A study from a Vancouver-based public policy think tank blames what it terms “misguided decisions” and runaway costs for the current financial crisis at the Insurance Corporation of British Columbia.
The Fraser Institute study, authored by John Chant, a professor emeritus of economics at Simon Fraser University, finds the corporation’s problems began years ago and grew steadily worse with government inaction.
The newly elected New Democrat government confirms the corporation faces a $1.3 billion loss this fiscal year and Chant says the public insurer had a $889 million loss last year.
He says the corporation’s basic insurance operation, which has a monopoly over mandatory coverage, suffered persistent losses for years but received infusions of $1.4 billion between 2010 and 2017 from the then-profitable optional insurance side of the business.
The former Liberal government also transferred $1.2 billion to provincial coffers from optional insurance but Chant says when that side of the corporation also began losing money, no action was taken to boost rates or stop the slide.
The corporation’s current financial position is unsustainable, he says, noting rate hikes totalling 44 per cent would have been required between 2015 and 2017 just to offset rising costs.
“Faced with exploding costs, the previous B.C. government had a choice: contain the costs, take the unpopular decision to increase rates substantially, or enact large-scale reform of the basic auto insurance system in the province. In the end, the government chose to do nothing,” Chant says in a news release.
No one from the Liberal Opposition was available to comment on the report.
Chant says the current government deserves credit for acknowledging the problems but the corporation’s role must be rethought and any fix will not be simple, or inexpensive.
“The kind of Band-Aid solutions they’ve used in the past simply won’t be enough to fix its problems moving forward,” he concludes.
The Canadian Press