From no-fault hater to no-fault lover: The inside story on David Eby's decision to revamp ICBC
Credit to Author: Rob Shaw| Date: Fri, 07 Feb 2020 02:09:50 +0000
VICTORIA — Attorney General David Eby’s conversion from an outspoken opponent of no-fault insurance to architect and lead champion of B.C.’s new no-fault system came slowly, over 14 months.
It took an admission to himself that he’d misjudged the ferocity of the fight against reforms by personal injury lawyers, horror stories about how the existing system still fails customers, the help of top officials from Manitoba and Saskatchewan, and the warnings of massive rate hikes in the next few years even though his contentious previous reforms were successful.
“I had too much confidence that the legal system could change more quickly than it actually can,” Eby told Postmedia News. “And I had an inadequate understanding at the time how concerned British Columbia were about their car insurance rates.
“I also had an inadequate understanding of how poorly the existing system supports people who have been in accidents.”
Eby has been quietly working to develop no-fault auto insurance in B.C. since November 2018, after being convinced only dramatic reform could keep premiums from soaring.
The attorney general convened a group of deputy ministers in late 2018. They began to investigate the policy merits of no-fault insurance. Such a system bans most lawsuits, which would save ICBC billions in legal fees. Earnest discussions began in spring 2019. Top officials from Manitoba and Saskatchewan were brought on board to help.
The journey culminated with a series of cabinet meetings on no-fault that started last summer and continued until December, when Premier John Horgan finally gave the green light to proceed.
Eby said he knew the system was unsustainable as far back as November 2018, when the Insurance Corp. of B.C. told him that his new cap on pain and suffering costs for minor auto injuries was on track to save $1 billion annually — yet wasn’t enough to halt a projected 36 per cent rate increase over the next five years.
“It’s not what people were asking for,” he said. “They were not saying do your best to keep rates around four per cent. They were saying where we are is too expensive for us. And reducing the benefits, I didn’t see as a very credible option.”
The NDP government was already feeling heat from motorists unhappy their premiums kept rising despite reforms at ICBC. A rate redesign in September 2018 meant the bill for inexperienced drivers jumped and in some cases exceeded the cost of university tuition.
The prospect of complex reforms, unpopular rate increases and facing more years of “chasing down additional savings” just to barely keep ICBC’s finances in the black was, Eby says, simply untenable.
B.C. Attorney General David Eby.
As well, it became apparent that legal challenges by personal injury lawyers to ICBC reforms, and an advertising campaign that targeted Eby specifically, were shaping up to be protracted battles.
“It was a street fight with many former colleagues in law, and some people I would even say friends in law, that fought every reform tooth and nail as hard as they could,” said Eby. “And I realized that it would be three- to five-year process to get to where we needed.”
Around the same time, a Vancouver woman wrote Eby a letter saying her car insurance bill had risen to $1,900 a year and she was struggling to afford to keep her home.
“I have nowhere else to go for insurance,” she wrote. “How is someone like me who lives in B.C. supposed to live?”
Eby wrote back that her insurance, while pricey, was still a pretty good deal. But he said it began to gnaw at him that his claim was wrong, because even her high rate was not buying her enough insurance to adequately cover her for a crash.
“I kept the letter on my desk,” Eby said. “It was a reminder I needed to do better.”
He also met a woman who had hit a moose with her vehicle and ended up quadriplegic. She had struggled to survive under ICBC’s old maximum of $150,000 in maximum medical costs. Eby said he learned even the new $300,000 level he’d set in 2019 was “totally inadequate” for her.
Eby said he realized the woman’s situation would have been dramatically better under a no-fault system where care could have continued through regular payments the rest of her life, instead of a one-time court settlement.
As he inched closer to no-fault, Eby had a problem. He’d already publicly ruled out no-fault insurance in 2017.
“If you roll into ICBC and say the problem is the lawyers, you are cutting off the one avenue people have had to get the rehabilitation and support that they need,” he told Postmedia News at the time. “So that’s why no-fault is really off the table for me.”
Or as he put it simply in another interview: “We’re not doing no-fault.”
Today, Eby admits he was wrong.
A key argument he raised three years ago — often repeated by critics of no-fault — was that ICBC had been so aggressive in fighting to reduce claims costs. So removing people’s ability to sue would take away the last weapon they had against a corporation that treated them poorly.
That’s still a concern, even as ICBC shifts to no-fault, Eby said. The only solution is a “significant cultural change” within ICBC, he said. No-fault would free the corporation from the “hypocritical position” where it has to rehabilitate injured drivers on one hand, and then on the other hand represent the at-fault driver in court to argue the victims aren’t really as injured as they claim.
“It means they can’t do either well,” said Eby. “People don’t understand what their job is. And it’s easy for someone to conflate denying benefits as doing what’s best for the corporation.”
The group of deputy ministers also took a hard look at either full and partial privatization of ICBC, which the Opposition B.C. Liberals have advocated. They also looked at Alberta’s model, which is a private system with partial payout caps set by government.
“The answer to that was no, and not only would it increase rates for everybody under 35 by about 17 per cent, but it would result in … us having to somehow absorb the existing liabilities at ICBC as well,” said Eby.
“So you’re talking about increased rates, as well as a hit to the government’s bottom line, and the same level of benefits currently.”
Last March, Eby heard the CEOs of the public auto insurers in Manitoba and Saskatchewan were visiting B.C. for an industry event. He asked to meet them.
Both provinces have no-fault insurance and less pressure on rates than B.C. Manitoba has applied this year for a one per cent rate drop. Saskatchewan, which has a hybrid system with an opt-out choice, hasn’t had a rate increase in five years.
When Eby sat down with the CEOs, he’d just announced that ICBC needed a 6.3 per cent rate increase in 2019.
“If I could describe their attitude towards B.C., it was like they felt sorry for us,” said Eby. “We seem to have the worst of two systems — a full tort system with the political accountability of a public auto insurer.”
Both Manitoba and Saskatchewan offered to help ICBC compile actuarial data on how, based on their experience, no-fault could produce savings in B.C. What followed was months of quiet work among the three provinces that produced a B.C. system that mirrors Manitoba’s structure, but with Saskatchewan’s higher benefits.
Eby said matters worsened in mid-2019 when the government’s attempt to limit the number of expert reports was challenged by the Trial Lawyers Association. ICBC saw $400 million in savings evaporate when a court sided with the lawyers.
Eby said he was also appalled by the case of an ICBC victim who received a $127,362 settlement but only took home $22,874 once legal costs were subtracted, including $9,000 in photocopy fees, as outlined in an column by Mike Smyth in The Province.
In that case, the law firm also lent the client money at 10 per cent interest to cover up-front legal costs it would later recovery directly from the settlement.
“So the person was paying interest essentially on their own money,” said Eby. “It just felt like one more excess that the system had had become completely disconnected from looking after the person that it was supposed to.”
He fired a warning shot to trial lawyers in October 2019: “In going after these reforms, they should be careful what they wish for, because there won’t be many options left for government after that.”
By then, Eby knew no-fault was coming.
“I had decided,” he said. “But I was still in the process of convincing my colleagues.”
Cabinet made the decision in December to proceed.
It was, Eby admits, “a long discussion.”
Now comes selling that decision to the public.