When ICBC wants to increase its rates, it must get approval from the BC Utilities Commission. The BCUC was appointed in 2003 as the independent regulator for ICBC, with the responsibility to approve rates for Basic Insurance. Most of us carry both Basic Insurance (the minimums required) as well as Optional Insurance. ICBC has a monopoly over the provision of Basic Insurance, while with Optional Insurance there is competition, with other insurance companies allowed to provide the insurance. When you purchase both Basic and Optional Insurance from ICBC, they keep your policy dollars in two separate notional “wallets”. The funds that go towards purchasing the Basic Insurance Policy are for accounting purposes kept separate from those collected from policy holders who purchase Optional Insurance. The only rate hike that the BCUC has to approve is an increase to Basic Insurance. If you are interested in reading ICBC’s application to the BCUC for the current rate hike that they are seeking, you can access it here. They are seeking a 4.9% rate increase which they say is necessary to make up for a projected short fall between revenue from Basic Insurance and pay outs. They point to increasing bodily injury claims cost as the reason for the required rate increase.
The submissions put forward by ICBC have a significant amount of information and data in them. In the submissions they state that “Claims costs are the most significant factor in determining ICBC’s Basic Insurance rates, and Bodily Injury claims are the largest component of claims costs.” The submissions go on to state that ICBC has seen an escalation in the number of crashes on BC roads with an associated increase in bodily injury claims and claimants with lawyers. The submissions also report that 20% of ICBC’s costs for bodily injury claims is attributable to ICBC’s litigation costs. ICBC states that this is the highest level of litigation costs to date that they have faced.
To address this issue, ICBC has done research to identify why claimants hire lawyers. They found through their research that claimants retained legal counsel because of “perceived lawyer benefits” including that lawyers reduce the hassle of dealing with ICBC, offer a chance for a higher settlement, provide access to more treatment and enable claimants to focus on their recovery. In addition, ICBC reports that many of their customers felt that hiring a lawyer gives them a greater sense of control by having an expert “fully on their side”. The BCUC during the 2015 application for a rate hike encouraged ICBC to analyze the issue that claimant’s views of the benefits of having a lawyer are largely a function of the treatment that they expect to receive from ICBC in the absence of having a lawyer. Rather than analyzing that issue in their 2016 submissions ICBC pointed to other factors that they say drive legal representation. I know from representing claimants in ICBC cases for almost 25 years that the primary driver of hiring a lawyer is that the claimant does not trust that they will be treated fairly by ICBC. Yet ICBC in their current submissions does not deal with that issue or come up with a plan for improving that aspect of their performance.
More telling to me as a lawyer involved in this system is that 20% of the costs of claims are going towards ICBC’s litigation costs. Litigation costs are determined by a variety of factors, including how far into the litigation process a case proceeds prior to resolution, the extent of use of experts, the extent of use of pre trial procedures and the discovery required of the parties. In my experience, rather than working to streamline cases, ICBC often takes steps which serve to prolong litigation and complicate it. ICBC in its 2016 submissions states that their litigation costs are the highest they have ever been. I would urge an analysis by ICBC of the reasons for their increasing litigation costs and development of a plan to decrease those costs.
There are a variety of things that can be done by ICBC to decrease costs without compromising the product that is provided to its insured’s. It is an easy answer to say we will charge the same premiums but provide you with less, pointing to the experience in other provinces where claimants are subjected to either a high premium for pay out of their bodily injury claim or other limitations on what can be paid out. In BC we have a system which provides for the “making whole” of injured claimants. They are entitled under our law to be provided with the compensation necessary to return them to the position that they were in prior to being the victim of another’s negligence. That is a principle that should be guarded and ICBC should be put to the task of finding a way to bring their costs under control without compromising on this basic principle of returning the injured claimant to their original position. When we have ICBC reporting that 20% of their costs are related to litigation that seems to be a prime area to look at what things can be done to improve this. The other area which ICBC has been encouraged to consider, but appears to have discarded, is the public’s lack of trust that ICBC will treat them fairly leading to higher rates of representation. If claimants knew that they would be treated fairly by ICBC, the rate of legal representation would presumably go down. These two things if done effectively surely have the ability of decreasing the costs that ICBC faces to a level that is sustainable and allows preservation of the system which provides for the return of injured victims to their original position.