BCUC confirms rates for basic auto insurance

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July 13, 2006 – The BC Utilities Commission has released its final decision on 2006 rates for basic, compulsory auto insurance. The Commission confirmed a rate increase of 6.5 per cent, which came into effect on an interim basis on March 15, 2006 .

“ICBC is committed to keeping auto insurance rates low and stable,” said Donnie Wing, ICBC’s senior vice president of insurance, marketing and underwriting, “but the fact of the matter is that the cost of claims is rising, particularly payouts for injury claims. Rates are increasing to cover those rising costs.”

With this trend of rising claims costs, ICBC expects basic insurance rates will need to increase again in 2007.

“Motorists can all play a role in controlling costs by continuing their efforts to drive safely, reducing the carnage on BC’s roads,” said Wing.

Approximately 400 people are killed and 78,000 injured on BC roads each year.

“We are currently involved in a campaign against speed and aggressive driving, targeting irresponsible drivers who are causing claims costs to rise,” said Wing. “The campaign involves enhanced enforcement by the police, backed up by raising public awareness.”

ICBC’s rates and service levels for basic coverage are regulated by the Commission. The review by the Commission is a public process involving hearings and a detailed examination of ICBC’s arguments by the Commission and interested parties.

For more information, visit www.icbc.com.


Questions & Answers Basic Rate Increase Approval from the BCUC – July 13

BCUC confirms rates for basic auto insurance

Summary:

  • Injury claims are one of the most volatile costs for insurers.

  • The amount ICBC pays out for claims under basic insurance is increasing, primarily due to increasing payouts to customers with injuries.

  • With this trend of rising claims costs, ICBC expects basic insurance rates will need to increase again in 2007.

  • Including this increase, since 2000, basic insurance rates have increased by approximately the rate of inflation.

  • The BCUC decides if and how much basic insurance rates need to change.

  • We continue to work on keeping rates low and stable for the benefit of customers.

Questions and Answers

  • Why does ICBC need to raise basic insurance rates?

  • Why does the increase apply only to basic insurance?

  • What does this rate increase mean for ICBC and its customers? Will we see additional rate increases for basic insurance in the near future?

  • What is ICBC doing to get a handle on the rise in bodily injury costs ?

  • Why is the cost of injury claims going up?

  • With the profits ICBC has been making over the last few years, why not use retained earnings instead of raising rates?

  • With this increase, how do auto insurance rates in BC compare with other provinces?


Q: Why does ICBC need to raise basic insurance rates?

  • A: The amount ICBC pays out for claims under basic insurance is increasing, primarily due to increasing payouts to customers with injuries.

  • ICBC has to ensure that premium revenue is sufficient to cover anticipated claims costs.

  • With this trend of rising claims costs, ICBC expects basic insurance rates will need to increase again in 2007.

Q: Why does the increase apply only to basic insurance ?

  • A:
    Basic and optional insurance offer different kinds of coverage. The BCUC regulates the basic insurance side of ICBC’s business, not the optional side.

  • Rates for basic insurance are increasing because the amount of money that ICBC is paying out to customers with claims under basic coverage is increasing. The rising cost of injury claims predominantly affects basic insurance – more than 80 per cent of the cost of injury claims is covered by basic insurance.

Q: What does this rate increase mean for ICBC and its customers? Will we see additional rate increases for basic insurance in the near future?

  • A: For those customers who renewed their policies on or after March 15, 2006 , there will be no change. For customers who have not renewed their policies, the rate increase represents an average increase in basic insurance premiums of approximately $38.

  • The amount that ICBC pays out for claims under basic insurance is increasing, primarily due to increasing payouts to customers with injuries. ICBC has to ensure that premium revenue is sufficient to cover anticipated claims costs. With this trend of rising claims costs, ICBC expects basic insurance rates will need to increase again in 2007.

Q: What is ICBC doing to get a handle on the rise in bodily injury costs ?

  • A: ICBC is focusing on strategies that target aggressive drivers, fraud and is working with police and other partners to enhance a coordinated approach to road safety.

  • There is no quick fix to this issue. ICBC will continue to analyze the reasons for the increase in basic insurance claims costs and look at both short and long term strategies that will help get a handle on rising bodily injury costs.

  • We can all do our part to keep rates low and stable by focusing on the road and avoiding crashes. Customers are also encouraged to report to ICBC any knowledge they have of fraudulent or exaggerated claims.

Q: Why is the cost of injury claims going up?

  • A: The average cost of claims from crashes is increasing. There are a number of factors that may contribute to changes in claims costs, such as: changes in driver behaviour, driver experience, weather, the number of vehicles on the road, medical costs, legal costs, and court settlement awards.

  • ICBC will continue to analyze the contributors to the increase in basic insurance claims costs and look at both short and long term strategies that will help address the increase.

  • The biggest single factor in controlling claims costs is driver behaviour and if more people drive more safely, the number of crashes will reduce.

Q: With the profits ICBC has been making over the last few years, why not use retained earnings instead of raising rates?

  • A: Retained earnings are there to protect customers from unexpected spikes in claims costs or unanticipated decreases in investment income, however this is only a temporary measure. When there is a continued trend of rising claims costs, eventually rates must be set at a level that is sufficient to offset the increase in costs.

  • ICBC also invests retained earnings to help keep rates low and stable. Income from our investments in 2005 meant that the average premium was approximately $200 lower than it would have been otherwise.

  • 2005 was a perfect example of why retained earnings are important � there was a loss on the basic side of the business, which was covered by retained earnings.

Q: With this increase, how do auto insurance rates in BC compare with other provinces?

  • A: It’s difficult to make apples-to-apples comparisons between provinces.

  • Many other provinces experienced skyrocketing rates in the early 2000s and, to stem those increases, a number of provinces have increased deductibles or caps on payments.

  • Statistics Canada shows that BC rates are lower than most other provinces, and lower than all other provinces with tort systems.

  • Studies done by other groups, such as the Consumers’ Association of Canada, also indicate that BC motorists have among the lowest rates in Canada.