Wednesday, August 04, 2004

Liberals running risk with ICBC overhaul

VICTORIA - Look for ICBC to be the next Crown corporation to get a makeover by the Liberal government, a risky move in the last months before an election.
The Liberals want to loosen ICBC's grip and let private insurance companies grab a bigger share of the business. Their campaign platform included a pledge to introduce "greater competition in auto insurance, to create increased choice and reduce motor vehicle premiums."
That hasn't happened.
Part of the problem was timing. As the Liberals took over, private car insurance rates were soaring across Canada and becoming a major political problem for provincial governments. But in B.C., rates were stable and the system was working.
The privatization push also ran into a problem in ICBC's new CEO, picked by the Liberals to run the company like a business. Nick Geer left his job as a vice-president in Jimmy Pattison's empire to run ICBC. And after taking a look at the company, he decided the current level of competition - which is tiny - served ICBC and its customers well.
Geer won the battles for a time, despite government grumbling. But earlier this summer he was pushed out with a $450,000 severance package. ICBC board member Ted Smith, a former broadcast industry executive, blamed the government. "In all my years in business, I have never seen a more stupid move in any company or corporation, public or private," he told the Vancouver Sun's Vaughn Palmer.
Geer's likely successor is Paul Taylor, who has been helping the Liberals cut costs since he was brought in right after the election. Taylor helped spearhead the Klein government's cost-cutting moves, and has done the same thing for the Liberals as finance deputy minister. His government role has just been cut back, clearing the way for the leap to ICBC, where he'll push the Liberal plan to shrink the corporation's role.
It's an initiative that should have Liberal MLAs cringing. The Campbell government has stumbled into a string of problems with its plans for Crown corporations, with the current BC Ferries' furore only the latest. Taking a fling at remaking another one, so close to the election, seems highly risky.
Especially when it's a Crown corporation that touches the pocketbook of almost every family in the province.
The idea of competition is appealing, because without it consumers will never know if they're paying too much for their car insurance. The basic principle, that competing companies will produce innovation and benefits for consumer, makes good sense.
Right now there is no real competition in car insurance in B.C. ICBC has a monopoly on basic insurance - the coverage you must have to cover the cost of dealing with injuries resulting from a car crash. That's about 60 per cent of the entire insurance market.
Optional insurance - the coverage to pay for repairs, for example - is theoretically open to competition. But ICBC's grip on the basic coverage means most people take the path of least resistance and buy their optional coverage from the Crown corporation as well. The result is that private companies have about 15 per cent of the optional coverage, a percentage that hasn't really changed under the Liberals.
Crunch the numbers, and you find ICBC has close to 95 per cent of the total vehicle insurance market. That's not meaningful competition.
But ideology aside, the government has been unable to justify selling off ICBC or ending its monopoly on basic insurance. (Asked what effect that would have, Geer said "You would find chaos in the marketplace, you would probably see the bankruptcy of ICBC.")
The Crown corporation has cut costs, raised rates by about 13 per cent over three years and reduced the level of coverage, and generally seems to remain well-viewed by British Columbians.
It hardly seems like the kind of thing that an unpopular government would want to mess with in the run-up to next May's election.
Footnote: Taylor's likely appointment sends a signal that the Liberals think the toughest part of the cost-cutting program are behind them. It also could mean a big raise: Taylor is paid $200,000; Geer was getting $262,000 to run ICBC, with hefty bonus potential.

1 comment:

echo456 said...

I would love to see other insurance companies come into BC and compete against ICBC for Basic Automobile Insurance why should one company dictate what goes on and all of us have to follow only one set of rules. I would like to see how long ICBC lasts if there is competition and what infuriates me is that ICBC will not work to help both parties they want to blame an accident on both parties so they can make more money.