The NDP government’s move to overhaul the province’s car insurance system may indeed make it fairer, but don’t expect the changes to make a big dent in your own insurance costs.
It is hard to argue against penalizing bad drivers and “rewarding” good drivers, although the word “rewarding” may be overstating things a bit.
However, it is hard to see how the changes are going to make things significantly more affordable for most folks. That’s because they have nothing to do with putting out the fiscal “dumpster fire” that is burning away at ICBC’s bottom line.
The Crown corporation expects to have lost $1.3 billion last year, a further loss of $700 million this year and a more manageable $21 million loss next fiscal year. But that deficit will shrink and eventually disappear only through some aggressive moves on ICBC’s part.
That bottom line will be improved by doing things such as capping injury payouts, reducing litigation, lowering auto repair costs and – you guessed it! – raising insurance rates.
The government news release touting the new system slyly states that “based on today’s rates” about two-thirds of all drivers would get varying, minor cost reductions (39 per cent under $50 and 13 per cent between $50 and $100).
As for those “bad” drivers who constitute a greater risk on the road, 17 per cent will get dinged by more than $100, while 11 per cent will get hit by up to $50.
However, the changes do not take effect until September 2019, which is more than a year away.
Before we get there, however, something else will occur: a rate increase, to take effect next April.
So any comparison of costs under the new system should be framed against rates that include the next scheduled rate hike, but the government will not yet say what that increase will be (ICBC will send a new rate increase request to the B.C. Utilities Commission in December).
At his news conference announcing the new rate structure, I twice asked Attorney General David Eby if he could rule out a double-digit increase in insurance rates, and both times, he declined. Now, I doubt if ICBC will request a rate hike of more than 10 per cent – that would be political poison - but the final figure likely will not be far off.
A check of ICBC’s three-year fiscal plan provides a bit of a clue to what may lie ahead.
The Crown corporation expects to collect more and more money in insurance premiums over the next three years (and likely well beyond that).
Next year, it expects to collect an additional $516 million, and the year after that, an additional $606 million. That translates into roughly nine per cent or so more a year.
Of course, new drivers are joining the driving fleet every year and they will account for some of that increase. But existing drivers, presumably, will account for the rest.
So I’m guessing a rate hike in the neighborhood of about seven per cent a year seems likely (even when the annual deficit disappears, ICBC is forecasting a steady rise in premiums collected which may suggest a continued, gradual climb in rates for the near future). If that turns out to be the case, it would boost average insurance rates by more than 21 per cent over three years.
If a motorist is currently paying about $1,500 a year in insurance, that kind of increase would see a hike of about $300 after three years. That will likely more than exceed any savings to be realized under the new rules.
The fact is, the car insurance industry is changing and ICBC is moving to adapt to those changes while at the same time trying to get its terrible finances under control. There is still a long ways to go, and many questions remain unanswered.
For all the NDP trumpeted while in Opposition, it is finding out a hard reality in government: things like car insurance rates and B.C. Hydro rates go up each year for a variety reasons.
Yes, the new car insurance rules will likely be fairer.
Just don’t expect them to make things that much cheaper.
Keith Baldrey is chief political reporter for Global B.C.