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Government modernizes ICBC rate design

By Contributor
August 12th, 2018

In a media release, the provincial government wants to make sure B.C. drivers pay ICBC premiums that more fairly and accurately reflect the risk they represent on the roads.

ICBC’s current rate structure is more than 30 years old. It is built around insuring the vehicle rather than the driver and allowing discounts to drivers despite multiple crashes. Combined, this has resulted in British Columbians with crash-free, clean driving records subsidizing bad drivers, including those with multiple accidents. David Eby, Attorney General, said the submission ICBC is making to the BC Utilities Commission (BCUC) will include revenue-neutral proposals aimed at levelling that playing field.

“We want to modernize ICBC so that British Columbians pay according to their crash history, driving records and level of risk, and take responsibility for their driving habits. It’s only fair,” said Eby.

“Right now, the system is broken. A driver with no crashes could be paying the same premium as a driver with three at-fault crashes in a year. We heard from British Columbians that their insurance rates need to be fair and we agree — good drivers shouldn’t have to continue paying more to cover the costs for those who cause crashes or present a higher risk on our roads.”

The proposed changes align with feedback government received from nearly 35,000 British Columbians on how to make insurance fairer. Key proposed changes to basic insurance include:

  • Moving to a driver-based model, so that at-fault crashes are tied to the driver and not the person who owns the vehicle;
  • Increasing insurance discounts for drivers with up to 40 years of driving experience, up from the current limit of nine years; and,
  • New discounts available for vehicles with original, manufacturer-installed automatic emergency braking technology and for vehicles driven less than 5,000 kilometres per year.

If approved by the BCUC, these changes will benefit an estimated two-thirds of ICBC’s customers. The changes will not increase the total funds that ICBC collects through basic policies, but instead will rebalance individual driver premiums and reset the way rates are determined.

“The changes we are proposing are the most significant updates to how ICBC’s basic insurance premiums are set in more than 30 years,” said Joy MacPhail, ICBC’s board chair. “When British Columbians were asked for their feedback on this topic, one message came out loud and clear — lower-risk drivers shouldn’t be paying the same as some high-risk drivers. We wholeheartedly agree.”

Other proposed changes include:

  • Basic insurance discounts for inexperienced drivers will be adjusted to better reflect their risk;
  • At-fault crashes will have a larger impact on the premium a driver pays;
  • Rate classes and territories data will be updated for the first time in more than 10 years to reflect significant changes in traffic density, population growth and changes in the urban infrastructure; and,
  • An increase to the Driver Penalty Point (DPP) and Driver Risk Premium (DRP) programs of 20% in fall 2018 and 20% in fall 2019, as previously announced.

As part of these changes, ICBC is proposing a “transition cap” that limits how much the premium can change annually based on a customer’s driving record and at-fault crash history. Most customers will fully transition to their new basic premium within three years under the proposed changes.

The B.C. government has directed ICBC to file an application with the BCUC by Aug. 15, 2018. Subject to approval, the changes would come into effect September 2019. Separately, the government has also directed ICBC to move the timing of its basic insurance rate application to the BCUC from late August to December to align any rate change with the other product changes already announced.

Quick Facts:

  • ICBC basic insurance is the mandatory coverage drivers need for a vehicle in B.C. It helps ensure that British Columbians who own and drive a motor vehicle in this province are protected with a basic level of coverage.
  • Under the model ICBC currently uses to determine premiums:

    • A customer at the highest level and receiving the top discount can have up to three crashes in one year and still pay the same basic premium as a driver who is crash free.
    • Over 40% of claims are forgiven each year, which means the cost of those claims is borne by everyone, including drivers who do not cause crashes.
    • At-fault crashes affect the vehicle rather than the driver, allowing some drivers to hide their true risk and avoid paying a fair rate.
  • Based on today’s rates, in the first year of this transition, an estimated 67% of customers would see basic insurance premiums that reflect a lower risk:

    • 39% of all drivers — up to $50 reduction
    • 13% of all drivers — between $50 and $100 reduction
    • 15% of all drivers — more than $100 reduction
  • Based on today’s rates, in the first year, an estimated 33% of customers would see basic insurance premiums that reflect a higher risk:

    • 11% of all drivers — up to $50 increase
    • 5% of all drivers — between $50 and $100 increase
    • 17% of all drivers — more than $100 increase

Categories: General

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