ICBC is reporting a net loss of $582 million for its second quarter, due to an increase in claims settlement costs. File photo.
ICBC’s financial situation is not looking up.
The insurance corporation has released its second-quarter results, which shows a net loss of $582 million for the first six months of the current fiscal year (April 1 to Sept.30, 2018).
The loss comes after ICBC reported a net loss of $1.3 billion for the 2017/18 fiscal year. It is now projecting to report a year-end financial net loss of $890 million for 2018/19.
ICBC’s net claims for the first six months of this fiscal year increased $634 million, or 26 per cent, from $2.4 billion to more than $3 billion.
“During the first six months of this current fiscal year, in particular, ICBC’s claims settlement costs have continued to grow, with an increasing number of large loss claims which run into hundreds of thousands of dollars each, and continuing aggressive pressure from plaintiff counsel which is leading to slower claims closure rates and higher settlement demands,” ICBC said in a statement.
B.C. Attorney General David Eby also released a statement on the net loss.
“For too long, financial problems at ICBC were ignored and hidden from the public, resulting in a $1.3-billion net loss in 2017-18. Unfortunately, ICBC’s second-quarter results for 2018-19 show that its financial position remains serious and ICBC is now forecasting a larger-than-expected loss of $890 million this fiscal year,” Eby said in a statement.
“This financial situation reflects the mounting pressure ICBC is under from the rising number and cost of claims. The primary reasons are higher bodily injury costs, as well as claims taking longer to resolve, which often result in higher claims costs. A key driver of these costs is a growing trend toward plaintiff lawyers strategically building the value of the claim – costs which have to be paid for by ICBC ratepayers.”
Eby said since March 2017, the dollar value of settlements demanded by plaintiff lawyers for litigated files increased by 27 per cent. The average cost of closed litigated injury claims for the first six months of ICBC’s fiscal year rose from $100,427 in 2017 to $121,686 in 2018, a 21 per cent increase. According to Eby, plaintiff counsel are also spending more to build their files, increasing their average cost of experts and reports by 20 per cent.
ICBC said there are no signs the costs will abate without major reform to the auto insurance product, which the provincial government and ICBC are implementing.
The changes include shifting from maximizing payouts to a care-based system with reduced legal costs, a limit on payouts for pain and suffering for minor injuries and a new dispute resolution model. All of that is projected to save $1 billion annually.
The provincial government and ICBC also plans to modernize the 30-year-old insurance system. However, the current rising costs will have to be addressed the next basic rate application which is due with the British Columbia Utilities Commission by December 15.
“We won’t start seeing these savings until after most of the reforms take effect, starting April 1, 2019, after which we can expect more dramatic financial improvement. It is now clear that this government needs to look for even more ways – beyond what is already planned – to further reduce the escalating cost of claims,” Eby said.
“Our government is making different choices that will stem ICBC’s losses. We will continue to monitor ICBC’s financial situation and we are taking steps toward making B.C.’s auto insurance system work for people again.”
Eby has previously acknowledged executive compensation at ICBC, saying it is a concern but the NDP government inherited contracts that included bonuses and additional compensation.
The corporation’s chief investment officer received a bonus of nearly $50,000 in the last fiscal year. Several other ICBC executives received bonuses that exceeded $40,000 on top of salaries of at least $250,000. Eby said the government has reduced the number of executives and taken aim at bonuses in new contracts.
ICBC said it will not make any further comments at this time.
With files from CBC
CHEK News
