Chuck Byrne: Auto insurance in B.C. – the road ahead
Credit to Author: Stephen Snelgrove| Date: Tue, 13 Aug 2019 19:48:26 +0000
In Canada, we grow up with cars. Getting a driver’s permit is a teenage rite of passage, and along with the promise of freedom is an inferred right to drive.
I use the term “right” to drive, but it is, of course, really a privilege — that is accompanied with great risk and personal and financial responsibility.
This will be the realization, I hope, of all drivers in B.C. as they experience the long-overdue transition to driver-based auto insurance starting in September. Yes, B.C. auto insurance has always had a tie to the driver, but driver accountability will be much more in focus with the coming rating changes. Most B.C. drivers will see improved auto insurance pricing, while a significant number will see premiums rise dramatically — but they still will be afforded the chance to change their driving habits before the pricing boom is fully levelled at them.
Drive badly or in high-risk ways and you will pay for it or, in the worst cases, even lose the privilege. Respect the laws and use your driving skills effectively and with caution for those around you, and you will be rewarded with lower premiums. It’s that simple. Repeat this to yourself the next time someone speeds excessively past you or cuts you off. Use a safe driving mantra, repeatedly, as I often do these days.
Fairness in pricing has been an experiment in B.C. since the late 1970s when the then-newly elected Social Credit party banned the use of age, gender, and marital status in pricing. Regardless of that brave experiment and its consequences, much good has been achieved along the way.
• In 45-plus years, every B.C. driver has consistently had access to universal coverage and limits at an affordable price — over their entire driving life. No age group, demographic, or region has suffered a loss of access to vehicle insurance. So-called competitive auto insurance markets in Canada can’t make that claim.
• Public auto insurance ensures that all drivers in B.C. have the same access to auto insurance, which protects them as well as all other road users. B.C.’s estimated uninsured rate is less than two per cent — much lower than other jurisdictions in North America where four to 20 per cent of drivers are uninsured.
• Approximately 91 per cent of B.C. premiums are returned to customers in the form of claims payments, which compares to approximately 56 per cent for private auto insurance markets in Canada.
• Non-discriminatory rating, which does not base rates on age, gender, or marital status.
• Efficient linkage between licensing, motor vehicle registration, and basic liability coverage eliminates redundancy.
• Historically ICBC has offered comparatively high accident benefits, even with the recent $5,500 cap on minor injuries.
• Efficient collection of motor vehicle debts and fines by the broker force.
Universally available coverage and limits, not a free-for-all of profit-seeking competition, is what provides stability to the societal dilemma of auto insurance. The private insurers and their never-ending battle with government and regulators in other provinces is not the model B.C. or Saskatchewan, Manitoba, or Quebec should aspire too. Been there … suffered that.
History speaks for itself. It isn’t about the societal dilemma in the other provinces; it is about the almighty buck/rate of return, which is why, in the private auto insurance market, so few insureds benefit with lower premiums or any type of sustainable market stability.
The highly politicized lobbyists for private insurance here in B.C. leave out a lot of detail when making their pitch. Here are a few realities of private auto insurance/competition:
• Someone in a less-than-desirable postal code will be affected by higher premiums, often with no explanation provided.
• An average or lower credit score may negate access to coverage and often increases premiums.
• Vehicles whose value or attributes don’t hit the underwriting sweet spot often “need not apply.”
• Drivers under age 25, if coverage is offered, pay exorbitantly simply due to their age.
• Likewise, drivers over age 65.
• Residential insurance claims can affect suitability for auto insurance.
The points above are why I have been a proponent of public auto insurance since shortly after arriving in B.C. in 1990. Full disclosure: In those days I managed an insurer’s operations here in the province that in a minor and highly profitable way competed against ICBC. The truth is we unfairly competed against ICBC to raid the highly profitable auto insurance customers.
I am not proposing a nation-wide shift to public auto insurance, but I will predict one is increasingly possible considering the need for balance between social responsibility, social privilege, and our society’s economic habits of necessity. Those factors, combined with the greed apparent for auto insurance profits, keep the non-public auto insurance provinces in the rest of Canada in a constant cycle of customer turmoil and regulatory recalibration.
Governments will always be involved with auto insurance — through regulation, oversight, sponsorship, whatever. The industry would be wise to embrace that fact. Pundits and lobbyists who are calling for less government involvement in the private auto insurance provinces are dreaming of profits and personal gain seemingly as they ignore the imbalance of what they propose. It is a tad obvious. I wonder why they are blind to it?
Chuck Byrne is the executive director and COO of the Insurance Brokers Association of B.C.
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