The Insurance Bureau of Canada (IBC) has once again suggested bringing a private auto insurance market to British Columbia will help the province’s troubled monopoly public insurance provider. Not only would it help the Insurance Corporation of British Columbia (ICBC), private companies would stimulate competition and save motorists up to $325 each year.
A report by advisory firm MNP was commissioned to assess how private insurance providers would impact the ICBC. The public insure has a monopoly on basic auto insurance in B.C., while private companies can sell additional. IBC has called for private companies to also be able to sell the basic coverage.
The study found more competition would bring changes to the industry in British Columbia. The ICBC currently assesses premiums based on driving record, experience, and location. Private markets in Canada typically also assess premiums based on other factors, such as risk, driver age, and how much the vehicle is in use.
If more insurance providers were in the market, the competition would allow the pricing in the province to change and the structure to become more affordable. Lower risk drivers would see premium reductions, while high risk drivers will pay more. MNP added the ICBC could also help itself by using the added assessment criteria, such as risk. The company says bad drivers may be incentivized into improving their habits to reduce premiums.
If private competition is not welcome, a minor injury cap of $5,000 could help the ICBC by slashing claims costs by up to 13%. Such a change would lower basic premiums by up to 20% and help the ICBC stabilize its financial crisis.