June 26, 2001
Kamloops Daily News



The Insurance Bureau of Canada has examined our public
insurer, ICBC, and found it wanting.  In their recent
full-page newspaper ads, they have a plan to make ICBC
better.

Or, more plainly, the Insurance Bureau of Canada wants some
of the action.  They  see the arrival of our new B.C.
Liberal government as a sign that ICBC is a plum ripe for
picking.  And they want to shake the tree.

The insurance business is straightforward -- collect premiums
and hope that you don't have to pay out claims.  Profits go
to shareholders.  In the case of ICBC, the shareholders are
you and I.  Last year, ICBC's investments in B.C. and road
safety programs paid dividends to auto insurance holders of
$100. 

Dennis Prouse, spokesman for Insurance Bureau of Canada was
not impressed by the dividend.  He told me that it was
"reckless, irresponsible, and politically motivated," to
return the money.  Surpluses should be kept in contingency
reserves, he said.  Private insurers keep a much bigger
rainy day fund.   ICBC has the luxury of financial backing
from the government.

ICBC insured drivers will likely have to pay that $100 back,
Prouse continued.   Higher than normal accidents this year
in the lower mainland are resulting in more claims, which
will push premiums up.  The transit strike is being blamed
for higher collision rates.  "How will drivers in Kamloops
feel about returning their dividend because of a strike in
Vancouver?", Prouse mused.

Another investment that has paid off for ICBC is road safety
programs. In Kamloops, ICBC funded the use of de-icing
compound on city streets. The result has been a reduction in
accidents, fewer claims, and greater profits for ICBC.  
According to ICBC, every dollar spent on reducing hazardous
road conditions saves two dollars in claims.

The idea that ICBC is innovative in road safety is plain
wrong says Prouse.  Programs like Road Star, graduated
drivers licences, and road safety improvements were all
started by private insurers.  ICBC is simply reacting to
competitive pressure, and competition is what the Insurance
Bureau of Canada would like to more of.

Prouse doesn't like the idea that private insurers pay taxes
and ICBC doesn't.  Last year, Canada's private insurers paid
$3.7 billion in taxes.  On top of that  B.C. drivers pay an
auto premium tax of 3.3% that most aren't aware of.   I
don't see that as a consideration since drivers pay the same
tax elsewhere on private insurance.

The ads from the Insurance Bureau of Canada point to a
Pollara poll that shows that British Columbians prefer a
system which allows full competition between the
government-run ICBC and private insurers (81% in favour). 
But the same poll shows that 73% of ICBC claimants are
satisfied with the way ICBC dealt with their claim.  Not as
satisfied as Ontario at 85%,  but dissatisfaction with ICBC
was connected to dissatisfaction with the NDP government.

No doubt private insurers will be able to offer reduced
premiums to low-risk drivers.  If drivers don't get in
accidents and don't file claims, the profits are easy
pickings.  The catch is that private insurers will have to
charge youths and high-risk drivers more than ICBC does.  As
a result, high-risk drivers will choose ICBC and low-risk
drivers will choose private insurers. 

If ICBC is stuck with high cost claims and private insurers
are left with the profitable side of the business, that will
not be good for ICBC.  The Insurance Bureau of Canada claims
that they want to make ICBC better.

Public insurance is cheaper for everyone because the goal of
public insurance is not to make money but to provide a
public service.   And ICBC can reduce injury and save more
lives because of the scale of ICBC's operation.  Since 1996,
injuries have been reduced by 10% -- 2,500 fewer injuries a
year.

Like public health insurance, public auto insurance has less
overhead and duplication of administration.   It seems to me
that public insurance is a better idea.  If a private
insurer is extracting a profit from insurance, and that is
the goal of any business, then eventually British Columbians
collectively will pay more for insurance.  

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