EBY FORCED TO SWERVE
More change coming at ICBC
VICTORIA B.C.’s Crown auto insurer is on the brink of insolvency and the province’s attorney general has unveiled last-ditch reforms in an attempt to stave off a taxpayer bailout.
David Eby announced Monday the Insurance Corp. of B.C. and plaintiff lawyers in automobile injury cases will be allowed to use one expert and report each for fasttrack claims valued at less than $100,000 and up to three experts and reports each for other claims.
“The benefits of the adversarial system are what we’re trying to preserve: the idea that people can have a lawyer represent them, a system and a claim,” he said. “What we’re trying to address are the excesses of the system that don’t advance any interests. It doesn’t advance any interest to have six-plus experts on a claim ... to have a $50,000 expense to resolve a $100,000 claim.”
The sudden move was necessary, said Eby, because ICBC projected last week it will lose $1.18 billion in the fiscal year ending March 31, creating a $2.5-billion loss over the last two years. The expert report cap will save about $400 million this fiscal year and $30 million a year thereafter, Eby said. That will be on top of an estimated $1 billion in savings to come after April 1 when pain and suffering claims on minor injury cases will be capped at $5,500.
Those caps will address roughly 80 per cent of all ICBC claims cases with the crackdown on expert reports targeting the remaining 20 per cent of cases, said Eby.
ICBC’s latest financial figures reveal its “minimum capital test” — a benchmark of an insurance company ’s cash on hand to pay out all of its claims in an emergency — sits at minus-17 per cent. In 2014, it was at plus-193 per cent.
“They are insolvent, no question about it,” said Richard McCandless, a retired public servant who analyzes ICBC’s finances. “Go to any accountant and they will say if your liabilities exceed your assets, you are insolvent.”
ICBC is a Crown corporation, so theoretically it cannot go insolvent because it would be backstopped by the provincial government. Eby ruled out a bailout in the provincial budget, suggesting ICBC has almost $14 billion in claims reserves.
“Those reserves they are referring to are largely spoken for with their past claims,” said Aaron Sutherland, vice-president of the Insurance Bureau of Canada, which represents private insurers and advocates for an end to ICBC’s monopoly on basic insurance.
“It’s right to question how are you paying for future claims? A claim that comes in today, do you have anything on hand to pay that? More importantly, if all the claims came due today and ICBC had to settle everything today, could they afford to do it? It looks like probably not.”
ICBC spokesperson Adam Grossman said the corporation also has $15.6 billion in its investment portfolio on top of claims reserves.
“We disagree with Mr. McCandless’ position — ICBC is not insolvent,” he said. “In addition to the reserves and portfolio referenced above, we are still generating sufficient cash flows from premium revenue and investment income, allowing us to meet our current obligations — this is the key point and we are not, therefore, being backstopped by government.”
Eby has ruled out allowing ICBC to increase its next rate hike, which will be 6.3 per cent on April 1.
Eby suggested there could be more reforms coming if ICBC losses continue to mount. He pointed to the United Kingdom’s legal reforms on automobile insurance cases, which caps experts at one joint expert only without the permission of a judge.
“In the U.K., they have an entirely separate set of motor vehicle court rules because they believe that claims are particularly unique and sufficient in volume to justify their own set of rules,” he said. “So we’re having a look at that to see whether court rules for motor vehicle claims make sense or broader reforms for the court rules make sense.”