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November 24, 2016:  ICBC rate increases and luxury vehicle insurance exclusion

Listen to the interview above or read the full transcript below.

Cash:    

We’ve heard this controversy around ICBC. Not only are they telling you, or they’ve finally agreed to tell at least the BC Utilities Commission and us what the rates are going to be in the upcoming years. We heard government try and block this for a period of time. Of course, they didn’t have any success. We’re looking at a 4.9% increase in our basic premiums this year. We’re also looking at, overall, a 42% compounded rate hike to 2020. Very concerning.

Then, we have the ministers thrown out there at this news conference, throws this noise, or wants you to focus your attention away from your 42% rate hike coming up from ICBC and saying, “You know what? We’re looking after you because we are no longer going to insure vehicles that are $150,000 or more.” Like that’s going to make a big difference. He talked about someone having their trim around the light fixed for $38,000. They want you to go out there and they want you to believe these people. Remember, we have over three million vehicles insured here in the Province of BC. These people, and I think there’s only around 3000, are really going to make a difference because we’re not insuring them, we’re going to have the private insurance companies insuring them.

But to talk a little bit more about this and get his opinion, I’m joined by an expert in this area, Manjot Hallen, lawyer specialized in automobile accident claims, personal injury, and he’s a partner at Warnett Hallen LLP. Good morning, Manjot.

Manjot Hallen:    

Hey, good morning Cash. Thanks for having me on the show.

Cash:         

Well, I kinda went on a rant this morning with Neil Morrison about this, and I wanted to get you on. I woke up thinking about this, because I’m listening to Stone on the radio live and I’m going “What is he doing? A bunch of noise created because he wants to deflect this away from the issue of rate hikes.”

Manjot Hallen:   

Well, Cash, first thing I gotta say is they’re doing something. I mean, $2.3 million in savings, it’s a step.

Cash:  

It’s a drop in the bucket, though.

Manjot Hallen:  

I agree. I mean, there’s a lot more that they can be doing to improve things. One of the things that you and I spoke about the last time I was on the show, is let’s focus on the real issues, like distracted driving. You get rid of people talking on their phones, or texting while they’re driving, and you’re gonna save a lot more than $2.3 million. But in theory, this idea that they have, it makes sense in theory. Look, luxury vehicles, if you can afford a vehicle for more than $150,000, then you shouldn’t require a public insurer to insure that vehicle, and in theory be subsidized by other rate pairers here in British Columbia.

So, the logic behind it makes a bit of sense, but you’re correct, it’s only $2.3 million savings, so you need to save a lot more to bring the rates down, and like I said, one of the ways to do that is to end distracted driving and improve the inefficiencies over at ICBC. Discussions that you and I have had in the past.

Cash:   

But we are going to have that 42% rate hike, no matter what mitigation they put in on the luxury vehicles right now, and the question I have on this: are we talking about basic insurance for those luxury vehicles or are we talking about the optional insurance, because this is very different. If they’re opening up the basic insurance, they’re actually opening up a can of worms for other private companies to come in and give you basic insurance.

Manjot Hallen:  

Yeah, I gotta tell you, Cash, I don’t totally understand how they’re gonna save this $2.3 million, because it doesn’t make a lot of sense to me. So let’s give an example for your listeners here. Let’s say I’m driving at the corner of Robson and Granville where my office is, and I’m not driving a Ferrari or Lamborghini. Trust me, I’d love to, but I’m not. I’m stopped at a red light. I get hit from behind. If I get hit from behind and there’s damage to my vehicle and I suffer injuries. Let’s say my claim is worth $10. Now, it doesn’t matter if I’m hit by a Tercel or by a Ferrari, I’m still entitled to $10 from the basic insurance of the vehicle that hit me.

I don’t see how that, getting out of the business of insuring luxury cars, presents any savings in that type of scenario. Now, the only way there could be a savings, and again I don’t quite understand this either because where they’re getting the $2.3 million from and of course they haven’t presented us the numbers, but say for example I do have a Ferrari or Lamborghini. I’m one of the fortunate people in British Columbia to be driving a vehicle like that, and I take it out for a spin, and I wrap it around a pole.

Now, ICBC has to cover the repairs for my vehicle under my own collision policy, but in theory, the premium that I pay for that collision policy should be a lot higher than the premiums paid by someone who’s driving a Civic.

Cash:    

Yes.

Manjot Hallen:  

So I really … but what’s happened here, what I assume has happened here, is one of two things. Either the premiums have not caught up with the repair costs, so these people that have been driving the Lamborghinis and Ferraris haven’t been paying the type of premiums they should have been paying all along and that’s where the savings comes in, or number two, the assumption is that people that drive these vehicles are most likely to be at fault for accidents.

They’re more likely to be speeding, they’re more likely to be doing something stupid that causes accidents. But, that’s where it doesn’t make a lot of sense to me, the numbers and how they came up with this $2.3 million savings, but if we believe that it’s a $2.3 million savings then it’s obviously, it’s something. It is a savings and they’re taking some measures, at least.

Cash:        

Well, the $2.3 million savings, I’m making an assumption. Now I haven’t seen the actual facts on this either, is it’s around repair costs.

Manjot Hallen:   

Yeah, that makes sense.

Cash: 

That’s what I’m thinking is taking place here, but again, are they saying to these people that have the luxury vehicles and I think in the interim til legislation’s passed when they sit again, they’re going to be paying double the rate that they’re paying right now, but at the end of the day, you have to look at, is it going to make a difference and is it just apply through optional insurance?

Because many of the people that already have these luxury vehicles have an optional insurance. I don’t buy my optional insurance from ICBC, I buy it from a private company, and we know, Manjot, these private companies have wanted to come into this to take the monopoly away from the basic side.

Manjot Hallen:    

And certainly ICBC’s opening that up now, aren’t they? Because now if they’re getting out of the business of insuring these luxury vehicles altogether, then private insurers are going to have to insure and provide basic coverage for these luxury vehicles.

Cash:   

Unless they try to have their cake and eat it too, because they have wanted not to have that opened up for other people. They want to maintain that monopoly and you know we are creatures of convenience. If we can go there, if we have to go to get our basic, we’ll most likely get our optional side there too.

Manjot Hallen:

That’s right. that’s right. Now, what we need to focus on though, Cash, you spoke about the rate increases and how it’s a concern for all citizens of British Columbia, but how do we prevent that? How does ICBC save money? That’s the question we need to be asking ourselves, and I come back to the same couple of topics here.

One is distracted driving. It is a massive expense. If we can make distracted driving have the same stigma as impaired driving, then I can assure you we’re gonna save a lot of money on claims. A ton. And that’s one step that ICBC should be taking, they should have a better campaign around distracted driving.

Lawyers such as myself and a lot of my colleagues, we’re running campaigns like that. We appreciate this problem. I have colleagues of mine that are speaking at high schools. My firm sponsors the Drop it and Drive Canada. These are the types of initiatives we need to take to ensure that insurance premiums don’t spiral out of control. And the other big issue is the inefficiency of ICBC, the topic that you and I have discussed at length.

Cash:  

And that’s concerning, because I’m not sure what ICBC’s actually doing. They’re not really allowed to operate as strictly just a crown corporation and not have political interference. We’ve seen that political interference, I’ve witnessed it firsthand, where the government is actually taking money out of the corporation and putting it into their general revenue to make government look more appealing, and that is, they call it a dividend or something of that nature.

Well, they’ve drained the company so much that they can’t take a dividend out anymore, but at the same time they cannot mitigate the increase of 42% til 2020 simply because they don’t have this money built in. You would think as a corporation they’d operate as a corporation and mitigate the raise in premiums because of the money they have, but that’s not taking place.

Manjot Hallen:  

Absolutely, and you make a good point. If they’re a corporation in name, they should act like a corporation in theory, and we don’t see a lot of that. You should see some of the things I see over here, Cash.

Cash:    

Well, I know.

Manjot Hallen: 

And I’ve discussed with you previously, it’s nuts.

Cash:       

It’s incredible … this is what I’m saying, is they’re not acting responsibly, Manjot, because even when they have people that have suffered as a result of a motor vehicle accident, they put them through the rigamarole for something that they need compensation for, and they do that based on some simple policy, not based on whether they will have legal success or success in this area, or not.

Manjot Hallen:               

Exactly, I mean if everyone knows that this claim is worth $10, why end up paying $10 and $5 in legal fees? That’s what ICBC ends up doing. They end up paying $15 when they could have settled that claim for $10. That’s the issue, that’s where the inefficiency’s coming, and obviously I’m using an example of $10, the claims are usually more than that, but in a nutshell, why pay all this money to defend a claim and end up settling it for the exact same amount that you could have settled for prior to trial?

Cash: 

At great expense, great expense to the taxpayer.

Manjot Hallen:

Exactly.

Cash:                                    

To the people that, and it’s the taxpayers. It’s 3 million vehicles that are insured here, they’re the taxpayers having to pay this increase, a 42% increase. I’ve gotta ask you, Manjot, do you think that the key to this, and we talked about distracted driving, impaired driving, all of that, is prevention, taking preventative approaches like Manjot Hallen is doing, or Warnett Hallen is doing in the schools right now, in sponsoring the Drop It program, or do you think it’s going to be deterrence, or a bit of both? You know, that punishment, the fine, the large fine.

Manjot Hallen:                 

You know, it’s gotta be a bit of both. It’s gotta be a bit of both, Cash. I mean, look, we can only do so much in educating the youth in particular to stop using their devices when driving. The other side of it has got to be heavier fines.

The government’s taken steps in the right direction, they have increased the fines recently, but we need to see more. We need to see more done in that regard, and as a culture as well, we’ve gonna think differently about distracted driving. As I said to you in the past, when you’re out and about, you’re at a bar with your friends, every one of your friends is gonna ask you before you drive, “Are you okay to drive? I saw that you had a beer,” or a beer and a half, or whatever the case may be. Most of your friends are gonna ask you that question.

You’re sitting on your phone all night, fighting with your wife or your spouse, nobody cares to ask you on those nights, “Are you gonna be okay to drive? I saw you on your phone all night long. I want to make sure that you’re not gonna be using your phone while you’re driving.” People don’t have those discussions, and we need to change our mindset as a community around this issue. We need to attach the same stigma to distracted driving as we attach to impaired driving. That’s the only way to end it.

Cash:                                    

And that starts with our youth.

Manjot Hallen:                 

It does, absolutely.

Cash:                                    

So (…) Warnett Hallen for sponsoring that program in our school system, because we need to get more of that information out to our youth, because in the long run we are going to benefit from this, but in the short term I gotta tell you, Manjot, this 42% rate hike for the next few years that we’re going to have to pay, it’s a compounded rate hike, I believe we’re going to have to pay it. I believe ICBC is going to try and our government is going to try and create noise around this increase in a way that you’ll say “Okay, these people that are driving these Ferraris, BMWs, whatever, are the ones that are driving up your rate. You point out a very good thing. There’s other areas that government really needs to focus on.

Let’s take that $2.3 million, if we can understand it a little bit better, and say okay, we’ve got one point here but there’s much more reward, or benefit that we can obtain, with these other initiatives.

Manjot Hallen:                 

That’s right. Absolutely.

Cash:                                    

Manjot, thanks for taking time out of your day. I know I sprung this on you suddenly this morning and it’s great to get your perspective on this, and other areas around automobile accident, personal injury claims, and other areas. I’m gonna hit you up, I’m gonna talk to Amber right now, want to get you back on because I want to talk to you about this youth problem that we’re having too, to get your perspective on this.

Manjot Hallen:                 

Great. Thanks, Cash.

Cash:                                    

Have a great day, Manjot.

Manjot Hallen:                 

You too.