According to budget documents ICBC will be running an $833 million dollar deficit by the end of this year. The number is a contradictory from the government's earlier projection that the auto insurance company would generate $678 million in surplus over three years. Richard McCandless, a former deputy minister and author of an ICBC review, stated there were three constant issues which has lead to the current predicament. He explains, first was a rapid increase in claims costs, both the total number and the average cost of each claim. Secondly, low interest rates have lowered ICBC's investment income. And lastly, it is the government's policy of suppressing the basic rate increase each year.
There is also a massive structural deficit in the basic coverage rates, he goes on to say that it would require at least a 20 percent rate increase to cover that structural deficit. However, he also explains "You've got to let the revenues go back up, but perhaps not immediately by 20 per cent as that would be rate shock." He also explains, the political strategy of keeping rates low and taking out dividends from the corporation has completely been abused and ICBC is quickly running out of capital reserves. Transportation Minister Todd Stone defended the way his political party has managed the Crown corporation and has already appointed an independent review of the company. The insurance company has taken major steps towards cutting costs.
When the news broke that the worst case scenario of a 42% rate increase by 2020, they had initially planned to drop insurance for luxury vehicles. In their term luxury vehicle was any vehicle worth more than $150,000 but is not a RV, collectible or limousine. The move was just a distraction to the major problem since dropping luxury insurance would have only saved the company a few million dollars but the deficit is in the hundreds of millions. Two weeks ago, the insurer also announced that they would be fixing window chips for free, weather permitted. Previously, claims would have had to be made and a deductible to be paid in order for the insurance company to fix the windshield. This is expected to save the company also a few million dollars but would keep fixable windshields out of the landfill. The company also claims that $600 million dollars are lost to insurance fraud every year. The insurance company has recent launched a new fraud analytics tool which will allow them to look through their claims data and find more fraud. ICBC has seen a 70 percent increase in tips coming into their fraud line in comparison to 2015 after a public information campaign last year.