Regulator green-lights auto insurer’s two-year rate freeze
British Columbia’s auto insurance regulatory body has approved a 0% rate change for basic auto insurance rates in the province for two years, the fifth year in a row of no rate increase.
The British Columbia Utilities Commission approved the interim rate freeze, effective Apr. 1, in an order issued Tuesday. The order includes a review of public auto insurer Insurance Corporation of British Columbia’s (ICBC) claims costs and the forecast operating expenses (Apr. 1, 2023 to Mar. 31, 2025), ICBC’s proposed changes to performance measures, and other reports.
Before the regulator approved ICBC’s proposed rate freeze, the association representing Canada’s private insurers, the Insurance Bureau of Canada (IBC), expressed concerns over a projected $298-million loss from the province’s second quarterly report released in late November.
Several years ago, before moving to its Enhanced Care no-fault-style regime in May 2021, the public auto insurer had estimated a net loss of more than $1 billion.
An ICBC spokesman told Canadian Underwriter Tuesday that “while we’ve updated our year-end net income forecast to be a $298-million loss, our actual net income this fiscal year through our second quarter is $117 million.”
Last year, IBC raised concerns about ICBC’s operating expenses and internal operating costs, the latter of which it said was a 25% increase since 2018 (to more than $1 billion). The provincial government’s second quarterly report issued in November estimated a loss ratio in the order of 80+%, and operating results were “lower by $625 million due to unrealized investment losses.”
CU asked ICBC what steps it was taking to try to bring losses further under control and why it decided to implement a rate freeze if there were still some projected losses and lower operating results.
“Like other insurers, we use an investment portfolio to help offset claims costs and reduce premiums,” the ICBC spokesman said. “Last fiscal year, our investment income was higher than expected, at more than $1.4 billion, while so far this fiscal year, a downturn in the markets has impacted our investment portfolio. Our forecast net income loss this year is a direct result of investment market volatility, which is something that has impacted insurers across Canada, and is separate from our core insurance business.”
The outlook for net income for the commercial Crown corporation is $3.3 billion, $576 million lower than projections in the first quarterly report.
ICBC said its Enhanced Care model remains “strong,” while the vice president of IBC’s western and Pacific regions, Aaron Sutherland, said in November there is a need to open up the market to competition.
“After years of financial turmoil, the introduction of no-fault was supposed to help stabilize ICBC’s financial situation by eliminating the right to sue in most cases and introducing strict limits on the care and recovery benefits it provides,” he said in a press release.
“ICBC’s significant financial challenges seem to be repeating themselves, yet it appears the monopoly insurer has not looked under the hood to find cost savings they could pass on to drivers,” Sutherland added. “ICBC’s internal costs have grown and British Columbians are paying more to support operations as a result.”
ICBC released a commissioned study by KPMG late last year suggesting B.C. drivers were paying lower auto insurance premiums than in provinces with private auto insurance regimes.
Feature image by iStock.com/takasuu
