British Columbia’s public auto insurer wants to hike rates, starting in February, blaming rising claims costs and declining investment revenues.
The request comes at the same time the provincial government is struggling to contain a burgeoning deficit, in part due to the Insurance Corp. of B.C.’s shrinking revenues.
ICBC’s net income is down $290-million from projections in this year’s B.C. budget, the single biggest decline in Monday’s financial update from Finance Minister Kevin Falcon.
With such troubling signs on the government’s books – prompting Mr. Falcon to back away from a firm government pledge to balance the budget in time for the next election – Shirley Bond, the minister responsible for ICBC, was not prepared to block an auto insurance rate increase that could help reduce the red ink.
“Undoubtedly, difficult decisions have to be made,” she told reporters Tuesday. “Our goal is to mitigate those rate increases wherever possible.”
ICBC president Jon Schubert said bodily injury costs have climbed faster than expected. At the same time, the company’s revenue cushion – its investment income – has been reduced by market turmoil.
He acknowledged the government wasn’t happy about the proposal.
“I don’t suspect anyone will be happy,” he said in an interview.
“What we try to do here is provide the best service we can, at the lowest price. We haven’t had an increase for four years.”
The corporation will be applying later this week to its regulator, the B.C. Utilities Commission, for the rate hike and offered scant details Tuesday.
ICBC will ask to increase the basic premium motorists pay – the portion that is compulsory in B.C. – but is offering to lower the optional insurance rates, where it must compete with the private sector.
The majority of customers would see the premiums rise by an average of $30 annually – for those customers taking both the basic and extra insurance from ICBC. Mr. Schubert would not say how much basic premiums will rise, saying that detail will be provided later this week when the proposal is delivered to the BCUC.
Ms. Bond was less sympathetic earlier this year when BC Ferries and BC Hydro proposed to hike their rates. Both of those Crown agencies were subject to financial reviews after the province deemed proposed fee hikes to be unaffordable for B.C. families.
BC Hydro has since been ordered to slash $800-million in spending, allowing it to reduce its proposed rate hikes by 50 per cent. BC Ferries is expecting a verdict on rate hikes in January.
Ms. Bond said ICBC has already found savings this year but it will still face a government review at some point. “We’re going to continue to find ways to insist that ICBC look to be as streamlined as possible,” she said.
However the province isn’t about to forgo the dividend it collects annually from ICBC. Ms. Bond said that money goes to pay for other important services.