A private insurance company is getting out of the auto insurance business, as a result of changes coming to ICBC.
Belairdirect, a subsidiary of Intact Insurance, advised its B.C. clients on Tuesday, Oct. 27 that the company won’t be renewing their auto insurance.
The private insurer made the decision after the province announced upcoming changes to the Insurance Corporation of British Columbia (ICBC) regulations that take effect in May 2021.
“Recent announcements from the government, means less competition and fewer choices for auto insurance for consumers,” Intact said in a statement to the Trail Times. “Competition provides a powerful incentive for any company to keep prices down and to deliver the best customer service possible.
“Auto insurance is no exception to this rule. Under ICBC, British Columbians pay more for auto insurance than anyone else in Canada.”
According to the Insurance Bureau of Canada, B.C. has the highest average premium of all 10 provinces.
For 2018-19, B.C. drivers paid an average of $1,832 per year in insurance, significantly more than Ontario, the second highest at $1,505, and Alberta, the third highest, at $1,316.
In addition, those totals don’t account for what B.C. tax payers will also have to pay to make up for ICBC’s over $1-billion in losses the past two years.
Recognizing ICBC’s severe shortcomings, Premiere John Horgan rolled out a new program called ‘Enhanced Care’ coverage in February.
The new regulations will adopt a no-fault system, where the government plans to eliminate legal fees and other costs of litigation associated with the current system.
However, for private insurers, the government monopoly on basic insurance also creates further road blocks.
“Unfortunately, ICBC has placed a major obstacle to competition by its unwillingness to share drivers’ records with other insurers,” said John Chant, professor emeritus of economics at Simon Fraser University, in his recent study, ‘Reforming BC Auto Insurance to Benefit Consumers’.
“Such records are vital to insurers trying to sort bad drivers from good. This lack of information sharing has already stifled the competition from private insurers allowed to do business in the optional market.”
Yet, ICBC says the new regulations will not impact private insurers.
“We respectfully disagree with the position of Intact and its subsidiary Belairdirect, that the introduction of Enhanced Care limits opportunities for private auto insurers,” said ICBC spokesperson Lindsay Wilkins.
“Under Enhanced Care, private insurers will continue to be able to sell the same optional insurance coverages that exist today, and other new product options that become available.”
Under no-fault insurance, drivers responsible for an accident will be treated the same as those of other parties and would not be liable for damages as they are at present. Yet, they will still face higher future insurance premiums.
By adopting a no-fault system, the government plans to eliminate legal fees and other costs of litigation that financially crippled the previous system.
These costs include ICBC’s own legal expenses together with the customers’ that form part of their settlements.
“Importantly, the introduction of Enhanced Care will result in significant reductions to the cost of auto insurance for British Columbia drivers by an average of 20 per cent or $400, delivering some of the lowest rates in Canada alongside some of the most generous benefits available anywhere,” added Wilkins.
ICBC’s basic insurance is mandatory for all drivers, while private insurers are able to provide optional insurance such as collision coverage, comprehensive coverage for auto theft and vandalism, and extended third party liability coverage.
It’s still not a level playing field, as many consumers just add on optional insurance when they renew their basic premiums, and not look at or be made aware of private insurance options.
In fact, ICBC provides 90 per cent of the optional insurance coverage in the province, compared to 10 per cent for all other companies combined.
Drivers in the province purchase $2 billion in optional insurance every year, of which ICBC gets $1.8 billion of the business.
For Professor Chant, the best way to improve the system is through privatization.
“Opening up British Columbia’s basic automobile insurance business to new competitors would be the best way to privatize automobile insurance. This reform would foster innovation and lead to lower consumer premiums than the alternatives.”
Belairdirect will continue to offer a variety of services including house insurance, personal property, commercial P&C, surety and speciality insurance.
However, all its auto insurance policies will come to an end on their respective renewal dates.
“Unfortunately, with the changes to auto insurance in BC coming in 2021, the opportunities for the private sector to compete has been reduced,” said Intact.