ICBC reported Friday, that it has posted a net loss of $582 million for the first six months of the current fiscal year (April 1 to Sept. 30, 2018).
According to a statement from the Crown insurer the loss is “reflective of the continued pressure ICBC is under from the rising number and cost of claims”.
Attorney General David Eby went on to say that the primary reasons are higher bodily injury costs, as well as claims taking longer to resolve, which often result in higher claims costs. A key driver of these costs is a growing trend toward plaintiff lawyers strategically building the value of the claim – costs which have to be paid for by ICBC ratepayers.
“For too long, financial problems at ICBC were ignored and hidden from the public, resulting in a $1.3-billion net loss in 2017-18. Unfortunately, ICBC’s second-quarter results for 2018-19 show that its financial position remains serious,” said Eby.
“These trends are becoming more severe. Since March 2017, the dollar value of settlements demanded by plaintiff lawyers for litigated files increased by 27 per cent . The average cost of closed litigated injury claims for the first six months of ICBC’s fiscal year rose from $100,427 in 2017 to $121,686 in 2018, a 21 per cent increase. Plaintiff counsel are also spending more to build their files, increasing their average cost of experts and reports by 20 per cent.”
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ICBC’s net claims incurred for the first six months of its fiscal year alone topped $3 billion, an increase of $634 million, or 26 per cent, over the same period last year.
“Given this situation, we are looking for ways to accelerate and add to our efforts to solve the financial problems at ICBC,” added Eby.
“Earlier this year, our government announced a suite of product changes to stem ICBC’s losses, provide enhanced care for people injured in crashes and to make insurance rates fairer. As a result of these changes, ICBC is projecting net savings of $1 billion annually. However, we won’t start seeing these savings until after most of the reforms take effect, starting April 1, 2019, after which we can expect more dramatic financial improvement.”
This significant financial loss comes after ICBC reported a net loss of $1.3 billion for its 2017/18 fiscal year, and means ICBC is now projecting to report a year-end financial net loss of $890 million for 2018/19.
“It is now clear that this government needs to look for even more ways – beyond what is already planned – to further reduce the escalating cost of claims,” said Eby.
“Our government is making different choices that will stem ICBC’s losses. We will continue to monitor ICBC’s financial situation and we are taking steps toward making B.C.’s auto insurance system work for people again.”
ICBC states that there are no signs that the ongoing and increasing claims cost pressures ICBC is experiencing, will abate without the major reform to the auto insurance product in British Columbia which government and ICBC are implementing.
“While our current financial pressures are clearly serious, they have been caused by an auto insurance system which has long been in need of substantial modernization – something that is now, at last, happening,” writes the auto insurer.
“These changes will shift the focus away from maximizing payouts to a care-based system – which makes taking care of people injured in a crash the top priority, with more money for the treatments and support they need to get better and less spent on legal costs.”
The government and ICBC are also modernizing ICBC’s 30 year-old insurance system to ensure all drivers pay premiums which more accurately reflect the risk they represent on the road.
In addition, a number of road safety initiatives are underway, aimed at lowering crashes and mitigating the current financial pressures on ICBC.
The growing claims costs pressures ICBC is facing will also need to be addressed with the next basic rate application which is due with the British Columbia Utilities Commission by December 15.
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