ICBC’s funny finances sorely need better oversight

A funny thing happened to the Insurance Corp. of British Columbia in the last four months of 2005. Apparently $341 million of income vaporized. ICBC's basic insurance rates now are regulated by the B.C. Utilities Commission. The commission began its proceedings with ICBC in the middle of 2005. For six months ICBC told the commission that it would be earning a profit on basic insurance and therefore wouldn't need a premium increase. It started last June by estimating that its profit would be about $120 million and it therefore wouldn't need a premium increase.

In August it told the commission it expected a profit of $185 million and wouldn't need a premium increase.

On Oct. 24, ICBC told the commission that it expected its profit on basic insurance to be $38 million and still wouldn't need an increase.

The original BCUC hearing dates for consideration of rate hikes were meant to be in December 2005. ICBC then pushed the date to March, 2006.

Then -- at 11:50 p.m. on Friday night, Jan. 27 --ICBC informed the commission that its expected profit wouldn't be materializing, that it would instead incur a loss of $156 million (hence the disappearance of $341 million in expected income) and it would need an immediate premium increase of 6.5 per cent.

In less than two working days and without any real explanation, let alone a hearing, the commission rubber-stamped ICBC's request, adding that the matter would be reviewed in the spring and if the commission deemed that the increase was not justified it could be refunded.

There is something very wrong about this story.

What we're talking about in the regulation of ICBC is not legality -- the conduct of ICBC and the commission is entirely legal -- but rather competence and integrity of process. To anyone who expects transparency in government or due diligence in the regulation of government monopoly, this episode raises serious questions about who is regulating whom in this province.

If a public company dropped its income forecast by $341 million, and that quickly, its stock price would take a huge hit, shareholders would be
talking about launching a class action suit against the directors, and the stock exchange regulators would be launching an investigation.

Yet in British Columbia, ICBC rolled out a news release that everything was normal and the public should be grateful that the corporation was looking after their interests.It's time for answers to three serious questions about ICBC and the BCUC:

Why has Victoria never proclaimed into law its own legislative changes to give the commission a full set of teeth with which to regulate ICBC?

Given the commission's apparent inability to decipher ICBC's now-you-see-it, now-you-don't finances, why has the commission (or the government) not ordered an independent expert audit of ICBC's finances to establish what its revenues and costs really are?

That's what the Alberta government did in 2004, ensuring that the public got a clear, objective accounting of the insurance industry's costs and revenues. Alberta then used that information to regulate insurance premiums sensibly and ensure that the public wasn't being gouged.

When is Victoria going to require that the commission create an efficient and transparent regulatory process for ICBC, instead of the expensive, prolonged and impossible-to-understand procedures that are now in effect? (If you think I'm exaggerating, take this simple test: visit the BCUC website and see if you can make any sense out of it.)

Colin Brown submits it's time the B.C. government took a serious look at both the conduct of ICBC's management and the adequacy of the B.C. Utility Commission's procedures and resources. This isn't the way a public monopoly is supposed to behave, and it certainly isn't the way the regulators of that monopoly should be looking after the public interest.

More than a million B.C. motorists are being exposed to mandatory premiums that Colin would argue are unsubstantiated. Colin Brown is the CEO of Canadian Direct Insurance, a competitor of ICBC in the optional insurance market.