ICBC projecting another year of billion-dollar losses as injury claims mount

ICBC has posted a loss of $860 million for the first nine months of the current fiscal year and is now projecting a year-end net loss of $1.18 billion, according to third quarter results released on Thursday.

The hemorrhaging of cash at the public insurer comes as the cost of claims – particularly litigated injury claims – continues to escalate.

“The rising cost of litigated injury claims is the single biggest pressure currently being put on ICBC and the insurance rates British Columbians are paying. The average cost of closed litigated injury claims has risen by 20 per cent from $101,920 in 2017 to $121,826 in 2018,” an ICBC press release reads.

“ICBC is committed to continuing to work alongside government to help alleviate the rapid growth in claims costs which are putting increasing pressure on the auto insurance rates British Columbians pay.”

The deficit is $290 million worse than ICBC was forecasting in December. The public insurer lost $1.3 billion last fiscal year.

The public insurer incurred close to $5 billion in net claims over the first five months of the fiscal year. The claims have gone up about $600 million over the same period last year.

The provincial government is in the midst of major reforms to auto insurance in B.C., which take effect on April 1. The biggest change is a $5,500 cap on pain and suffering payouts for minor injury claims. The government projects those changes will save approximately $1 billion per year.

“Losses of this magnitude are unsustainable and unacceptable,” B.C. Attorney General David Eby said.

“They are especially frustrating given the opportunity British Columbia had to avoid these losses if the upcoming reforms had been implemented years ago when they were first recommended, instead of being buried by the previous government.”

ICBC says the losses are being driven by increased claims settlement costs which are much higher than anticipated, and aggressive pressure from lawyers which is leading to higher settlement demands and slower claims closure rates.

The public insurer claims there has also been an increase in the number of large loss claims, which run into hundreds of thousands of dollars each.

“Plaintiff disbursement costs have increased by 21 per cent this fiscal year over last, with an increased use of medical experts which, in almost all cases, ICBC is responsible for paying for,” ICBC said in a statement.

WATCH: ICBC ends negotiations with personal injury lawyers

1:48 ICBC ends negotiations with personal injury lawyers

“A review of 1,200 selected injury files in excess of $100,000 and within three months of trial found that, on average for these files, plaintiff counsel had more than six medical experts per file, many with overlapping skills – more than the Canada Evidence Act allows without leave of the court in any civil or criminal matter where federal law applies.”

ICBC has approximately 110,000 open injury claims which are currently estimated to total at least $7 billion. Those costs are expected to continue to increase, and the insurer estimates its total unpaid injury claims could be in excess of $12 billion.

WATCH: B.C. government facing major challenges in 2019

1:48 B.C. government facing major challenges in 2019

“Almost half of each litigated settlement is now being absorbed by legal expenses. This includes lawyers’ fees, estimated contingency fees, the costs of securing and paying for expert witnesses, and the costs of delay,” Eby said.

“The reforms that will come on April 1 will fix much of this broken system. However, until staff are hired and trained and new systems come online, we are stuck under the old system. It is also important to remember that crashes that happen before April 1 will continue to be handled under the old rules.”

In terms of rates, the insurer has applied to raise rates 6.3 per cent this spring. But it is still unknown how much those rates could continue to climb after the changes come into effect.