Insurance Fraud & Insurance Rates - Who to Believe?

Question MarkOuch! My ICBC insurance rates are going up as much as 42% over the next five years according to an article in the Province newspaper. I already paid $630 this year for the privilege of having my fellow British Columbians help me pay for collision liability if I make a mistake and crash my pickup. I’m not looking forward to paying $895 in 2021, but when you consider how much you could be on the hook for if you didn’t have insurance, even that doesn’t look too bad.

If you are a fan of B.C. politics, this is an interesting situation. ICBC tried to have the B.C. Utilities Commission (which oversees the setting of ICBC rates on behalf of taxpayers) keep their increase forecast under wraps. The Commission ultimately refused to do this.

The N.D.P. points out that this is an attempt by the Liberals to hide bad news just prior to an election.

The provincial government takes “dividends” out of ICBC coffers that could have remained for investment and the reduction of our insurance rates.

ICBC rightly points out that insurance rates have been impacted by the cost of bodily injury claims, insurance fraud and the cost of repairing high end vehicles. If I’m reading their annual report correctly, the cost of claims totalled just over 4 billion dollars in 2015. That’s for an average (2009 to 2013) of 52,000 injury crashes (about 142 per day).

Fraud costs us all between $100 and $150 per year according to ICBC, which is definitely significant in my view. Both ICBC and the Insurance Bureau of Canada hope that we’ll all help by preventing frauds. In fact, ICBC has two units that work to expose fraud, the Special Investigations Unit and the Cyber Unit that uses information available on the internet and social media to catch offenders.

Examples of frauds are highlighted in ICBC’s 2015 Hall of Shame and Cyber Fraud files.

To the contrary, a pair of lawyers from the law firm Murphy Battista in Vancouver think that insurance fraud is only a drop in the bucket of claims each year.

I don’t understand refusing to insure high end vehicles as a cost cutting measure though. ICBC and other insurance companies know how much these vehicles cost and how much they cost to repair. Setting an appropriate premium for the risk is what an insurance company is all about. If they do cost six times as much to repair, surely the rates should be six times higher.

The Fraser Institute is a Canadian think tank that, in part, communicates the effects of government policies on our well being. Their last report claims that B.C. drivers are paying rates that are too high due to a lack of competition.

So, how do we as drivers decide what is reasonable and what is not for our mandatory vehicle insurance purchase? The true answer probably lies somewhere in the middle of all of this.

I’d be willing to bet that if we quit crashing into things our rates would be much lower. That may seem trite, but we do it about 700 times a day in this province.

Comments

Submitted by E-Mail

Actuaries determine future at fault risk and rates are based on that and the costs associated with those risks. Since risk is primarily determined by exposure, I'd argue a $2000 junker which is driven every day has more likelihood of doing just as much harm or more than a $300k car.

Supercars are generally not every day drivers, therefore their exposure is lower. I'd argue their propensity and ability to avoid crashes is higher too.

Since bodily injury is by far the most expensive portion of auto insurance, the comments by Stone about repair costs are simply a distraction IMO. Besides, it's the optional portion which covers those repairs for the supercar owners.

Yet the Government is cutting out liability and optional. Pure BS in my opinion.

Insurance rates

Anonymous has some points. although basic insurance rates(which is what we are talking abouut) does not include collision dammage to own vehicle and therefore would not be any different for a 'super car' than your granny's run about the cost of third party repairs are definitely increasing. With the modern car now having all the safety and collision protection demanded by drivers; front end collision warnings and prevention ,lane control, and super back up cameras front and rear collisions do a lot of dammage to these items and add more expense to a simple fender bender repair.

However I'm not sure that justifies the 47% increase requested by ICBC. If they are only talking "top up" collision insurance then surely the insurance rate is dependant principally on the value of the car and the cost to repair it. Then 'super cars' will pay their share anyhow?

I don't doubt that ICBC payouts are increasing but I feel a little better justification would be useful without blaming it all on $210K super cars.

It's my guess ...

... that most of the costs incurred by ICBC are a result of paying lawyers to fight cases, instead of paying out to those who have paid premiums (mandatory, for basic coverage) to them, and who them attempt to make a claim to which they're entitled.

If ICBC were not, by nature, so damned adversarial in the way they treat their 'clients', the ones who would suffer most would be in the legal profession.

What a corrupt corporation!

VTP and other thoughts

In the late 50's I drove taxis in Vancouver for a few years. This was long before ICBC and private insurance rates were very high. At that time, there were about 400 taxis in Vancouver and they had formed a "co-op" insurance ststem called the Vancouver Taxi Pool. It had two part-time employees. One was a taxi owner who doubled as an adjuster and the other, a housewife who doubled as a stenographer. The VTP purchased a liability policy from Lloyds of London with a $2 million deductible .... a fortune in those days.

If a member taxi was involved in a collision or other claim, the adjuster was called out. Settlements were made and each month the expenses were totalled, divided by 400 and statements sent to each member taxi owner.

The system worked very well because every owner became a police man over every other taxi, no matter which company was involved. If a Yellow cab owner saw a Black Top being driven by an idiot, he would be on the phone to the BT manager like a shot because, if the idiot crashed, it was money out of his pocket next month. Great system but the advent of ICBC killed it.

Or perhaps ICBC was the greater incarnation of the VTP? It was supposed to be a co-op insurance system for the masses. Insulated from private insurance competition, it would offer rock-bottom rates to the public based upon total amounts paid out plus administration costs. But what happened?

First of all, ICBC grew into a behemouth with a multitude of over-paid executives with little or no accountability. Then it got used to administer vehicle and driver licensing, fine collection and a host of other duties rightfully belonging to the Ministry of Transport (and paid for by our tax dollars). Even more, ICBC has been called upon to pay for police overtime (speed and impairment) and even highway design costs under the guise of "Increasing safety to reduce claims". Further, our government has sought to steal "dividends" from a supposedly self sustaining co-op. All of this is illegal taxation and if the private sector had done it, many executives would be in jail.

But let's step back and look at the insurance system. "Risk" is the primary factor. Other than it's primary or replacement value, does a vehicle incur "risk"? I've never heard of a vehicle causing a collision .... DRIVERS do that. So let's have a look:

Vehicle risk should be based upon potential loss. A $2,000 car, a $500,000 super-car or a semi hauling a multi-million dollar load should be assessed on those values alone.

The potential for having/causing a collision rests squarely between a driver's ears. It has nothing to do with the vehicle. So why are we insuring vehicles? Should we not be insuring drivers? Based upon a proven driving history, should we not be paying a rate based upon our personal potential to causing a claim .... regardless of the vehicle? Drivers who drive drunk, distracted, impaired and/or incompetently should be assessed far higher rates than those who don't.

In my past, I've driven some non-expensive cars and motorcycles, a few exotics like Ferrari and Maserati and heavy semis. If anything, my attention to the job of driving may have increased with the value of the ride. Of course, I'm one of the 95% who consider ourselves, "better than average".

But then, when did logic have anything to do with it, eh?

Submitted by e-Mail

I’ve given up on ICBC and BC politicians (the policy makers on road safety) on the issue of accidents and cost of accidents on BC Roads.Sadly only 5 British Columbians submitted letters of comment to the BCUC on the ICBC rate increases. ICBC Still has not updated stats for 2014. 2015 which indicates the BC Government lack of interest in accident prevention. Could all of this be a move towards privatization of all auto insurance in BC?

Submitted by E-Mail

Since “basic” insurance covers liability and not physical damage, why refuse to insure that small number of customers with luxury vehicles because they are too expensive to repair? If I run into one with my VW, ICBC will be paying to repair it under my basic coverage.

Why is no one calling for the government to bring in no fault insurance to eliminate most fraudulent claims and reduce the overall cost of bodily injury claims?

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