Attorney-General David Eby will introduce major reforms for the Insurance Corporation of B.C. this spring to avert "massive" rate hikes for drivers, but a forecast of a $1.3-billion loss for the Crown corporation will test the NDP government's commitment to balance the budget.
Mr. Eby said on Monday he is considering caps on payouts for minor injuries, increased premiums for high-risk drivers and tighter controls on auto-body repairs to contain a fast-growing deficit in the coming year.
"This is a financial dumpster fire," Mr. Eby told a news conference on Monday, after the release of ICBC's latest fiscal update.
Officials at the Attorney-General's ministry said on background that individual drivers are expected to be classified as high-risk if they rack up several traffic violations, or are involved in multiple vehicle accidents.
Details will be announced in the coming weeks, but Mr. Eby would not say whether the changes will be enough to prevent rate increases. Right now, ICBC does not have the minimum amount of capital that insurance companies are required to have so they can meet their obligations.
"I can tell you now, many of these initiatives will be difficult for many groups who have an interest in the status quo," Mr. Eby said.
The minority NDP government took office last July, and Mr. Eby says it has taken until now to get a clear picture of the finances at ICBC. He said the former Liberal government misled voters in the last election campaign by playing down ICBC's financial challenges and suppressing internal warnings that tough action was needed to contain costs.
Mr. Eby said the current forecast would mean a rate increase of $400 a year for the average driver, which he called "massive."
The Crown corporation is grappling with a rapid increase in the number of collisions, as well as the rising costs of those claims.
Mr. Eby noted that the Liberals had forecast a deficit of just $11-million for this year for ICBC.
"Years of reckless decisions by the former government have undermined ICBC's ability to deliver low-cost insurance to British Columbians," he said. "… Now, British Columbians are facing the full consequences of the previous government's decision to bury the truth."
John Yap, the Liberal opposition critic for ICBC, said the NDP should have acted sooner. He noted that an Ernst & Young report with recommendations for fiscal remedies has been on Mr. Eby's desk for seven months.
"David Eby has a blueprint for moving forward at ICBC, but keeps delaying any action and is allowing the problem to grow even worse under his watch," Mr. Yap said in a statement.
The Ernst & Young report concluded that premiums for B.C. drivers could be reduced if the government would move away from a litigation-based system of claims settlement to a "no fault" model.
British Columbia is unique in Canada with its full tort system, where those who are injured have the right to sue for all damages in court without any legislated cap on payments.
As a result, 24 per cent of ICBC's expenses are for legal fees, expert reports and related costs.
He repeated on Monday that his government will not consider the no-fault option "at this time."
The Attorney-General also ruled out a financial bailout from taxpayers, saying structural changes are needed or ICBC will continue to pile up huge deficits. Even with the proposed changes, he said, the Crown corporation's deficit will strain the provincial government's overall financial picture.
Finance Minister Carole James will deliver her first full budget on Feb. 20. In last year's election campaign, her party said it could balance the budget and deliver costly programs that include subsidized daycare, the elimination of Medical Services Plan premiums and a renters' rebate.
In her fiscal update in November, Ms. James noted that record-breaking costs for fighting wildfires, rising vehicle-insurance claims and weaker income-tax revenues had reduced the expected surplus for the current fiscal year.
However, she maintained that the province's strongly performing economy will allow new spending and a surplus. "I will bring forward a balanced budget," Ms. James told reporters at that time.