News that the Insurance Corp. of B.C. wants a 6.7 per cent lift in basic car-insurance rates has caused a predictable uproar. Todd Stone, the minister responsible for ICBC, called the proposed increase “unacceptable.” Letters to our editorial page have been almost uniformly hostile.
None of this, of course, can have surprised the corporation. We’ve seen this before. The company shoots high in its opening bid, the B.C. Utilities Commission pegs the increase down and we have no choice but to live with whatever emerges.
Yet ICBC’s justification for a rate increase raises more questions than it answers.
The company blames a rapid escalation in injury claims, and there is no doubt that has happened. Over the past four years, vehicle-related injury claims are up 16 per cent.
But this flies in the face of everything we know about road safety. Between 2007 and 2013, the number of annual traffic fatalities in B.C. fell from 411 to 269, a remarkable 35 per cent drop. Vehicle crashes are also down, albeit by a smaller margin.
The reason for this turnaround is likely a combination of tougher penalties for road infractions, along with the province’s aggressive anti-drunk-driving campaign. In 2010, 9,276 prohibitions were issued for alcohol- or drug-related offences. By 2014, that figure was up to 26,705.
So how can it be, with fewer accidents and a significant reduction in mortalities, that injury claims have grown substantially?
Other provinces have reported a similar trend, and insurance fraud is considered the most likely explanation.
Of the claims ICBC processes each year, four out of five allege soft-tissue damage. There is clearly an opportunity here for fraud, because these claims are notoriously hard to disprove.
Unlike most other wounds, soft-tissue injuries often don’t show up in diagnostic scans, such as CT or MRI images. It can cost the company more to challenge the claimant than to settle out of court.
The question is what, if anything, can be done? During the 1990s, ICBC experienced an even more dramatic explosion in claim costs. Basic premiums climbed 150 per cent in 10 years.
The corporation’s preferred solution was no-fault insurance, the idea being to take legal costs out of the equation and focus on fair compensation for injury victims. But the public would have none of it. The scheme offended people’s basic sense of fairness — that drivers responsible for a crash should be held at fault.
So the provincial government chose an alternate route, and began the crackdown on careless driving that continues to this day. Fines were in some cases doubled, new infractions were introduced and licensing programs for young drivers were both lengthened and made tougher.
And for the better part of two decades, it worked. Since the mid-1990s, ICBC has recorded profits over $4 billion.
But nothing lasts forever. Most of the juice that could be squeezed out of tougher regulations has already been squeezed.
The company employs a range of techniques to catch scam artists. But as the numbers show, this appears to be a losing battle.
The real solution lies with the provincial government. Every year, the Finance Ministry raids ICBC’s coffers to fatten its revenues. Since 2013, more than $1 billion has been siphoned off for this purpose.
Now, it’s perfectly reasonable that Crown corporations should contribute to the government’s bottom line. That’s one reason we retain them.
But when those contributions bleed the company dry and motorists end up paying for it, the policy has been taken too far.
There should be no rate increase this year. ICBC has challenges enough, without the albatross of government round its neck.