British Columbia drivers can expect to pay an average of $30 more for auto insurance next year to offset rapidly rising body-injury claims and declining income from the Insurance Corp. of B.C.'s investments, corporation CEO John Schubert said Tuesday.
The public insurer will reduce premiums for optional coverage to take some of the sting out, but ICBC's financial picture over the near future is "not sustainable without a rate increase," Schubert said at a news conference.
ICBC dropped basic premiums by 2.4 per cent in 2010. The last increases were in 2007 when they were raised 3.3 per cent, and 2006 when they went up 6.5 per cent.
Schubert would not reveal the full impact of proposed rate increases for basic liability insurance, the area where ICBC holds a monopoly, saying that the corporation had not finalized the numbers.
However, for drivers who purchase optional collision and comprehensive insurance through ICBC, Schubert said once savings are factored in, the average increase will be less than three per cent, or around $30.
All the details of the proposed premium increases will be included in ICBC's application to the B.C. Utilities Commission for approval, which is expected by the end of this week and would take effect in February.
Schubert said the corporation couldn't cite specific reasons for the increasing amount of claims.
However, the number of people injured per crash is rising and Schubert noted the province has seen more extreme weather and road conditions during the period that claims have risen.
"It's very hard to isolate individual factors," according to Schubert.
ICBC's cost of claims has risen to $2.47 billion over the first nine months of 2011, $200 million higher than the same period of 2010, while its revenue has remained flat at around $2.8 billion.
During much of the same period, Schubert added that plummeting interest rates on bond markets has eaten away at its expectations for income for the premiums that ICBC has invested. Over the first nine months of 2011, Schubert said ICBC's investment income is $38 million lower than the same period of 2010, a figure he expects will deepen to $90 million by the end of the year.
Typically, Schubert said ICBC's investment income defrays premiums it charges customers, but lower returns mean they are less able to do so.
ICBC's investment income totalled $341 million at the end of September 2011, compared with $379 million over the same period of 2010.
However, the opposition critic of the Crown corporation in the Legislature questions whether government should have taken so much money out of ICBC for general revenue over recent years.
"ICBC has skimmed hundreds of millions of dollars over the last several years," said Kathy Corrigan, the NDP critic for the Ministry of Public Safety and Solicitor-general, the ministry responsible for ICBC.
"I don't think it's fair for [government] to take out revenue at the front end and let the company solve its problems by placing the burden on ratepayers," she added.
Shirley Bond, the Minister for Public Safety and Solicitor-general, responded that government does plan to continue taking dividends from the Crown corporation, albeit less so.
"There will continue to be a dividend paid to the province, but it will be, as you can imagine, much smaller than the ones have been previously," Bond said, though declined to offer a figure. "Those funds go to provide other important supports in government."
Provincial budget documents show ICBC was forecast to contribute $290 million to provincial coffers in fiscal 2011-12, following $361 million in fiscal 2010-11 and $601 million in fiscal 2009-10.
"I think all of us are concerned any time there's going to be an additional burden on families in British Columbia. But I think ICBC, like the rest of the world, is facing some pretty significant issues," Bond said.
Corrigan added that she has more questions for ICBC related to the management of claims.
While preparing for last year's bud-get debates, Corrigan said she had heard from trial lawyers who told her that ICBC was taking a "cutthroat approach" to the amount it would pay to lawyers to take its insurance cases, which was hurting ICBC's ability to defend such claims.
And other trial lawyers are of the opinion ICBC is being sued more often because the settlements it offers are too low.
"It's our experience that more cases are being litigated because of the tactical positions that ICBC has taken," said Marc Kazimirski, incoming president of the Trial Lawyers Association of B.C., in an interview. "They are making lower offers - unreasonable offers - and there were fewer mediations, which meant there were more litigated claims."
ICBC spokesman Mark Jan Vrem said there has been no change in its policy regarding the defence of claims in court.
"The number of trials has in no way driven these results," Jan Vrem said in an email. "The increased costs are driven by an unexpected increase in frequency [of injury claims.]"
