the first year of this new system, ICBC admits that it may not be perfect; there’s no way to know if the new system and rate classes will still generate enough revenue, or that claims-related losses will go down enough.
Perhaps they’re concerned they may do too good a job of recovering financially — a different kind of public perception problem. They certainly don’t need bad press during a time of such enormous change, when many consumers may feel an extra pinch come renewal time.
That said, we believe that when the new ICBC system is compared to other public and private plans offered elsewhere in Canada, that it’s the best – and fairest – system available.
Keep that in mind when you talk to your broker, and learn about how you may be affected by the changes to basic auto insurance.
Need a Quote? Call AllWest Insurance at 604.736-3925, and talk to one of our brokers.
We can explain how the ICBC changes will affect your renewal premiums, provide a quote over the phone, and deliver your renewal papers to your front door for free!
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