The Insurance Corporation of British Columbia (ICBC) which was, only a decade ago, a financially sound crown corporation, is on the ropes today. What happened?
The information ICBC offers on its “Rate Pressures” web page speaks of “significant external pressures on ICBC’s insurance rates”.
From 2014 to 2016, the number of crashes increased by 14 per cent, and their costs went through the roof. Injury claims jumped 16 per cent and vehicle damage claims by 15 per cent. The cost of injury claims has risen by 80 per cent over the last seven years. It would seem that the province’s drivers are responsible for ICBC’s financial woes. It is therefore reasonable that vehicle owners and drivers should now pay.
Not so fast! There are “significant external pressures” on ICBC’s finances about which the corporation’s web page is silent. The place to learn about those other “significant external pressures” is “Politics and Public Automobile Insurance in BC, 1970 to 2010”, a 23-page research paper authored by former Assistant Deputy Minister and Chief Financial Officer Richard McCandless and published by BC Studies in 2013.
According to McCandless the original idea was to create “a public Crown corporation to provide BC drivers with low and, as much as possible, relatively stable insurance for liability claims”.
By 2003, ICBC had attained “about 87 per cent of optional policies”, but as the corporation’s success did not dovetail with the government’s economic ideology, it imposed a new management model on ICBC. The government wanted “to create a more equal relationship with private insurers” for ICBC’s optional insurance coverage. By 2009, ICBC “had enough reserve capital to provide free auto insurance for a year”, and the BC Utilities Commission ordered it to reduce its surplus. ICBC considered programs such as good driver rebates, but the provincial government had other plans.
Resource revenues had sharply declined and the province was facing severe financial difficulties. The government reduced expenditures and raised some fees, but that was not enough to fix the 2010-11 budget. The government needed more revenues, but it lacked the political will and courage to raise taxes. The preferred solution was to order ICBC to hand over $778 million from its reserves.
McCandless reports that “ICBC’s legislation did not permit a transfer of its funds to the government”. This did not deter the government: it decided to treat ICBC as a “commercial Crown” similar to the Liquor Distribution Board. Looting ICBC’s reserves amounted to a tax on good drivers.
Why did the public not rebel when the government decided to convert ICBC from a piggy bank into a milking machine?
News then was dominated by a fight over the harmonized sales tax (HST). Prior to the 2009 election the provincial government had assured citizens that provincial sales taxes would not change. Once re-elected, however, and challenged by the global economic crisis, the province was tempted by a $1.6 billion transfer it stood to gain from the federal government if it implemented the HST. Public opposition to the HST led to the 2011 referendum, calling for the abolition of the HST and the restoration of the PST.
ICBC’s Board Governance Manual calls on the CEO to “foster a high performance corporate culture that promotes ethical practices, encourages individual integrity/accountability and social responsibility.”
Why then does ICBC’s web site not show, or in any way refer to the hundreds of millions of dollars the province drained from its reserves? The reason is, as McCandless observes in his conclusion, that the government exerts “more [political] control than ever over [ICBC’s] operations and rates through various cabinet directives”.
A steep hike in insurance rates is now a reality. More troubling though is the reality of governments withholding consequential information to mislead the public, thus making a mockery of commitments to “ethical practices, integrity, accountability and social responsibility”.