SHOCK, AWE: ICBC $1.3B IN THE RED
Tough decisions coming to avoid $400-a-year hike in premiums
British Columbia’s public auto insurer has driven over a financial cliff and the damage is far worse than anyone had feared or predicted.
On Monday, ICBC will announce a staggering projected operating loss of $1.3 billion for the current fiscal year.
That’s more than $1 billion higher than projected just three months ago.
The financial hemorrhaging — the Insurance Corp. of B.C. is losing $3.5 million a day — could force massive premium hikes on B.C. drivers and possibly tilt next month’s balanced provincial budget into a deficit.
The tsunami of red ink is revealed in a series of jaw-dropping internal government documents I obtained.
An ICBC “statement of operations” for the nine-month period that ended Dec. 31 shows a “net loss” of $935 million and a projected total loss of $1.29 billion by the end of the current fiscal year on March 31.
“ICBC’s year-end loss is now projected to hit $1.3 billion,” says a private briefing note prepared for Attorney General David Eby. “Now, B.C. drivers are looking at a rate hike of at least $400 more in their premiums by next year unless we take immediate action to keep rates more affordable.”
The shocking losses are much higher than what was projected just three months ago, when the fiscal year-end loss was pegged at around $200 million.
“The dramatic increase in losses has been driven by the emergence of many large, extremely costly claims,” the briefing note says.
Eby earlier ordered ICBC to conduct a fresh review of unsettled auto-accident claims, many stretching back years, and provide a financial update to the corporation’s board of directors.
“While the rise in the number of claims and the associated costs are not new issues for ICBC, what has been unexpected is the degree of the cost escalation from these claims and the significant number of older claims — dating as far back as 2010 — that are now extremely costly.”
The ICBC board — chaired by former NDP finance minister Joy MacPhail — got the bad news at a meeting Thursday that a source described as a “shock-and-awe moment.”
The briefing note prepared for Eby, the minister responsible for ICBC, blamed the previous Liberal government for the mess.
“Years of bad decisions and mismanagement by the former government have meant a fiscally unsustainable position at ICBC,” the briefing note says. “We never expected to find this level of mismanagement by the previous government.”
The New Democrats are slamming the Liberals for not acting on recommendations contained in a 2014 report by consultants Ernst and Young.
The report called on the government to impose a cap on large court-ordered financial awards paid to victims who suffer “minor” soft-tissue injuries like whiplash in auto crashes. British Columbia is the only province in Canada where such awards are still unlimited.
But the Liberal government stripped the controversial recommendation out of the report before passing it on to ICBC.
“The response from government was, ‘We’re not prepared to consider that,’” former Liberal finance minister Mike de Jong told Postmedia. “There was no point presenting it as an option.”
But now the NDP says the Liberals’ inaction has plunged ICBC into a financial crisis.
“If action was taken, this situation could have been prevented,” Eby’s briefing note says.
A source tells me the NDP government now feels it is forced to move forward with the cap on injury claims and several other “aggressive” moves to slow down ICBC’s financial losses.
The measures include a tougher crackdown on distracted driving, expanded red-light cameras at intersections, increased insurance premiums for bad drivers and new rules to prevent ICBC from getting ripped off by price-inflating auto-body repair shops.
The moves will be controversial and have already sparked a backlash by personal-injury lawyers, who started a campaign to fight financial caps.
“ICBC wants a cap system to solve their financial woes, but punishing victims is not the answer,” says the ROAD (Rights Over Arbitrary Decisions) B.C. campaign.
But the government said only “drastic” measures will prevent large insurance rate hikes of up to 20 per cent on drivers.
“The amount of basic insurance premiums ICBC is collecting from customers is not covering the increasing amount they are paying out in basic claims costs,” says the Eby briefing note.
The note also slams the Liberals for taking more than $1.2 billion out of ICBC’s accounts and transferring the “excess capital” into government coffers.
“ICBC’s year-end loss is now nearly the amount the former government siphoned out of ICBC while ignoring the needs of B.C. families.”
A government source told me the losses have left finance ministry officials scrambling ahead of the provincial budget, to be presented Feb. 20 by Finance Minister Carole James.
James promised a balanced budget, but the source told me officials are now studying the “implications” of the ICBC losses on the commitment.
Hang on to your wallets. This one could get uglier.