After more than a year of heated argument, about the only thing proponents and critics of the Insurance Corp. of British Columbia’s (ICBC) upcoming switch to no-fault “enhanced care” auto insurance can agree upon is that a change is needed.
But the specifics of the change as laid out in the program slated to launch May 1 remain highly contentious.
Government officials and ICBC blame B.C.’s legal profession for the Crown corporation’s escalating costs and annual deficits.
The government says it needed to make changes that essentially remove lawyers and the courts from the dispute-settlement process for drivers injured in car crashes.
But lawyers and insurance-industry advocates argue that those changes will reduce policy-holders’ rights and unfairly strengthen ICBC’s monopoly over B.C.’s auto insurance market.
Enhanced care
B.C. Attorney General David Eby announced ICBC’s switch to enhanced care in February 2020, outlining a plan to cut $1.5 billion in costs (mostly legal fees for defending the government against lawsuits from injured motorists seeking greater compensation).
In the place of legal recourse, ICBC is changing its focus from a combative role in dealing with injury claims to a more co-operative model in which adjusters work with motorists and health professionals directly to determine appropriate recovery plans and payouts.
The result, ICBC says, benefits everyone. Annual insurance premiums will drop 20% – or about $400 for the average British Columbian – the Crown corporation said. The savings in legal costs also allow ICBC to boost the upper limits of benefits available to a person injured in an auto accident: benefits for any injured person, regardless of fault, would have a ceiling of $7.5 million (up from $300,000 in the current system), and new personal care assistance of up to $10,000 a month and permanent impairment care of up to $250,000 would be available.
The scale of change required within the insurance corporation during the last year to accommodate the shift to enhanced care was monumental, said ICBC president and CEO Nicolas Jimenez.
Officials said ICBC dedicated hundreds of employees in the past year to alter its culture and operations for the new system.
“I’ve never experienced such transformation in my 45 years in business and politics,” said ICBC chair and former provincial finance minister Joy MacPhail. “We are a $6 billion operating company with a $20 billion investment arm. We have almost 6,000 employees in virtually every community in British Columbia, and we offer a product that three million policy holders require. And we needed to change almost everything about the corporation.”
A change, said Aaron Sutherland, was necessary.
The vice-president of the Pacific region of the Insurance Bureau of Canada noted that B.C. has Canada’s highest car insurance premiums ($1,832); Ontario has the second highest ($1,528).
Meanwhile, ICBC and provincial officials have warned that the Crown corporation racked up another deficit last year ($298 million), and premiums would have to jump by as much as 40% if no changes were made.
Prior to last year, ICBC posted deficits of more than $1 billion for each of the 2018-19 and the 2017-18 fiscal years – while barely missing that mark for a third year (2016-17, $889 million).
“We have the most expensive car insurance market in Canada under the ICBC monopoly,” Sutherland said, “so government deserves a lot of credit for the changes they are making to make that more affordable.”
But he added that enhanced care is unlikely to be “a panacea” for all that ails ICBC and the province’s auto-insurance sector.
Potential problems
Lindsay LLP lawyer Roger Watts, one of the province’s top experts in personal injury law, calls the Crown corporation’s increase of care benefits to $7.5 million from $300,000 a red herring, because the benefit – which is determined by an ICBC adjuster regardless of fault – is only one part of the compensation an injured person is eligible to get under ICBC’s current tort system.
Currently, in addition to the benefits, an injured person can claim against whoever is responsible for the accident and their third-party insurance policy (likely from ICBC) for additional compensation – which covers areas like pain and suffering as well as future income-earning capacity loss. If the injured person is unhappy with ICBC’s payout, he or she can sue.
“It’s wrong to imply that currently, $300,000 is the most an injured person can get on their claim,” Watts said. “It doesn’t work that way.… There’s no limit of what you can claim against somebody else, as long as you can prove that their negligence caused the loss you are claiming.”
Under enhanced care, the ability to challenge whatever ICBC decides on compensation in court is gone. That means that – while the insurer can give an injured person up to $7.5 million in recovery benefits, there’s no guarantee that a claimant will see anywhere close to that amount, and whatever amount a claimant does get cannot be disputed in an independent court of law.
“The catch is, you still have to prove the injury and the losses you are claiming happened because of the accident – and the medical treatments you are seeking are necessary and justified,” Watts said. “The adjuster is not likely to sign a blank cheque to you when you make a claim.… It’s still going to be in the ICBC’s interest to minimize payments where they can.
“Just because they are advertising $7.5 million in big shiny numbers, it doesn’t mean they are just going to hand over whatever you ask for up to that amount.”
Jimenez disagreed.
“You’ll hear people on the other side of this debate … who will say, ‘Well, you are not giving people … access to the courts.’ And I say, ‘Well, to what end?’
“The reality is, this system is better in every single respect for the customers – particularly injured customers.”
ICBC spends about $170 million a year on defence counsel, and injury settlements through the courts cost almost $4 billion, with the average injury settlement court case lasting three to four years. That’s the money and time being saved by enhanced care, Jimenez said.
Jennifer Brun, president of the B.C. branch of the Canadian Bar Association, argued that the savings may seem big on paper, but the cost to injured people in terms of their lost rights to legal recourse is far higher.
One example, Brun said, is the new compensation benefit for lost income, which covers up to 90% of a person’s income up to $100,000. That means that income-loss protection will never exceed $90,000 no matter how much a person earns – and the amount can’t be disputed.
ICBC says that it is implementing a new Fairness Office for injured policy holders, and those who feel additional settlement is needed can escalate the case to an ombudsman, then to the Civil Resolution Tribunal (CRT).
But BC Supreme Court Chief Justice Christopher Hinkson ruled in March that the last move – diverting minor injury claims up to $50,000 from the courts to the CRT – was unconstitutional.
The province has applied for a stay of proceedings to allow the CRT to resume assessing small claims while the government appeals the decision.
Monopoly vs. competition
Sutherland said he worries that enhanced care fortifies ICBC’s monopoly, for which he blames many of the insurer’s ills. Provisions such as the Fairness Office, he said, reinforce the idea that B.C. needs to open its doors to private insurers to compete.
“It’s almost a tacit admission that ICBC doesn’t have a great track record of supporting their customers,” Sutherland said. “So they are layering on all these other things to try to improve it, and I think the best way to improve it is to put drivers in the driver’s seat. Give them the ability to take their business elsewhere if they don’t like the service or the price they are paying.”
The provincial government has deferred comment until closer to enhanced care’s May 1 launch date, but MacPhail said a model where private insurers are allowed in the market has not helped Alberta – which, with premiums at $1,316, has Canada’s third-most expensive auto insurance.
“It’s mixing apples with oranges,” MacPhail said. “Privatizing our auto insurance business in British Columbia would do nothing to deal with the issue of a massive deficit and the horrendous cost pressures of operating in a legal system. A private insurer would have those same pressures in a tort system.”
She added that a public-insurer model works best for parts of the auto insurance sector.
In addition to the personal side of auto insurance, the second major component of the industry is vehicle collision coverage – where some portions are open to private-sector competition, Jimenz said. ICBC has proven successful in those areas of auto insurance business as well, signalling ICBC is competitive in a setting with private players, he said.
But Sutherland said ICBC has put the Crown corporation into an almost unassailable position in the B.C. market.
For example, ICBC does not share claims trends, information on drivers’ claim histories and driving records data with private insurers, which puts them at a distinct disadvantage.
In addition, Sutherland said the contention that B.C.’s vehicle damage coverage is open to private competition is only partially true. Under the enhanced care system, ICBC has carved out a portion called basic vehicle damage coverage, for covering costs when someone else hits a policy-holder’s car. Only ICBC can sell that coverage under the new system.
“You are taking half of all accidents and saying to private insurers, ‘You can’t sell those,’” Sutherland said, noting that one private insurer has already left B.C. since enhanced care was announced.
The opposition BC Liberals said during last year’s election campaign that the party would open up B.C.’s auto insurance market to private players if elected.
Mike Morris, opposition critic for the solicitor general, said private insurers should be part of the solution.
“There will be a role for ICBC for sure, but I think anytime you can inject competition into any sort of a business model, it enhances service to the public,” Morris said.
What’s next?
One thing that people may not know, Brun said, is that this was not B.C.’s first attempt to look at no-fault insurance as a solution for the province’s auto insurance scene. Brun noted that the province considered the switch back in the 1990s, and the Canadian Bar Association was consulted and challenged the proposal. The province subsequently scuttled its plans.
Brun added, however, that the association was not consulted despite sending submissions to the province in 2018 and 2020 asking for discussion.
“We were successful that time [in the 1990s],” she said. “This time around, there has been little to no consultation with the same stakeholders in the justice system with respect to this new model.”
But MacPhail said the province engaged groups like the Trial Lawyers Association of British Columbia as well as groups representing injured motorists.
She added that, given the responses she has seen from the legal community, she doesn’t foresee things turning out differently even with more consultation.
“In those discussions, I think it’s fair to say that there were all sorts of solutions offered up by the trial lawyers, of which none had anything to do with them changing the way they operate,” MacPhail said. “All the solutions were coming from other places.”
Any injuries that happen before May 1 will still go through the tort settlement system, and MacPhail said there are about 90,000 cases worth approximately $10 billion to be resolved through the courts – so there remains some space for trial lawyers to operate in the auto insurance space for now.
But she added that the legal industry should not be surprised by this type of change.
“Other provinces and jurisdictions have been moving in that direction for years,” MacPhail said. “The changes did not come as a surprise to anyone.”
Maybe so, Watts said, but the ICBC defence lawyer added that consumers attracted to ICBC’s message of more savings and more injury benefits need to think carefully about whether the math adds up.
“You get what you pay for,” he said. “How does a reduction to your insurance premiums equate to an increase in benefits? It usually doesn’t; if you pay less, you tend to get less.”
