Insurance Corporation of British Columbia (ICBC) projects that its annual internal operating expenses -- which support employee salaries, benefits and other costs -- will grow to more than $1 billion next year. This is an increase of over 25% since 2018 -- the year ICBC was first described as a "financial dumpster fire" -- placing an increased cost on drivers in the province. This growth is also alarming given ICBC's new projections that show the crown insurer will lose $298 million this year.
When including commissions and premium taxes, ICBC's financials show that 34 cents of every dollar it collected in premiums last year went to the Crown insurer's operating expenses. That works out to $407 per driver, on average. In contrast, private auto insurers report operating expenses averaging 26 cents per premium dollar, according to data from the General Insurance Statistical Agency (GISA), the statistical agency run by Canada's provincial insurance regulators. A lower expense ratio means a lower portion of consumer premiums are devoted to operating expenses, bolstering the argument that drivers could benefit from significant savings if ICBC was opened to competition.
"ICBC's significant financial challenges seem to be repeating themselves, yet it appears the monopoly insurer has not looked under the hood to find cost savings they could pass on to drivers," said Aaron Sutherland, Vice-President, Pacific and Western, Insurance Bureau of Canada. "ICBC's internal costs have grown and British Columbians are paying more to support its operations as a result. With its operating expenses far exceeding the private sector average, drivers could find significant savings if given more choice and the ability to shop around for their coverage."
To help assess efficiency, private insurers in Canada use an operating
expense ratio that compares their total operating expenses (including
internal costs, premium taxes and commissions) to their total premium
volume.
Importantly, ICBC excludes premium taxes and commissions when projecting its own expense ratio, which runs counter to standard industry practices. When these operating costs are added together, ICBC's total operating expenses for 2021/22 are $1.62 billion, against earned premiums of $4.78 billion. This results in an expense ratio of 34% (or 34 cents per premium dollar) for the monopoly insurer.
ICBC's own data also clearly shows that the monopoly insurer spent more on its operational costs last year, than it provided in benefits to help drivers recover. Over the coming weeks, IBC will continue to highlight the uncomfortable truths about ICBC and its new no-fault model.
Quick Links:
- ICBC's projected financial loss of $298 million for 2022/23 is shown on page 16 of the BC Government Second Quarterly Report: https://www2.gov.bc.ca/assets/gov/british-columbians-our-governments/government-finances/quarterly-reports/2022-23-q2-report.pdf
- ICBC's projected internal operating costs of $1 billion next year are shown on page 23 of its 2022/23 Service Plan: www.icbc.com/about-icbc/company-info/Documents/service-plan-2022-2025.pdf
- In 2018/19, ICBC's internal operating costs were $799 million, as shown on page 18 of its 2020/21 Annual Service Plan: www.icbc.com/about-icbc/company-info/Documents/service-plan-2020-2023.pdf
- ICBC reported earned premiums of $4.78 billion for 2021/22 and its total year-end operating expenses of $1.62 billion on pages 18 and 66 of its Annual Service Plan Report: www.icbc.com/about-icbc/company-info/Documents/ar-22.pdf
- The average private passenger auto insurer's expense ratio is calculated as a simple average of private auto insurers in Ontario, Alberta and Atlantic Canada. It was calculated by IBC using data from the General Insurance Statistical Agency (GISA), the national statistical body of Canada's provincial insurance regulators. It has averaged 26.3% since GISA began tracking this information in 2013.
