Fraser Institute suggests ICBC charges more to young drivers to cover financial loss

The Fraser Institute has released a report suggesting there are multiple areas where ICBC could make policy changes to address growing losses at the public insurer.

The report, authored by John Chant, points to increasing rates for young drivers as one of the ways the insurer can cut into $1.3 billion in losses last year.

“It is ICBC’s policy to charge drivers the same rates regardless of their age. Yet, much evidence shows that the incidence of accidents differs markedly among drivers of different ages. The costs of personal injury and property damage caused by drivers from 16 to 20 years old are estimated to be $900 more than for average drivers,” reads the report.

“The costs for drivers between 21 and 34 are also higher. This rate structure requires safer drivers to pay higher premiums to subsidize riskier drivers. ICBC’s plans to add $100 to its premiums for inexperienced drivers will reduce only a small portion of the differences in costs.”

The provincial government is in the midst of overhauling rates and insurance payouts.

Attorney General David Eby signed off on regulation changes last week that will come into effect April 1, 2019, that caps payouts for minor injuries.

The B.C. Utilities Commission (BCUC) is expected to approve a rate increase for all drivers next year but it is still unclear how much.

As part of the regulation changes, the province also announced that concussions and brain injuries would be classified as minor injuries. But there would be no $5,500 annual cap on payouts if a psychological injury persists for more than four months.

“Through consultation with the medical community and looking at the experiences of other jurisdictions, it became clear B.C.’s minor injury definition should include mild concussions,” reads an information document for the attorney general.

The province is also changing the rate structure so that high-risk drivers pay more and low-risk drivers pay less. But the Fraser Institute analysis shows that young drivers are not covering the share of the cost they put into the system.

“With the announced changes to its rates, ICBC now plans to add $100 to the annual cost of insurance premiums for drivers with less than 10 years of experience. This measure will reduce only a small share of the differences in costs incurred by higher-risk drivers,” reads the report.

The major changes proposed by the province include greater rate increases for drivers that are found at-fault in crashes, a move towards a driver-based model and increasing insurance discounts for drivers with up to 40 years of driving experience, up from the current nine years of experience limit.

The B.C. government has also announced new discounts available for vehicles with original, manufacturer-installed automatic braking technology and for vehicles driven less than 5,000 kilometres per year.

WATCH HERE: Province releases details of ICBC overhaul

But the province has not changed its policy around no-fault insurance. The Fraser Institute found that forcing drivers to pay no-fault has unnecessarily driven up the costs in some cases.

“At present, many motorists are forced to pay for no-fault coverage from which they do not benefit. Homemakers, students, and retirees do not need wage loss protection,” reads the report.

“Drivers who already have medical insurance will not value this feature of ICBC’s basic insurance. The no-fault coverages cost $71 for each personal policy, or more than eight per cent of ICBC’s average premium.”

WATCH HERE: New concerns about ICBC fee for lending vehicles

The final argument from the Fraser Institute is the cost associated with non-insurance products ICBC offers.

The report says ICBC does not charge the province anything to conduct road-safety programs. ICBC is also responsible for conducting driver testing, driver and vehicle licensing, and collection of fines.

Manitoba conducts similar programs for the province but receives government money to defray the costs.

“ICBC also carries out non-insurance activities on behalf of the provincial government at no cost. These activities include programs for improving road safety together with testing and licensing for both vehicles and drivers,” reads the report.

“The $170-million expenses for these activities are borne entirely by ICBC and add $50 per policy, or over six per cent, to the costs of basic coverage.”

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