Don’t kill ICBC, the goose that lays golden eggs

We bleed it dry and grumble, Richard Littlemore writes.

Just to be contrary, I’d like to suggest that the Insurance Corp. of B.C. — characterized so recently by Attorney General David Eby as a financial dumpster fire — is actually a valuable public asset, one that British Columbians would embrace if they realized the extent of its contribution. The problem, which Eby only partly diagnosed, is that the ICBC’s political masters have abused the corporation so badly that it’s in danger of losing all public support.

To review the recent, hysterical narrative, the ICBC is the monolithic public auto insurer with which we all must deal. It appears to be badly run — at least that might seem a fair conclusion when a once-profitable monopoly threatens a deficit of $1.3 billion.

Clearly the shortfall is a problem, and I’ll leave it to the lawyers and actuaries to debate whether Eby’s short-term fix — a cap on softtissue injury claims — is a sufficient short-term solution. But the larger problem (if you’ll forgive a farmyard full of metaphor) is that the B.C. government has been treating the insurer as both a cash cow and a workhorse, and being less than fully transparent about the implications.

On the cash cow front, provincial politicians have been milking the ICBC for years, sucking a net $2.1 billion into general revenue in the last decade alone. Christy Clark and Gordon Campbell’s Liberals loved this tactic; they helped balance the provincial budget by demanding dividends from Crown corporations.

(Even worse, the Liberals accumulated offthe-books debt in the same way, drawing more than $5 billion in dividends from B.C. Hydro even as that organization hemorrhaged money in ill-considered capital projects. Because the resulting shortfall appeared only on B.C. Hydro accounts, Clark’s Liberals were able to claim they were balancing the provincial books and protecting B.C.’s credit rating, even while piling up profligate debt levels at Hydro.)

Imagine how much better the corporation would look if that $2.1 billion was sitting in retained earnings.

On the workhorse front, the provincial government uses the insurer to run all provincial licensing services, thus covering an expense that would fall on provincial taxpayers if B.C. had a private insurance regime. It’s difficult to tease those expenses out of the ICBC budget, but it’s easy to see how much the insurer collects in licensing fees and fines. Last year, it took in $572 million — which also went directly into provincial coffers.

So, ICBC customers pay all auto-related administrative costs while the government spends the revenue, not on auto insurance claims or even, necessarily, on transportationrelated investments. In fact, the ICBC pays for some of those, too. Last year alone, the corporation spent $41 million in road improvements and traffic safety programs and more than $50 million in road safety and loss-management services.

None of this is bad, necessarily. It makes sense for an insurance monopoly to spend small sums fixing dangerous street corners when those improvements will reduce collisions and cut insurance claims by a larger amount. It makes sense for an insurance monopoly to manage licensing and fines, creating a single, helpful service point for administration and enforcement (if you don’t pay your fines, you don’t get your insurance). Such efficiency would never be available in a private insurance environment.

But it doesn’t make sense for taxpayers to reap billions of dollars in good times and then condemn the public insurer when claims go up. Imagine how much better the corporation would look if that $2.1 billion was sitting in retained earnings, ready for this rainy day?

Longtime ICBC watchers will recall the short, impressive tenure of the late Nick Geer, a senior executive to Jimmy Pattison who the Campbell Liberals recruited in 2001, ostensibly to privatize auto insurance. No ideologue, Geer studied the business and concluded that privatization would be a mistake: the system works.

But government interference has since endangered the Crown corporation’s solvency and a lack of transparency has undermined public support. The current government has a chance to fix that, and the fate of a worthy enterprise hangs in the balance.