What choice in car insurance could look like - The Orca
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What choice in car insurance could look like

Sutherland, Aaron
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Every day, British Columbians choose how and where to spend their money. Why not with car insurance?

It’s human nature to shop around. Most people check out a couple of retailers before making a final decision, especially for an expensive purchase.

The freedom to choose how and where we spend our money is the great equalizer – it makes the pocketbook more powerful than the cash register.

Unfortunately, drivers in BC are denied this freedom with car insurance.

Despite a near-daily barrage of stories describing ICBC’s rate increases and financial challenges, drivers have little recourse. Their choice is pay up…or ride a bike.

It’s a key reason why British Columbians pay more for auto insurance than anyone else in Canada, despite receiving roughly the same amount when they make a claim.

It doesn’t have to be this way. More and more drivers are crying out for a change – so let’s consider what choice in car insurance could look like, and how competition could be introduced into the market.

First, competition doesn’t have to mean the end of ICBC.

As I’ve said many times before, if ICBC truly believes it offers the best price, our public auto insurer shouldn’t fear competition. It should relish it, because competition would allow it to prove – once and for all – that it really is the best game in town.

In a competitive system, the government would still determine – in law – the mandatory insurance all insurers would have to provide (i.e., the way Basic Auto Insurance works today). And it could still set the price of that insurance.

The advantage for drivers is that multiple companies would then compete for their business, spurring innovation and efficiencies to drive prices down.

Innovations like buying insurance online, streamlined claims handling, or using usage-based insurance to prove you’re a good driver. Common elsewhere in Canada, the quickest way to bring those innovations to BC is competition. The fear of losing customers would force ICBC to catch up faster than any government directive.

Opening the market to competition needs to be fair to ICBC, drivers, and any companies that compete for business in BC.

First and foremost, the provincial government must ensure that all drivers have access to insurance, no matter who sells it, and ICBC shouldn’t be relied on as the insurer of last resort. In competitive markets, all insurers – by law – are responsible for covering high-risk drivers proportionally to their market share.

The same would apply in BC. If a company came to BC and scooped up 10% of the car insurance market, it would then be responsible for 10% of the province’s high-risk drivers.

This idea isn’t new. It works in provinces where drivers have the benefits of choice and competition.

But the best way to make competition work – even if it’s just in Optional insurance – is to force ICBC to share the information it collects under its monopoly.

ICBC uses each customer’s driving and claims record when selling auto insurance. But it prevents other insurers from seeing this information, even though they’ve offered to pay for it. That prevents other companies from coming to BC to give drivers the choice they need and deserve.

ICBC has lost more than $3 billion in the last three years – over $600 per taxpayer, and that’s before accounting for a recent Supreme Court decision that likely adds another $400 million to its growing river of red ink.

Because ICBC’s losses flow directly to the provincial budget, ICBC is costing all British Columbians whether they drive or not. Yet this isn’t the first time the public has had to bail out our public insurer. It likely won’t be the last.

Opening ICBC to competition could remove this financial burden from taxpayers.

Instead, ICBC is relying heavily on its customers to dig it out of its financial hole. ICBC’s current Financial Plan projects premium increases of $1.74 billion over three years – nearly double the annual savings of all its reforms combined.

ICBC’s defenders want you to believe that other insurers couldn’t possibly offer better prices without reducing benefits or denying coverage, despite all evidence to the contrary.

It’s time for them to put their cards on the table. Bringing choice and competition to BC would prove once and for all whether ICBC really is as effective as it claims.

Perhaps most importantly, it would put drivers back in the driver’s seat.

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.

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