Battered ICBC to take $1.18 billion hit this year

VICTORIA B.C.’s public auto insurer continues to hemorrhage money as the attorney-general says a lastminute rush to settle claims before a new cap comes into effect is driving up costs.

The Insurance Corp. of B.C. revealed Thursday that it’s projected deficit for the current fiscal year is $1.18 billion — roughly $290 million worse than the last estimate just two months ago.

“It’s really frustrating what’s happening,” ICBC CEO Nicolas Jimenez said. “These trends we’re seeing are not sustainable, whether it’s increases in disbursement costs, increases in settlement demands, which of course is leading to the cost to close litigation injury claims. These are all up over 20 per cent.”

The losses are the latest update to a financial situation Attorney-General David Eby has called a “dumpster fire” at ICBC. Rising claims and legal costs caused the Crown auto-insurer — which enjoys a monopoly on basic vehicle insurance in B.C. — to post a $1.3-billion loss last fiscal year.

If the estimates hold for the current fiscal year, ending March 31, it will mean ICBC lost almost $2.5 billion over two years.

The average cost of closed-injury claims rose 20 per cent to $121,826 in 2018, ICBC said. Plaintiff payouts also increased 21 per cent in the last year, with the increased use of medical experts that ICBC pays for. Eby said ICBC has had to crack down on settlement offers, which in some cases have also risen 20 per cent since last year, by bringing in senior adjusters and a new settlement guideline.

ICBC has been deluged by personal injury lawyers trying to get as much money as possible from minor-injury-files cases that, after April 1, will be subject to a $5,000 cap for pain and suffering, said Eby.

“What we’re seeing is a totally understandable reaction from the plaintiff bar that is very concerned about changes coming, to get as much as they can on the claims on their desks right now because they don’t know what the new system will be like,” said Eby. “It’s a human reaction. ICBC built space into their projections to anticipate it, it just wasn’t enough space.”

The comments will likely escalate a war of words between Eby and the B.C. Trial Lawyers Association, which said this week that ICBC’s losses are being inflated for political purposes and that Eby’s proposed cap and new civil tribunal system for cases valued below $50,000 may be challenged for being unconstitutional.

ICBC in its report Thursday also pointed to “an increase in the number of large-loss claims which run into hundreds of thousands of dollars each, in particular, largeloss injury claims from prior years continue to grow in cost.”

Eby zeroed in on the rising use of expert reports in claims trials, the costs of which are usually born by ICBC.

There’s now an average of six medical experts retained per file (on injury cases in excess of $100,000 within three months of trial), which is more than is allowed under federal law for a major criminal case without leave from a court, ICBC said.

“The big one we’re concerned about are the cost of export reports,” said Eby.

He said he’s working with senior lawyers, judges and other stakeholders and hopes to announce reforms within the coming days.

The changes to settlement guidelines, combined with the looming reforms on expert reports, should help stabilize the corporation until April when the new cap on minorinjury-claims payouts is expected to start saving the corporation $1 billion annually, said Eby.

“The key for me is we’ve got to make it to April 1,” he said.

Eby ruled out increasing ICBC’s rate application beyond 6.3 per cent. “I don’t think it’s fair to go back to British Columbians when the issues are structural and the issues are the system we’re working in, and we can fix the system.”

Eby built upon his description of ICBC’s finances as a dumpster fire in explaining what he plans to do next. “We’re headed in the right direction,” he said. “The fire trucks are finally on scene. We’ve just got to get the water through the hoses.”

The new quarterly numbers also mark the first time ICBC has produced a negative result on the minimum capital test that is used as a measure of safety for insurance companies.

ICBC had been required by law until last year to keep at least a 100-per-cent minimum capital test — basically the ability to ensure the company has enough cash on hand to pay out all its claims in an emergency.

The rate had been 193 per cent in 2014. On Thursday it dropped to -17 per cent.

ICBC argued it still has claims reserves of $13.5 billion and an investment portfolio (also performing poorly) of $15.6 billion to draw upon in case of an emergency. However, Eby has said the solvency of the corporation is at risk.