How are Rates Designed Now?
The current system
We need to update the way ICBC determines insurance rates so they more fairly reflect a customer’s risk of getting into a crash. This would hold them more accountable for their decisions and driving behaviour.
Although ICBC currently considers driving experience and crashes when determining rates, it’s done only in a limited way. For example, drivers who have a crash-free record for a long time are rewarded, and appropriately so. But under some circumstances, the current system allows drivers who have been at-fault in a crash (two or even three times) to keep their maximum Basic insurance discount. We can make the system more fair so that drivers who have a crash-free record pay less than those who cause multiple crashes.
The current system is vehicle-based. The vehicle owner sees the insurance rate impact of an at-fault crash. Drivers who cause a crash using someone else’s vehicle are treated as if they have never had an at-fault crash – there is no impact to the insurance rates the drivers pay for their own vehicles. The person whose vehicle they crashed is accountable for that claim and may see an increase in their premium, even if they have never caused a crash themselves.
Currently, drivers with serious driving convictions (such as excessive speeding or impaired or distracted driving), receive fines and penalties under the Driver Penalty Point (DPP) and Driver Risk Premium (DRP) programs, but their insurance rates do not increase. There are also no insurance impacts for drivers who have multiple minor driving convictions (such as such as speeding, unsafe lane changes, or seat belt violations). These drivers represent a higher risk, and we believe they should pay more.
Drivers who use their vehicle only occasionally or who purchase vehicles with advanced safety features that have been proven to reduce crashes are currently not rewarded with appropriate discounts.
What is rate design?
Every year ICBC, like all insurers, has to estimate how much money it needs to cover the future costs of the policies it has sold. This amount comes from the insurance premiums all customers pay. ICBC then looks at various risk factors to determine how much each individual customer should pay.
Rate design is the process of defining which variables should be used and the calculations that determine how much each individual customer should pay. The changes that are being considered wouldn’t increase the overall amount of money ICBC collects from insurance policies – they would improve how ICBC calculates the amount that individual drivers pay based on their risk level. This would increase fairness so that lower-risk drivers would pay less and higher-risk drivers would pay more.