Thursday December 1, 2011
On The Road
ICBC Insurance Rates Set To Increase
Changes will cost the majority of customers an average of $27 extra per year
Released by ICBC
onfirming its rates announcement on Tuesday, November 29, ICBC will submit an application today with the British Columbia Utilities Commission (BCUC) for an increase to its basic insurance rates for 2012. At the same time, ICBC confirmed an average decrease to its optional insurance rates for next year. When combined, the changes will cost the majority of customers an average of $27 more per year.
“The only way to fully understand these rate changes and the impact on our customers, one must look at them in combination” said Jon Schubert, ICBC president and CEO. “If you look at just the basic or optional change in isolation, then it gives you an incomplete picture for the majority of our customers who write one cheque for their insurance policy.”
ICBC’s application to the BCUC will ask for an average basic insurance increase of $68 or 11.2 per cent per customer, which will be reduced by an average decrease in its optional insurance rates of $41 or six per cent. When the rate changes are combined, the majority of customers – those who purchase their full personal vehicle insurance coverage from ICBC – will see an average rate increase of $27 or 2.1 per cent.
The $27 increase is an average for approximately 80 per cent of ICBC’s personal insurance customers. Each individual premium is based on a number of factors including claims history, type and use of vehicle, where you live, years of experience and the level of coverage purchased.
“The average premium our customers pay today is approximately the same as it was in 2008 but, after four years of not having to increase our rates, we now unfortunately face a different reality,” said Schubert. “We’re not happy that we need to increase our rates but the majority of our customers will be paying just a few dollars more, on average, than they did in 2008.”
The decrease in optional rates is made possible primarily due to the continued drop in auto crime and material damage claims.
“Our priority is to ensure that this rate increase is as low as possible so the impact on our customers is kept to a minimum,” said Schubert.
Those who only purchase basic insurance coverage through ICBC will see an average increase of $68 a year.
ICBC’s net income for the first nine months of 2011 was down by $279 million from the same period in 2010 due, in large part, to a $200 million increase in ICBC’s claims costs.
“We have seen increasing pressure, in particular, from bodily injury costs,” said Schubert. “This year, bodily injury costs will be approximately $1.7 billion - $350 million more than five years ago. This increase in costs is not sustainable without a rate increase.”
The pressure on rates has been intensified by current worldwide economic and capital market conditions which have led to a drop in ICBC’s investment income – down by $38 million for the first nine months of 2011 over the same period last year.
“In past years, we’ve been able to rely on our investment income to cushion the impact of claims costs on rates but, given current investment market conditions, we can no longer do so to the same extent,” said Schubert.
Due to these new pressures, ICBC has asked the BCUC to approve an interim basic rate increase of 11.2 per cent, effective February 1, 2012. BCUC’s review of the full basic insurance rate application will likely not be complete until later next year.
ICBC’s operating costs make up a small portion of insurance premiums and have been held around the rate of inflation since 2002.
“We always focus on managing our operating costs and we’ll continue to do so,” said Schubert. “We have already reduced our 2011 operating costs by $26 million and we’ll focus just as hard on looking for savings in 2012.”
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