ICBC’s September 1 change may cost more – much more – than advertised.
In just a few weeks, the Insurance Corporation of British Columbia (ICBC) will make its biggest-ever change to the way it prices auto insurance.
The centrepiece of its new rate design is a change that should have been made long ago – pricing auto insurance based on risk. Beginning September 1, drivers who have caused collisions will pay higher premiums and assume a greater share of overall insurance costs than those who have a history of safe driving.
It’s a change that makes sense. Pricing based on risk is how other auto insurers in Canada have operated for a long time – and ICBC is finally catching up.
Yet the way ICBC is communicating the impact of this change demonstrates that the Crown corporation still has a lot to learn about respecting its customers.
When describing the change, ICBC suggests that “approximately three-quarters of ICBC customers will be better off than today, with many seeing a decrease to their overall premiums.” Remember this come September, and check if you see a decrease in the price you’re paying.
Odds are, you won’t find a reduction.
This is because ICBC is forecasting a negative equity position of $230 million this year, which makes it technically insolvent were it not for provincial taxpayers bankrolling its losses. To return to solvency, ICBC is calling for $1.74 billion in rate increases over the next three years.
How, then, can ICBC suggest that a majority of drivers will see a rate reduction in basic auto insurance coverage when they renew after September 1? The answer: it can’t.
In making its argument for savings, ICBC assumes drivers have already seen this year’s 6.3% rate increase. Of course, drivers who renew in September won’t have paid this yet and will be in for a big sticker shock.
ICBC is also ignoring its double-digit, although still undisclosed, increase in rates for optional coverage this year. That’s at least another 10% increase for most drivers.
The impacts of its pricing changes were detailed in ICBC’s submission to the BC Utilities Commission late last year. Perhaps its communications staff missed that – because when you combine the information in that submission with the impact of its overall rate increase, you get a very different picture than what ICBC has been claiming of late.
All told, 75% of drivers will be paying more for auto insurance this September – not less. In many cases, they will be paying a lot more. Nearly 20% of drivers will pay at least $150 more for basic insurance as a result of ICBC’s pricing changes, and tens of thousands of drivers will pay several hundred dollars more.
To be fair, 25% of drivers will see some savings. But for most of these drivers, the savings will be modest – about $40 on average.
But don’t take my word for it. Refer to ICBC’s CEO Nicholas Jimenez’ comments in December to get the real picture. When the Vancouver Sun asked Jimenez about the combined impact of ICBC’s overall rate increase and September pricing changes, he admitted that just 25% of customers would be better off. The remaining drivers will see an increase, and a third them will see rate increases of more than 6.3%.
Hold on to your wallets. It’s going to be a bumpy, costly ride.
Aaron Sutherland is Vice-President, Pacific with the Insurance Bureau of Canada (IBC). IBC is the national association representing Canada’s private home, business, and auto insurers.