ICBC requires major reform

Attorney General David Eby announced this week that the cost of basic and optional auto insurance from the Insurance Corporation of British Columbia for the average driver will rise by eight per cent, or $130 more a year, effective Nov. 1. He was quick to blame ICBC’s financial woes on the Liberal government, which he accused of mismanagement and “gutting” by “raiding” it of $1.2 billion since 2010.

However, a 203-page consultant’s report by Ernst & Young LLP, which analyzed ICBC’s business model and proposed recommendations to keep premiums affordable while covering its costs, made scant reference to the dividend.

The omission might be because the dividend was derived from revenue generated by the sale of optional insurance. Some of those proceeds were used to cover shortfalls between the premium revenue on basic insurance and the cost of paying out claims. Any balance remaining was then transferred as a dividend.

The concept of a Crown corporation paying a dividend to its single shareholder — the government — is hardly new or controversial. The NDP instituted the practice with B.C. Hydro in 1992.

When sales of ICBC’s optional insurance suffered a setback, the previous Liberal government said last November it would not take dividends from ICBC for three years.

The crisis facing ICBC is due to an increase in crashes, higher claims for repairs and injury and soaring litigation costs. Most other jurisdictions have opted for a comprehensive care model, in which claimants receive treatment rather than a cash settlement, or a hybrid model that caps payments for pain and suffering caused by minor injuries. The E&Y report presented scenarios that would save between $770 million and $1.4 billion a year, with annual premium reductions of $380 to $630. The government should adopt one and get on with it.