ICBC has never been a good deal
Mark Milke, The Orca, October 22, 2020
In the provincial election dust-up over who managed the Insurance Corporation of British Columbia (ICBC) worse, the NDP has long accused the BC Liberals of overseeing a “dumpster fire.” The latter—after decades of defending the government monopoly—finally saw the value in some competition for the lumbering, expensive Leviathan.
Postmedia columnist Vaughn Palmer weighed in, arguing the BC Liberals are wrong to favour to automobile insurance competition. Palmer notes onetime ICBC head Paul Taylor (appointed by the Liberals) tilted against competition and privatization in his role. This, Palmer argues, shows that the BC Liberal record does not “make the case for privatization in whole or in part.”
Reality check: There has always been a lot of nonsense surrounding ICBC in large part promoted by ICBC itself, whether the political bosses were cut from NDP or BC Liberal cloth.
I’ve tracked auto insurance premiums across Canada for two decades. I first did so after a fake consumers group published studies in the early 2000s claiming that British Columbians were getting a great deal from ICBC. (The lobby group, the Consumers Association of Canada (CAC), was fake because it didn’t have actual members. Instead, it received millions from the federal government in the 1990s and then money from government unions after that—I assume to lobby for and protect government insurance monopolies.)
The group claimed BC auto insurance rates were lower than what Albertans paid for the exact same insurance. The claim was always bunk. The CAC’s numbers were not based on actual premiums paid by consumers but internet-derived averages and median figures.
To grasp the difference and why the internet-derived numbers were flawed, consider a simple example.
Suppose—in a province like Alberta where competition for your auto insurance dollar exists—you call up five different companies. Suppose the resulting quotes (all else being equal in the coverage) are $1,200, $1,400, $1,600, $1,800, and $2,400.
For the sake of argument, let’s assume the ICBC price for your insurance (basic and optional together) is $1,500.
If you’re comparing both provinces, and don’t care to be accurate about deriving averages and medians from actual premiums paid, you add the five Alberta quotes, divide by five, and claim the average Alberta auto insurance premium is the resulting $1,680. That’s higher than the BC premium.
Or do a median calculation—the middle quote out of five—which is $1,600. Either way, you then claim that BC insurance at $1,500 is cheaper. This approach to inter-provincial comparisons is exactly what the faux consumers group did in multiple studies. It’s also what ICBC has done in its public comparisons for decades.
The problem is that the five Alberta quotes are just that—quotes—not actual premiums paid. Take another look at the Alberta quotes: $1,200, $1,400, $1,600, $1,800, and $2,400.
If you’re an Alberta motorist, are you going to pay some fictional, internet-derived average or median price? Or the lowest quote you received, the $1,200 premium? Sure, someone bad at math might choose a premium higher than $1,200, but all else being equal, most people will choose the lower premium.
When you do a proper comparison between the two provinces—actual written premiums—and only then calculate averages from that hard data, here’s what I’ve found over two decades: Average British Columbia premiums for motorists were cheaper than Alberta in only one year out of twenty. That was in 2003, when the average BC premium was $1,139. That was two dollars less than the average Alberta premium at $1,141.
In every other year, British Columbians have paid higher automobile insurance premiums than Albertans, who have a competitive market for auto insurance.
As for recent data, in 2019, the average insurance premium in BC based on actual paid premiums was $1,832. That was $516 more or 39% higher than the Alberta average premium of $1,316.
Taylor did indeed seem skeptical of competition for ICBC or privatization. However, such views, as with many who oppose change to auto insurance in British Columbia, were not based in facts and weighing the empirical evidence.
The data was always available, and still is: in every year except one in the last two decades—when ICBC beat Alberta by two bucks—Albertans have had cheaper auto insurance than British Columbians. ICBC has never been a good deal for consumers.
~
Mark Milke is a policy analyst and author of several studies on automobile insurance in Canada. He is also the author of six books. His most recent is The Victim Cult: How the culture of blame hurts everyone and wrecks civilizations. Image by Marcel Langthim from Pixabay.