TORONTO, June 13 – Insurance Corporation of British Columbia (ICBC) is proposing no increase in basic insurance rates for 2006. If approved by the BC Utilities Commission (BCUC), this would mark three straight years with virtually no change to basic insurance rates.
ICBC’s formal filing with BCUC for basic insurance rates will occur this summer. Optional insurance rate reductions will be announced before the end of June.
Basic insurance bears more than 75 per cent of the cost of injury claims. In 2004 and so far in 2005, the average cost of an injury claim has been rising by more than five per cent on an annual basis. ICBC’s forecasts call for the average cost to rise by 3.5 per cent in 2006. However, safe driving has led to fewer claims, which has helped counteract the increase in the average cost.
“Managing our controllable costs and investing in road safety have helped us continue to keep basic insurance rates low and stable,” said Paul Taylor, ICBC’s President and CEO. “A great deal of credit must also go to our customers, whose safe driving has led to fewer claims.”
ICBC’s 2004 annual report reveals that basic insurance contributed a small portion of the company’s 2004 net income, despite accounting >for a larger portion of ICBC’s business.
“Our proposal to BCUC is based on forecasts of revenues, claims and other costs,” said Donnie Wing, Senior Vice President, Insurance, Marketing and Underwriting. “Our forecasts leave us confident we can hold the line on basic insurance rates despite cost pressures.”
ICBC operates as an integrated business, which benefits customers through economies of scale, improved customer service, and convenience. After a thorough review, a recent BCUC decision confirmed that virtually all of ICBC’s costs were properly allocated between basic and optional insurance, confirming there is no cross-subsidization between the two lines of business.
Basic insurance rates are set by BCUC, while optional insurance rates are set independently by ICBC’s Board of Directors in the context of a competitive marketplace.
Note: A backgrounder on basic and optional insurance and how they differ is available at www.icbc.com.