Vehicle insurance rates that don’t adjust for younger drivers’ higher risk create an effective subsidy from older drivers to younger ones. (Fraser Institute)

Older B.C. drivers subsidizing younger ones, study finds

ICBC protects higher-risk drivers, pays for testing costs

The Insurance Corp. of B.C. is moving to make bad drivers pay more for rising accident and injury costs, but a new study says it is still giving higher-risk drivers a break in rates.

“The government’s recent changes are welcome, but they don’t go far enough to fix our fundamentally flawed system that punishes safer drivers with higher rates to subsidize riskier drivers,” said John Chant, professor emeritus of economics at Simon Fraser University and author of a new study, Understanding Why Basic Auto Insurance Rates in B.C. Are So High.

The B.C. government has implemented changes for next year that tighten the safe driver discount rules, so drivers need to go 10 years without an at-fault crash before they can make a claim without their insurance rate rising.

Rates have already gone up 20 per cent for accumulating too many penalty points or serious offence convictions, with another 20 per cent coming in September 2019. Owners who have a learner using their vehicles will pay for the additional risk, ranging from from $130 to $230 per year on basic insurance.

RELATED: Pay, bonuses being reduced for ICBC executives

RELATED: ICBC moves to tighten safe driver discount rules

But Chant says ICBC should do what private insurance companies do: charge higher rates for younger drivers who are consistently more likely to have accidents than other drivers. He calculates that drivers aged 16-20 get an effective discount of $833 per year, while drivers 55-64 pay $228 more and those aged 65-74 pay $234 more than what their insurance risk would indicate.

Another feature of B.C.’s public monopoly on basic vehicle insurance is the extras that have been added to ICBC over the years. Paying for traffic safety programs and operating driver testing, licensing and fine collection add another $50 to each driver’s basic insurance bill for the year that they likely don’t know about, Chant estimates.

“The costs of coverage beyond the minimum are buried in a 1,000-page document,” Chant wrote. “Those of non-insurance activities can be found in an obscure note to ICBC’s financial statements, and the loss experience of drivers of different ages does not appear to be public.”

Effective April 1, 2019, a limit of $5,500 takes effect for “pain and suffering” claims on vehicle insurance. A claim resolution tribunal is also being put in place to settle disputed claims out of court, after legal and expert fees were identified as major factors in an 80 per cent increase in injury claim costs in recent years.

With increasing accidents and claims in recent years, ICBC ended 2016-17 with a loss of $889 million, and projected a deficit of more than $1 billion for 2017-18.


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