ICBC’S $860-million loss for the first nine months of the year is $273 million higher than expected, says Attorney General David Eby. ICBC is currently on track to record a $1.18 billion loss for 2018-19, compounding the blow of last year’s $1.3-billion deficit.
In response to ICBC’s third quarter results, Eby says: “Until major reforms kick in on April 1 of this year, ICBC’s financial situation remains critical and is worsening.”
In a statement, Eby says: “Losses of this magnitude are unsustainable and unacceptable. They are especially frustrating given the opportunity British Columbia had to avoid these losses if the upcoming reforms had been implemented years ago when they were first recommended, instead of being buried by the previous government.
“A key reason for ICBC’s worsening financial crisis is the escalating costs of settling personal injury claims, which have increased 43% in the last five years. ICBC estimates these costs reached a staggering $3.67 billion in 2018 alone.
“This trend is being exacerbated by the current gaps in the system which allow, for example, the use of almost unlimited experts who prepare costly reports in litigation that lasts for years, all paid for by drivers. Over the past year, the increasing use of expert reports has contributed to inflating ICBC’s settlement costs by 20%. We will act to address this issue.
“Almost half of each litigated settlement is now being absorbed by legal expenses. This includes lawyers’ fees, estimated contingency fees, the costs of securing and paying for expert witnesses, and the costs of delay. The reforms that will come on April 1 will fix much of this broken system. However, until staff are hired and trained and new systems come online, we are stuck under the old system. It is also important to remember that crashes that happen before April 1 will continue to be handled under the old rules.
“While the escalation in the use of expert reports, the increases in settlement demand amounts and the ongoing delay of resolution of claims have serious impacts on the financial condition at ICBC, plaintiff lawyers are not at fault here. They are operating according to the rules of a system that has devolved over years of mismanagement by the previous government.
“To keep auto insurance affordable and make sure injured British Columbians get the appropriate care they need, we must bring this broken system under control.
“While the reforms coming April 1 are projected to save ICBC more than $1 billion per year, the corporation’s third quarter results make it clear we need to do even more – and do it fast.
“In the coming days, we will have more details on how the government intends to respond to escalating legal administration expenses. I am confident we can accelerate the improvement in ICBC’s financial situation, while striking the appropriate balance between reducing legal costs and preserving the ability of injured people to advocate for and obtain settlements that meet their needs.
“Although ICBC’s financial challenges are significant, there should also be no doubt that ICBC remains a valuable public asset that provides important benefits for British Columbians.
“While it is all too easy to just consider our own problems here in B.C., many of the significant challenges facing auto insurance in our province are also plaguing other jurisdictions in Canada. As noted by the Insurance Bureau of Canada, auto insurance systems across Canada are in crisis. Ontario, a fully privatized system, has the highest insurance rates in the country.
“Our government’s job is to deliver affordable, high-quality auto insurance to British Columbians, and we will do so.”
ICBC has posted a net loss of $860 million for the first nine months of its current fiscal year (April 1 to December 31, 2018) as the pressures caused by the rising cost of claims – particularly litigated injury claims – continues to escalate.
ICBC’s net claims incurred for the first nine months of its fiscal year are close to $5 billion, an increase of approximately $600 million over the same period last year, and ICBC is now projecting a year-end net loss of $1.18 billion.
Major reforms are coming to auto insurance in B.C. on April 1 – primarily a limit on pain and suffering payouts for minor injury claims which, along with a new dispute resolution process, are projected to help save approximately $1 billion per year while also allowing for substantially increased care for anyone who is injured in a crash.
ICBC is committed to continuing to work alongside government to help alleviate the rapid growth in claims costs which are putting increasing pressure on the auto insurance rates British Columbians pay.
ICBC’s ongoing financial net losses continue to be driven by increased claims settlement costs which are much higher than anticipated, and aggressive pressure from plaintiff counsel which is leading to higher settlement demands and slower claims closure rates. There has also been an increase in the number of large loss claims which run into hundreds of thousands of dollars each, in particular, large loss injury claims from prior years continue to grow in cost.
The rising cost of litigated injury claims is the single biggest pressure currently being put on ICBC and the insurance rates British Columbians are paying. The average cost of closed litigated injury claims has risen by 20 per cent from $101,920 in 2017 to $121,826 in 2018.
Plaintiff disbursement costs have increased by 21 per cent this fiscal year over last, with an increased use of medical experts which, in almost all cases, ICBC is responsible for paying for. A review of 1,200 selected injury files in excess of $100,000 and within three months of trial found that, on average for these files, plaintiff counsel had more than six medical experts per file, many with overlapping skills – more than the Canada Evidence Act allows without leave of the court in any civil or criminal matter where federal law applies.
ICBC’s injury claims closure rate has also dipped recently, by 13 per cent, despite higher settlements being offered than ever before. The number of large loss claims, particularly those from prior years, continue to grow in cost. As of December 31, 2018, ICBC had approximately 5,600 pending large loss claims – an increase of 34 per cent over 2017 – currently costing approximately $490,000 each.
ICBC has approximately 110,000 open injury claims which are currently estimated to total at least $7 billion; costs which are expected to continue to increase. ICBC’s estimate for its total unpaid injury claims – including those claims which have not yet been filed – is estimated to be even higher than that, in excess of $12 billion.
To compound these claims pressures, ICBC’s investment income – which is relied on to help mitigate the pressure on insurance rates – has been unfavourably impacted by lower than expected capital gain and income distributions from pooled equity funds and asset impairments.