Getting to know ICBC

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This is an old and somewhat popular thread from a previous incarnation of my webpage.  I'll archive it here.  I've put copies of the old documents up on my webpage as the originals have been removed from the ICBC page.  You could likely also find them using the WayBack Machine.


I moved to British Columbia in July of 2007, and promptly realized British Columbia is unlike any other place I've lived before. BC is green and the climate is mild. The people are athletic and healthy (at least compared to other parts of Canada), and the culture is mellow and more mediterranean than the rest of Canada. My colleagues and I go out to have a sit-down lunch every day, with tea and coffee afterwards. But I miss the blue skies of Alberta, the thunder and lightning storms, and yes I miss the beautiful frozen winters and the outdoor skating. In my eyes, there's two negatives about BC. The grey, wet boring winters, and the (seemingly) broken institutions of society. That might sound strange coming from somebody from Alberta, but I'm increasingly convinced it's true -- the institutions of BC are lacking compared to everywhere else I've lived. To me a glaring example is the Insurance Corporation of British Columbia (ICBC).
 
If you want to drive a vehicle on public roads in BC, you have to have insurance. Provided you're a BC resident, the only company that can legally insure you for your basic insurance is ICBC (edit: I have since found out this might not be quite true. See the comments below). ICBC is a provincially-owned government-run monopoly. Insurance rates are set by the BC Utilities Commission, which is an arm of the provincial government.
 
Consider this. I have an 1140cc motorcycle which has been insured in several places: Rochester NY, Eugene OR, Edmonton AB, Bonn Germany, Paris France and now Victoria, BC. Insurance for this motorcycle was pretty cheap in Alberta at $160/year. In France my bills added up to about 400 EUR per year. In Germany, it only cost 200 EUR per year (both my European policies insured the bike for all Europe and North Africa). My insurance in Eugene and Rochester was a bit more expensive since it was comprehensive insurance. These policies were about USD $700-$900/year. 3rd party liability insurance would have been in the USD $300/year range at that time. In BC minimal insurance for this motorcycle is $1200/year. At first I thought, this has to be wrong. But I've since learned this is really the insurance rate that is deemed fair in BC. I would like to know why this is considered fair.
 
To find out, I've been talking with the ICBC Ombudsman, Janet McKennon. She originally tried to convince me that I'm getting higher-quality insurance for my money in BC. I tried to convince her that such a statement was very difficult to confirm, and even if it was true, my BC insurance policy is certainly not worth 8 times what my Alberta policy provided me. For the kind of money ICBC is charging me, I'd expect free fuel, oil, tires, and someone to occasionally come into my apartment and clean up after me. Janet eventually helped me to put in a Freedom of Information and Privacy Act request for the ICBC budget, relating specifically to motorcycles. Janet put me in contact with Deborah Hebert, who responded to my information request. Deborah sent me selected portions of these documents:
 
 
Page 330 of the rate design volume 2 is one of the most relevant bits. There are three particularly interesting columns.
  • Number of written vehicles is the total number of motorcycle insurance policies.
  • Earned premiums is the amount of money ICBC takes in for the year on its active policies.
  • Claims and adjustment expenses incurred is the amount of money lost on those insurance policies.

If you add up earned premiums - claims and adjustment expenses over the three 2006 rows (third party total, accident benefits, underinsured motorist) you get the net income of ICBC (presumably this is neglecting their other main expenses -- employee salaries and such). But it gives a nice idea of what the ICBC margins are like. So I take my calculator and add things up to get this figure: $374.15 is the net profit ICBC makes per motorcycle policy, per year (based on the 2006 figure). Considering that this number is more than twice what my motorcycle policy cost in Alberta, I would call this amount of profit extremely excessive.

It's curious that if you go back to previous years, you get rather different numbers. Take a look at the claims and adjustment expeses -- from 2002 to 2005 it shows a steady increase, but then in 2006 there is a sudden drop. I have yet to discover the source of this drop. For example, if you compute the per-policy net profit per year in 2005, you get a loss of $12.86, which means motorcycle policies in 2005 were subsidised by other vehicle insurance policies.
 
To anyone that's interested, the ICBC webpages contains loads of information.
 
  • This document contains detailed accident statistics for BC are available here. The most interesting aspect of the document is that it shows the number one type of multi-vehicle accident for a motorcyclist in BC is being rear-ended at an intersection.

California accident statistics for a long time have the number one multi-vehicle motorcycle accident being the failure of the car to yield the right of way (from the "Hurt Report"). The comparable ICBC stats appear on page 92 of the 2005 report. I think the reason for the difference with the California statistics, is that the ICBC stats separate "Left turn across oncoming traffic" with "intersection - right angle". If you combine those two numbers, you get something that looks more like the Hurt Report.

Technically there appears to be an "out" clause regarding having to insure through ICBC.   A corporation is allowed to insure their vehicles elsewhere.  Notice that all big car rental companies in BC tend to register and insure their vehicles outside of BC.   Do you know anyone that has gone this route, incorporate in a State, register, plate and insure outside of BC?  

ICBC now attempts to partially address the complaint above with this webpage

In case the webpage changes form, here is the quote:

Why is motorcycle insurance more expensive in BC than other provinces?

Thanks to our mild climate, our motorcycle season is a lot longer here than in other provinces.

When you consider the lack of physical protection motorcycles provide and the longer riding season, you can understand why claims costs such as medical treatment, rehabilitation, and disability payments, have such a significant impact on setting premiums.

When we set our rates for motorcycle premiums, we have to look at a lot of variables, in particular:

  • crash history
  • driving experience
  • cylinder displacement, and
  • the need for rates to adequately cover claims costs.

Insurance in other provinces might use a different rating criteria, so their types of mandatory insurance coverage may vary. 

Look at the form of the response!  We have a longer driving season.  So does Oregon, and their prices are cheaper.  You can ride much of the year in southern Ontario, as well -- their weather is much like Rochester's.   

The second reply is that motorcycles are more dangerous than cars.  That isn't a reply to the question.  Motorcycles are more dangerous than cars in Alberta, too, and they have a far superior insurance price-point than ICBC. 

The third response is to give a vague description of how they set premiums, which at this level of detail isn't really any different than any other insurance company, or province. 

The very last point only hints at the real reason: the BC Utilities Commission sets the rates. The BC Utilities Commission appears to have shoddy methods that are not reflective in the actual costs (to ICBC) of offering motorcycle insurance.