23 Jan ICBC Is Misrepresenting Profitability Through Bookkeeping
ICBC claims poverty, when they rake in large profits
You might have seen in the media that ICBC is crying wolf saying they are losing massive amounts of money from Basic Insurance coverages. Meanwhile, they are making even better profits from Optional Insurance. So why is ICBC crying out they are losing money and yet the BC Government has been able to use ICBC as a “cash cow” for years to fund general expenses?
Here Is Why
ICBC is misleading the public by separating the two levels of insurance, Basic and Optional Insurance. They are claiming poverty for Basic Insurance while raking in huge profits from Optional Insurance saying they are “borrowing” money from one insurance to cover the other. This bookkeeping exercise is deceitful and needs to be exposed to the innocent rate payer.
Years ago, our government decided to add “competition” into motor vehicle insurance. They half heartily did it by allowing private insurers to offer British Columbia motorists Optional Insurance only. ICBC was allowed a continual monopoly on Basic Insurance and also, the ability to continue providing Optional Insurance.
Basic Insurance is the minimum coverages a motorist is required to have such as $200,000 third party insurance, no-fault benefits (Part VII benefits), etc… Optional Insurance is extra third party insurance up to $5 million, collision coverage, etc…
There is no question Basic Insurance covers most of the run-of-the-mill losses except such claims as vehicle repairs of your vehicle in an at-fault accident. Hence, that is why ICBC is losing money on Basic Insurance and is wildly profitable on Optional Insurance. Basic Insurance responds to most claims and Optional Insurance is seldom tapped.
So if the “competition” was true competition with private insurers, I can see an argument that ICBC should be able to keep the two insurances levels and the associated profits and losses separate but they are not separate. The reality of the insurance scheme is that because everyone has to use ICBC for Basic Insurance, the vast majority of motorists simply purchase Optional Insurance from ICBC out of convenience.
Who wants two different insurers for the same car insurance? How many times is an insurance agent pushing other private insurance companies for Optional Insurance? I have personally been to a number of insurance brokers more than 100 times over the years and have never been offered Optional Insurance with a private carrier.
So the end result is ICBC is getting the vast majority of motorists to buy Optional Insurance from them simply because of the fact that every motorist has to buy Basic Insurance from ICBC and it is easy to stick with one insurer. Therefore, the Basic Insurance is used as a tremendous marketing tool to secure the profitable business of Optional Insurance.
It is no different than a business or store using “door crasher” sales or “lost leaders” to get clients into the business hoping they will purchase the profitable item or service. Does the same business then turn around and separate out each type of item sold and cry foul when they lose money on the “lost leader”?
In summary, ICBC is misleading when they suggest significant losses from a certain book of business- Basic Insurance. The whole system is so intertwined that ICBC should be looking at the big picture results not claiming poverty on one level of insurance while using the same level of insurance to generate massive profits at another level.