Private Auto Insurance

July 8, 2003

Moving Backwards on Auto Insurance

When Premier Campbell meets his counterparts from across the country, they must wonder why BC is moving contrary to other provinces on auto insurance. On the same day that a committee of Alberta MLAs called for an end to setting premiums based on age, BC declared that it would eliminate its ability to regulate private auto insurance premiums.

ICBC's head, Nick Geer, "corrected" the impression left by his earlier trial balloon on charging young and old drivers higher premiums for "optional" coverage. ("Optional" coverage is only "optional" for those who have nothing to lose. Anyone with a future income that could be attached or assets that could be seized needs more than $200,000 in liability insurance.) Geer has now offered clarification by saying that only young drivers will be the victims of ICBC rate discrimination according to current government policy. According to rate comparisons provided by the Consumers Association, that means that a teenager who drives to school or a job could cost her family an additional $2,000 in premiums. Although Alberta has purely private auto insurance, it is talking about regulating the industry so as to prevent rating based on age.

The "discussion paper" issued by the Ministry of Finance contains warnings that it does not necessarily reflect government policy. Page 37 of that very legalistic document takes a much different tone when it mentions the sections of the Insurance Act that provide for regulation of private automobile insurance rates. It says "It is proposed that sections 179 to 187 be repealed, consistent with the policy decision not to regulate optional automobile insurance rates." The policy decision goes in the opposite direction from the rest of the country.

July 7, 2003

BC Readies to Deregulate Private Auto Insurers

Young and old drivers will get hit when ICBC increases premiums for optional coverage. The term "optional" is misleading. The mandatory basic coverage is just $200,000 worth of third party liability (as well as coverage for uninsured motorists, medical, hit and run, and a complicated inverse liability that covers those jurisdictions that limit third party recoveries). Many people think that $5 million in liability coverage is necessary, and most people want at least some form of collision coverage for repairs to their vehicle.

Costs for what most would consider to be an adequate package to meet their needs could go up by $1,000 for drivers under age 25 or over age 65. The same government that allowed tuition fees to double and that cut Pharmacare is once again going after the young and the old.

A page on the ICBC website says that premiums are set depending on rate class (pleasure or business use, etc.), where you live, your claim record and what vehicle you drive. Now they are going to add age as a factor for determining rates for "optional" coverage. What if they discovered that people of different races had substantially different accident records? It is not likely that the courts would let ICBC, or any insurer, get away with setting premiums based on race, so what is different about setting premiums based on age?

ICBC will argue that the automobile insurance industry has used age as a rating factor in other jurisdictions, and that it is accepted because it is a justifiable grounds for discrimination. Ultimately that is a question of public policy which is determined by the provincial government. The Campbell government has made it clear that it stands on side with private insurers.

At the same time that ICBC is publicly musing about increasing rates based on age, the Ministry of Finance has published a discussion paper on changing the Insurance Act. The news release says that the paper is very technical, and it is. It is aimed at lawyers and insurance companies in order to get feedback on what unintended consequences might flow from technical changes in the Act. The changes deregulate the private automobile insurance industry. The current Act requires the forms (the essence of the private insurance contract) to be approved by the Superintendent, and it provides for regulation of premiums set by private automobile insurers. The Campbell government is backing away from any regulation of private automobile insurers that might protect the public. It is doing that at the same time that other provinces are rushing to regulate the industry. In New Brunswick, Premier Lord's majority Conservative government was almost wiped out over public reaction to hikes in automobile insurance premiums.

The Campbell government is either blinded by its own ideology, or it feels that it is immune from public reaction. New Brunswick's surviving Conservatives now know better than to hurt young and old drivers while deregulating private insurers.