The Insurance Corp. of B.C. needs to return to its original purpose of serving the people, not politicians. While government oversight of the corporation is necessary, it should be at arm’s length and not be used as a means to garner political advantage.
The insurance industry can be cyclical — good years can be followed by bad years, and vice versa — but too often, decisions concerning ICBC are tied to the election cycle, rather than being guided by sound business practices.
The latest move is bizarre — Transportation Minister Todd Stone announced last week that the B.C. government intends to deny basic insurance coverage to owners of luxury cars, a move intended to help minimize anticipated increases in insurance premiums.
Repairs to high-end vehicles, he said, cost vastly more than fixing the cars driven by ordinary people. Those who own cars costing $150,000 or more will be forced to buy insurance from private companies.
Stone calculates the change would save $2.3 million annually in claim costs. ICBC forecasts show insurance rates could rise up to 42 per cent by 2020 if costs and claims are not reduced, and the estimated savings from denying coverage to luxury cars is a drop in the bucket.
And that’s if the savings really happen — the minister has not explained how it will work. For starters, it’s difficult to understand how denying basic coverage will change anything, as it covers only the damage or injury inflicted on another person by the at-fault driver.
“The person who drives a Honda isn’t going to be covering the cost of your $36,000 replacement door for your Aston Martin,” Premier Christy Clark told reporters last week. “Sorry, if you can afford a car that is that expensive, you can afford to fix it yourself.”
Well, if the person driving the Honda is the one at fault, ICBC will indeed be paying to fix the Aston Martin.
Stone says that is one of the details that needs to be worked out, which is an indication that this strategy was the work of someone more concerned about political policy than insurance policies.
And that’s a problem that has plagued ICBC for far too long.
ICBC was created in 1973 to give more fair and affordable insurance coverage to British Columbians, and it worked. The corporation truly did bring in more reasonable insurance premiums, and it managed to be profitable.
But parties in power could not resist meddling for their own purposes. They have consistently manipulated insurance rates, freezing them just before elections and letting them rise when the election is over.
And since taking power in 2001, the B.C. Liberals have consistently helped themselves to the public insurer’s profits, which should have gone into reserves to cushion rate increases when losses exceed premiums. They have realized that’s an unsustainable practice, but it comes a little late — since 2010, the government has siphoned off $1.2 billion from ICBC into general revenues.
ICBC has had its internal problems. A 2012 audit of the corporation found mismanagement and an atmosphere of entitlement that resulted in unreasonable salaries and bonuses. Managers were not focused on cutting costs, choosing more expensive options when selecting goods and services. Part of the blame lies at the feet of cabinet ministers who should have been watching more closely.
But that scrutiny should be for the public good, not political fortune. Decisions on rates should be determined by actuarial science, not by glancing at the calendar to see how close the next election is.
ICBC should operate for the benefit of its owners — the people — and not the party in power.