The BC Liberals have been kicking the tires on opening up ICBC to competition for years and in the midst of the 2020 provincial election finally committed to doing it.
If he ends up as premier, Andrew Wilkinson has committed to breaking up ICBC’s monopoly and allowing private insurance companies to sell basic insurance.
“We can do way better than the current system where young people face bills between five and seven thousand dollars,” Wilkinson said.
The question all voters want answered is whether the switch to allow competition will actually make rates cheaper. The answer depends of who is asking the questions.
Justin Thouin, the founder of LowestRates.ca, says more competition will ultimately lead to everyone lowering insurance rates.
“Choice means competition, and competition means innovation and innovation means a better price for consumers,” Thouin said.
But Sauder school of business professor Werner Antweiller says it is a broken system driving up costs and not a lack of competition.
Antweiller is not alone in his analysis that higher insurance costs are being triggered by higher legal bills. The Liberal plan calls for the private insurers to work under the current insurance model while ICBC would operate under a no-fault system, limiting the use of lawyers in reaching a settlement.
“A solution means taking the litigation out of insurance and competition is not going to change that,” Antweiller said.
“The insurers will just pass the costs to the customer.”
British Columbia has some of the highest rates of auto insurance in the country. The BC NDP attempted to massage the system by putting caps on soft tissue injury claims and requiring bad drivers to pay more. But ultimately the plan didn’t work and the province opted for a switch to no-fault insurance.
The no-fault model comes into effect in May and provides enhanced benefits but takes away the ability to sue. The province’s trial lawyers have expressed many concerns about the impact it will have on future earnings.
The model British Columbia is adopting comes from in part from Manitoba and in part from Saskatchewan, the jurisdictions with the lowest car insurance rates in the country.
“They have up to $7.5 million in liability if you are insured and the lowest rates of coverage,” ICBC expert and retired bureaucrat Richard McCandless said.
What the combination would allow is new innovation. The public insurer has been slow to adopt alternative insurance products like pay-as-you-go or moving to a model where customers can buy online.
“They are in the stone ages, there is just no innovation in the car insurance space,” Thouin said.
The competition system does create winners and losers. The lowest risk drivers should be able to find a lower rate because it is advantageous to the insurance company. High risk drivers may be able to find a lower rate but it will come with fewer benefits.
McCandless points out the Liberal plan does not include a seniors’ discount. Currently drivers over the age of 65 get 15 per cent off and that could go away under the competitive system.
ICBC also doesn’t pick and choose who they will offer insurance to. Private companies can say they won’t insure certain drivers based on any type of perceived risk.
“The private insurers will just come in and pick from the customers that are lower-risk and leave the drivers that are harder to ascertain,” Antweiler said.
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