The Insurance Corporation of B.C. says it must raise it rates because it is paying out more in claims than it brings in from basic auto insurance premiums. It’s asking for a 5.2 per cent increase, following an increase of the same amount in 2013 and a hike of 11.2 per cent in 2012.
But if the B.C. Liberal government would keep its hands off ICBC’s cash flow, this raise would not be necessary, or would be much smaller. The government should allow the Crown insurance corporation to operate as it was intended — to provide fair and affordable auto insurance, not as a revenue-generator for the government.
Granted, the money siphoned from ICBC is used for purposes that ostensibly benefit all British Columbians, but it means drivers pay an unfair share of the costs. The B.C. Liberals like to brag about not raising taxes, but the premium increase is just a whitewashed tax hike. Also, we pay a 4.4 per cent tax to the province on those premiums — in effect, a tax on a tax.
Before ICBC was created in 1973, British Columbia was an insurance jungle.
Justice R.A.B. Wootton, appointed by Social Credit premier W.A.C. Bennett to study the practices of the 175 insurance companies operating in B.C., found that competition was limited. He noted in his 1968 report that there was no compulsory insurance to cover cyclists, pedestrians or passengers in motor vehicles. The lack of compulsory insurance meant innocent victims could be devastated financially. Rates were seen as discriminatory, as they were based on age, sex, marital status, area of residence and other social criteria.
Leading up to the 1972 election, Dave Barrett and the NDP campaigned on a promise of inexpensive public auto insurance. During that election, Bennett warned that the “socialist hordes are at the gate.” But the prospect of lower and consistent insurance premiums helped propel Barrett and his party to victory.
Money flows into insurance companies in the form of premiums and flows out as payment for claims. In the interval between the two transactions, the money is invested. Profits result when the money from premiums and investments exceeds operating expenses and claims payments.
“A private insurer needs to provide a reasonable return to investors, which is typically generated from its investment portfolio, whereas a public insurer can use this income to pay claims and lower rates for its policyholders or to add to surplus capital to prevent future rate shock,” said the B.C. branch of the Consumers’ Association of Canada in a 2013 paper entitled A Consumers’ Perspective to Fixing ICBC .
ICBC is profitable, thanks to returns on investments and profits from optional insurance.
But since taking power in 2001, the B.C. Liberals have consistently helped themselves to the public insurer’s profits. “A public insurer built on creating public value for the motoring public has turned into a cash cow for the province,” says the CAC report.
The money the provincial government has siphoned off — amounting to hundreds of millions of dollars — would more than cover the rate increases.
“ICBC as a Crown corporation and as a public insurer was built on the premise of fair rates and service for all British Columbians, regardless of their socio-economic status or their geographic location,” says the consumers’ association report.
“The B.C. Liberals have rigged the system so that the province’s share of the benefits from public auto insurance comes at the expense of one group of its citizens — ICBC policyholders.”
If the province were to stop taking its “dividends” from ICBC, the money would have to come from somewhere else, and that would mean raising taxes. But we’re already paying those taxes as part of higher insurance premiums.
Let’s stop pretending otherwise.
