ICBC rate increases: the real culprit?

The typical insurance model is to collect premiums from insurance payers (A.K.A. insurees) and then invest those premiums. The profits from those investments are largely what is used to pay out insurance claims. In most jurisdictions, the residents have a variety of insurance companies to choose from. Theoretically, a competitive market ensures that insurees pay a competitive premium rate.

The model in British Columbia, however, works differently. Residents of British Columbia have one mandatory insurer for basic automobile insurance, a crown corporation known as the Insurance Corporation of British Columbia (“ICBC”), which was created in 1973 by the NDP government. Lately, the Provincial – and now Liberal government – of British Columbia (the “Province”), has used ICBC and other crown corporations as a source of revenue. The Province is in the midst of a 3 year plan to take 1.7 billion in revenue from ICBC by the end of the 2016/17 fiscal year:

This is also not the first time that the Province has gone to the ICBC well. In 2010, the Province, over the course of the following 3 years, extracted $778 million in revenue from ICBC:

These amounts are in addition to already existing taxes; the Province already collects an additional 4.4% tax on ICBC premiums pursuant to the Insurance Premium Tax Act. Meanwhile, ICBC has been continuously raising premium rates, citing an ever increasing amount of personal injury claims. While ICBC is correct that the number of personal injury claims against ICBC has been steadily increasing, so has the population of BC as a whole. The growing population of BC, theoretically, should have offset a large proportion of these additional ICBC claims by providing a larger population from which to extract premiums.


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