Reforming B.C. Auto Insurance to Benefit Consumers

Chant: The Corporation lost $1.3 billion in 2018 and a further $1.2 billion in the following year.

John Chant, Professor Emeritus of Economics, Simon Fraser University. Photo: Fraser Institute

John Chant, Professor Emeritus of Economics, Simon Fraser University. Photo: Fraser Institute

British Columbia’s Attorney General has described the state of the government-owned Insurance Corporation of British Columbia (ICBC) as a “dumpster fire” and was justified in doing so.

The Corporation lost $1.3 billion in 2018 and a further $1.2 billion in the following year.

These losses had totally exhausted ICBC’s capital and regulators would have shut down a private insurer in the same condition a long time ago.

The sad state of ICBC’s finances results from government interference.

It has been saddled with financial responsibilities uncommon for other auto insurers: the BC government drained off $1,050 million from ICBC into general revenue between 2010 and 2015 and has limited its ability to raise its premiums.

The cap on rates has caused ICBC’s revenue to rise more slowly than its costs.

In 2018, the cap alone caused a revenue shortfall of $415 million.

ICBC’s insurance costs are generally the highest in Canada and are even higher when its losses are taken into account.

As a monopoly it lacks any competition to keep its rates low and to provide a benchmark for its performance.

The present BC government deserves credit for tackling the dumpster fire.

It has introduced legislation to prevent further raids on the ICBC piggy bank. It has also made the insurer’s operations conform to commercial principles by requiring bad drivers to be responsible for their performance and by charging beginning drivers more than others.

As a major step, it also plans to introduce no-fault insurance. How much these measures will improve ICBC’s financial condition remains uncertain.

These measures, however, do nothing to solve the source of ICBC’s problems: it will still be owned by the government, with the overhanging threat of government interference.

It will continue as a monopoly without the pressure of competitors to keep its rates low.

Many have called for the privatization of ICBC. But privatization can be done in different ways and the way that is chosen matters.

ICBC could be privatized in the way that the previous government sold BC Hydro’s gas division as a complete unit to a private interest. The sale solved the problem of government ownership but left the monopoly for gas distribution in private hands.

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.

Unfortunately, ICBC has placed a major obstacle to competition by its unwillingness to share drivers’ records with other insurers.

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. It will do the same if competition is permitted in the larger basic market. Unless this obstacle is removed, private insurers cannot be significant competitors in the basic insurance market and may avoid the market entirely.

Information sharing among insurers must be part of any reform to introduce competition.

The Government’s recent measures to stem the flow of red ink at ICBC should not be the end of reform.

Opening the market to competition is the best way to benefit consumers and should be the next step.

John Chant, Professor Emeritus of Economics, Simon Fraser University.

ICBCOpinion

Just Posted

FILE – Perry Bellegarde, National Chief of the Assembly of First Nations, takes part in an event on Parliament Hill in Ottawa on Tuesday, July 7, 2020. THE CANADIAN PRESS/Sean Kilpatrick
Indigenous Peoples Day must be a ‘call to action’, says Assembly of First Nations chief

Discovery of children at Kamloops residential school site must lead to change, Perry Bellegarde says

Trees blown over by a windstorm in forest owned by Anderson Creek Timber. Photo: Anderson Creek Timber
Timber company logging near Nelson raises local concerns

Anderson Creek Timber owns 600 hectares of forest adjacent to the city

Keith Smyth, Kootenay Savings director at-large joins children from the Kids’ Care Centre at St. Michael’s Catholic School. Photo: Submitted
Kootenay Savings continues credit union’s tradition of giving

Funding totalling $48,250, is going to a wide array of Kootenay initiatives

From left: Karl Luedtke (West Arm Outdoors Club), Dale Williams (BCWF), Molly Teather (FLNORD), Gord Grunerud (West Arm Outdoors Club), Eugene Volokhov (Grand Prize Winner), Casey McKinnon and Lex Jones (Jones Boys Boats). Photo: Tammy White, Whitelight Photography
Balfour man lands big prize from angler incentive program

Eugene Volokhov of Balfour is now the proud owner of a sleek 18-foot Kingfisher boat

“I want to see the difference in the world, embrace it, celebrate it … ” Photo: David Cantelli/Unsplash
A new way to say ‘Hello’

“Inclusion, you see, is NOT about making us all the same.”

The border crossing into the United States is seen during the COVID-19 pandemic in Lacolle, Que. on February 12, 2021. THE CANADIAN PRESS/Paul Chiasson
VIDEO: Border quarantine to soon lift for fully vaccinated Canadians

Eligible travellers must still take multiple COVID-19 tests

Chilliwack secondary school’s principal is apologizing after a quote equating graduation with the end of slavery in the U.S. was included in the 2020-2021 yearbook. (Screenshot from submitted SnapChat)
B.C. student’s yearbook quote equates grad to end of slavery; principal cites editing error

Black former student ‘disgusted’ as CSS principal apologizes for what is called an editing error

Skeena MLA Ellis Ross. (Photo by Peter Versteege)
BC Liberal leadership candidate condemns ‘senseless violence’ of Okanagan church fires

Skeena MLA Ellis Ross says reconciliation isn’t about revenge for past tragedies

A coroner’s inquest will be taking place at the Capitol Theatre in Port Alberni for the next week. (ELENA RARDON / ALBERNI VALLEY NEWS)
Teen B.C. mom who died following police custody recalled as ‘friend to many’

Police sent Jocelyn George to hospital after intoxication had gone ‘beyond the realm’ of normal detox

FILE - In this Nov. 29, 2020, file photo, Las Vegas Raiders defensive end Carl Nassib leaves the field after an NFL football game against the Atlanta Falcons in Atlanta. Nassib on Monday, June 21, 2021, became the first active NFL player to come out as gay. Nassib announced the news on Instagram, saying he was not doing it for the attention but because “I just think that representation and visibility are so important.” (AP Photo/John Bazemore, File)
Nassib becomes first active NFL player to come out as gay

More than a dozen NFL players have come out as gay after their careers were over

Penticton Indian Band Chief Greg Gabriel speaks to the Sacred Hearts Catholic Church burning down early Monday morning, June 21, 2021. (Monique Tamminga Western News)
Penticton band chief condemns suspicious burning of 2 Catholic churches

Both Catholic church fires are deemed suspicious, says RCMP

COVID-19 daily cases reported to B.C. public health, seven-day moving average to June 17, 2021. (B.C. Centre for Disease Control)
B.C.’s COVID-19 infections drop to 90 on Sunday, 45 Monday

Pandemic spread dwindles as 77% of adults receive vaccine

By protesting uninvited in First Nations’ territories, conservationists are acting in a neocolonial or paternalistic manner, says Huu-ay-aht Chief Robert Dennis. Photo by Heather Thomson
A closer look: do Vancouver Island First Nations support the war in the woods?

First Nations/environmentalist old growth alliance uneasy, if it exists at all

A blood drive in support of 1-year-old Rielynn Gormley of Agassiz is scheduled for Monday, June 28 at Tzeachten First Nation Community Hall in Chilliwack. Rielynn lives with type 3 von Willebrand disease, which makes it difficult for her to stop bleeding. (Screenshot/Canadian Blood Services)
Upcoming blood drive in honour of Fraser Valley toddler with rare blood condition

The Gormley family has organized a blood drive in Chilliwack on June 28

Most Read