discussion guide - may 2012

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ICBC Basic Vehicle Insurance Rating System

2012 Consultation and Engagement

Discussion Guide and Feedback Form

May 14 June 22, 2012

Have your say!

publicengagement.icbc.com

Have your say about poptions to create a favehicle insurance ratinwhere lower-risk driveand higher-risk drivers


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How will eedback be used?

The Insurance Corporation o British Columbia (ICBC)is updating the way it sets premiums or Basic vehicleinsurance coverage to create a airer system where lower-risk drivers pay less and higher-risk drivers pay more.

Your eedback will help us make the most reasonablerecommendations to our regulator, the British ColumbiaUtilities Commission, which has the nal say in the bestinterests o British Columbians.

Open house schedule

ICBC wants to hear rom British Columbians aschanges regarding proposals or key elementsand more driver-based system. To have your sapublic open house in a community near you.

OPEN HOUSE SCHEDULE

Vancouver Tuesday, May 22 6:00 9:00 pm SFU Vancouver Segal Graduate School o

Kamloops Wednesday, May 23 6:00 9:00 pm Hotel 540

Kelowna Thursday, May 24 6:00 9:00 pm Ramada Hotel & Conerence Centre Kel

Prince George Tuesday, May 29 6:00 9:00 pm Ramada Hotel Downtown Pr ince George

Fort St. John Wednesday, May 30 6:00 9:00 pm Qual ity Inn Northern Grand Hotel

Surrey Thursday, May 31 6:00 9:00 pm Sheraton Vancouver Guildord Hotel

Richmond Tuesday, June 5 6:00 9:00 pm Executive Airport Plaza Hotel

Abbotsord Wednesday, June 6 6:00 9:00 pm Ramada Plaza & Conerence Centre

Prince Rupert Tuesday, June 12 6:00 9:00 pm Crest Hotel

Victoria Wednesday, June 13 6:00 9:00 pm Hotel Grand Pacifc

Nanaimo Thursday, June 14 6:00 9:00 pm Coast Bastion Inn

Cranbrook Tuesday, June 19 6:00 9:00 pm Prestige Rocky Mountain Resort

How can I participate in theconsultation and engagement process?

We invite you to provide eedback through any

o the ollowing consultation and engagementopportunities:

DiscussionGuideandFeedbackFormPublicOpenHousesStakeholderMeetingsOnlineFeedbackFormWrittenSubmissionsbyEmailorMailOnlineForumWebinar

The deadline to submit eedback on the Basic vehicleinsurance rating system is June 22, 2012. To submit

your eedback online or or more inormation, pleasevisit publicengagement.icbc.com.


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Basic Vehicle Insurance Rating System. 2012 Consultation and Engage

Table o contents

What is the purpose o the consultation? 1

About ICBC 2

Universal, accessible and without discrimination:insurance or everyone 3

Crash less; pay less Crash more; pay more 4

The move to a driver-based system 5

Premium changes: how do we predict who shouldpay less and who should pay more? 6

Understanding premium impacts 7

Consultation and engagement topics

Topic 1 Driving Experience 8 9

Topic 2 Crashes 1016

Topic 3 Driving Violations 17

Feedback Form 1825

What is the purpose o the consultation?

ICBC is updating the way it sets premiums or Basic vehicleinsurance coverage.1 Our customers have told us they thinkthe system would be airer i lower-risk drivers paid less ortheir vehicle insurance, and higher-risk drivers paid more.

We agree. To do this, we need to change the structure oour premiums so we can clearly identiy higher-risk drivers.Currently, some higher-risk drivers get the same discount aslower-risk drivers.

So, the provincial government has directed ICBC toaddress higher-risk drivers by making insurance premiumsmore refective o risk.

ICBC has also made commitments to its regulator, theBritish Columbia Utilities Commission, that it will bemoving to a system that more airly recognizes drivingrecords. This will create a airer system that also provides

an incentive or higher-risk drivers to drive more saely.

Beore making any changes, however, ICBC is undertakinga province-wide consultation and engagement process toinorm our customers and stakeholders about the changesunder consideration, and to seek eedback on options or aairer and more driver-based system.

Depending on your eedback in this coengagement process, about two-thirdspay less than they do today, and aboutcould pay more. O course, any changesystem could be transitioned so that thbe implemented gradually.

The changes to Basic insurance are notincrease the total amount o revenue cRather, ICBC will redistribute insurancelower-risk drivers would pay less, and hwould pay more. ICBC is working to havehicle insurance pricing system ready in 2014/2015. Your eedback will help usystem or our customers.

1 Except or vehicles that are rated as part o a feet.


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2 Basic Vehicle Insurance Rating System. 2012 Consultation and Engagement Discussion Guide.

About ICBC

ICBC is a provincial Crown corporation, established in 1974to provide universal compulsory vehicle insurance to allB.C. drivers. Along with Basic insurance, we also providedriver licensing services, vehicle licensing and registration,

road saety programs and optional insurance to more than3.3 million customers. We pay out roughly $2.7 billioneach year to settle almost 900,000 injury and vehicledamage claims. Customers are served throughout theprovince through 38 claim oces and 120 points o service,including driver licensing oces, government agent oces,a network o more than 900 independent brokers, and our24/7 Dial-a-Claim call centre.

As in other jurisdictions across Canada, motorists in B.C.are required by law to purchase a minimum level o Basicvehicle insurance. ICBCs Basic coverage is among themost comprehensive in the country, providing privatepassenger and certain commercial vehicle owners with aminimum o:

$200,000inthird-partyliabilityprotection$150,000forno-faultmedicaland

rehabilitation costs$1millionofunderinsuredmotoristprotection

As the sole provider o this coverage, ICBC is regulatedby the British Columbia Utilities Commission, which isresponsible or approving rate changes to Basic insuranceand ensuring that British Columbians are paying air, justand reasonable rates.

ICBC Basic premiums are subject to approval by theBritish Columbia Utilities Commission, and unlike drivers inprovinces that legislate caps or deductibles on pain-and-suering awards, British Columbians are entitled to takeat-ault parties to court in an eort to recover any damagesthey suer.

ICBC also oers taxpayer benets through the provision ovehicle and drivers licensing services that are a direct costto government in other jurisdictions.

Recent rate increase

Ater three years during which ICBC has beenable to reeze or lower Basic insurance rates,rising claims costs in 2011 required ICBC to applyto the British Columbia Utilities Commission ora Basic insurance rate increase. That increase isnot related to the consultation and engagementprocess regarding how high- and low-risk driversshould be assessed or Basic insurance.


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Universal, accessible and withoutdiscrimination: insurance or everyone

Every crash claim increases the cost o insurance or all,so i customers crash less oten, their insurance companysaves money a saving that ICBC has a history o passingto its customers.

To this end, many insurance companies try to minimizetheir costs by only insuring lower-risk drivers. They oersteep discounts to those with the best driving record, andthey set large premiums or higher-risk drivers or reuse toinsure them at all.

As a universal provider regulated by the British ColumbiaUtilities Commission, ICBC is mandated to oer Basicvehicle insurance to all drivers, including those whosehistory and behaviour make them a higher risk. Thismandate creates a benet or British Columbians. It makes

Basic insurance coverage available and aordable to alldrivers, which means that B.C. has a much lower thanaverage number o uninsured drivers on the road.

In some jurisdictions, vehicle insurance is rated on thebasis o such things as age, gender and marital status orexample, charging higher rates to some young male driverswho are statistically a high risk. Again, as a regulateduniversal provider, ICBC is prohibited by provincial lawrom using personal characteristics such as age and genderin setting its rates. In act, as a matter o provincial policy,ICBC provides aordable rates to new drivers and a25% discount or seniors and disabled persons.

Given the responsibility o providing universal, accessibleand non-discriminatory Basic vehicle insurance, ICBC hasa vested interest in representing every driver and in tryingto prevent as many crashes as possible. Thats why ICBCinvests approximately $45 million a year in road saetymeasures and programs that save lives and reduce costs.

ICBCs operating costs continue to remthe industry average, with approximatepremium dollar used or administrative

Basic vehicle insurance coverage

The minimum insurance protection any vehicle mustcarry to legally operate in B.C.:

Third-PartyLiability I you are at ault in anaccident and i anyone is injured or their vehicle isdamaged, you are liable and responsible or thebill. Basic insurance pays up to $200,000 or this

liability to these third parties.

AccidentBenets Covers medical expenses,rehabilitation costs and lost earnings resultingrom a crash, regardless o ault.

UnderinsuredMotoristProtection Covers you(up to a maximum o $1 million) ater a crash inwhich an at-ault driver does not have enoughcoverage to pay your costs.

ProtectionAgainstHit-and-RunandUninsuredMotorists Covers you and yourproperty or damage inficted by hit-and-run or

uninsured drivers.

Optional vehicle insurance

ICBC competes with other insurancethedeliveryofOptionalcoverage.Tincludes such things as:

Third-PartyLiabilityOver$200,0elect to protect yoursel against clare at ault when damages to injur

property exceed the Basic coverag

Collision Covers damage to you

Comprehensive Covers such thiwindshield damage or thet rom t

PricingforOptionalcoverageisnotthis consultation and engagement p


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Crash less; pay lessCrash more; pay more

ICBC has heard rom many customers that people who aremore likely to cause crashes should pay higher insurancepremiums and people who are less likely to crash shouldpay less.

However, thats not always what happens today. Thecurrent system rewards vehicle owners who have gone longperiods o time without being responsible or a crash [seetable]. But under some circumstances, the current systemallows some people to keep their maximum basic premiumdiscount even ater they have been at ault in two, andsometimes three, crashes.

For example, the current system assigns a maximumdiscount o 43% to every level on the claim-rated scalerom 9 20+ years o crash-ree driving.

Ifadriverisat-20andtheyhaveonecrash,theymove up three steps to -17 and still receive themaximum discount o 43%.

Asecondcrashmovesthedriverupanotherthreestepsto -14 and they still get the 43% discount.

Athirdcrashtakesthemto-10andtheyarestilleligibleor ICBCs best discount o 43%.

This is unair to those drivers who have a crash-ree record.

In addition, there is also a second reason or charging

higher-risk drivers a higher premium: it sends a messagethat there is a nancial consequence to high-risk driving.

At-Fault CrashMove up:

Basic Insurance

Surcharges andDiscounts

Claim-Rated

Scale Level

+10 205% 6 steps+9 165% 6 steps

+8 130% 6 steps

+7 100% 6 steps

+6 75% 6 steps

+5 55% 6 steps

+4 40% 6 steps

+3 30% 6 steps

+2 20% 6 steps

+1 10% 6 steps

0 Base Rate 6 steps-1 5% 6 steps

-2 10% 6 steps

-3 15% 6 steps

-4 20% 5 steps

-5 25% 5 steps

-6 30% 5 steps

-7 35% 5 steps

-8 40% 5 steps

-9 43% 4 steps

-10 43% 4 steps

-11 43% 4 steps

-12 43% 4 steps

-13 43% 4 steps

-14 43% 4 steps-15 43% 3 steps

-16 43% 3 steps

-17 43% 3 steps

-18 43% 3 steps

-19 43% 3 steps

-20 43% 3 steps

Surcharge

levels

Discount

levels

example

example

example

Current claim-rated scale

Current system higher-riskdrivers retain maximum discou

Both have a 43% discount is this reectivrisk these drivers represent?

Driver B:

20 years o 3 at-ault cr

Driver A:

20 years o experienceNo at-ault crashes


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The move to a driver-based system

A driver-based system means that at-ault crashes wouldollow the driver, not the vehicle. This would result in asystem that more ully recognizes both lower-risk andhigher-risk driving behaviours.

One o the major barriers to moving to a system thatrefects drivers risk is the act that ICBCs current claim-rated scale (see table on page 4) is assessed on a vehicle-by-vehicle basis. That means that a person who has hadmany crashes on one vehicle can insure a second vehicleand be treated as i they have never had an at-ault crash.

The obvious, airer solution is to look at each personsull crash history and driving experience every time theyinsure a vehicle. Its important to note that people who ownmultiple vehicles and who have had at-ault crashes wouldpay an increased premium on all o their vehicles. Likewise,

i you are a lower-risk driver with multiple vehicles, youwould pay less on all o your vehicles.

Today, the maximum discount or Basic insurance is43%. I ICBC moves to a more driver-based system, thelowest-risk customers should see an improvement in theirBasic premium discounts better than the current 43%maximum discount.

With a driver-based system:

At-ault crashes

ThroughoutthisDiscussionGuide,reerence to crash reers to what at-ault crash, one in which the dr

than 25% at ault. I you are in an where you are 25% at ault or lessimpact on your premium now anunder any option currently under

ICBC assesses liability in 25% incre25%, 50%, 75% and 100%). In moro all crashes, one driver is ound tault which means the other driveis unaected.

Who is low-risk? Who is

Low-risk and high-risk drivers are whitecategories.However,somelowerriskthanothers.InthisDiscwe look at three commonly used o risk: driving experience, at-auanddrivingviolations.Eachoftheimpacts whether you pose a highlower risk o causing a crash than

About

Pay Less

About

Pay More


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Premium changes: how do we predictwho should pay less and who shouldpay more?

Statistics show that i you crash your car today, there is

a higher likelihood that you will crash it again within thenext year.

Thats why insurance companies raise your premium ater acrash. They are NOT trying to recover the cost o paying outa claim. That would be impossible because some claim costsreach a million dollars and more. Rather, insurers are tryingto identiy higher-risk drivers the ones who are most likelyto cause crashes in the uture and to charge those driversmore or their insurance.

Its the same principle that lie insurance companies usewhen they decide what to charge. Lie insurance is lessexpensive or those who can demonstrate their tness andhealthy liestyle and more expensive or smokers becausethe insurance industry has calculated that there is a higherrisk that they will have to pay an early claim or someonewho smokes.

Other vehicle insurance companies oten considerrisk actors such as age and gender. As a publiclyregulated body that is prohibited rom discriminatingon such bases, ICBC is considering the ollowing mainrisk assessment categories to determine discountsand surcharges:

DrivingExperience

Crashes

Although ICBC considers driving experience and crashesunder its current system, we do so in a limited way.

Both o these topics are discussed throughout thisDiscussion Guide, along with options or how they mightbe incorporated into the calculation o the ICBC Basicinsurance premiums. A Feedback Form, located at the endo the guide, gives you an opportunity to provide yourinput regarding which options you think are the airest.

The use o actuarial statisticsin insurance

The insurance industry experts who analy

or example, the people at ICBC who destatistics showing who is most likely to cacrashes are called actuaries. Using sophtechniques, they study what has happenepast to predict what is likely to happen inuture. This allows us to understand what past behaviours are likely to result in an inrisk o uture claims.


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Joe Low-Risk

Current Premium

$825

New Premium

(Under a driver-based system)

$675

Pam One-Crash

Current Premium

$825

New Premium


$675

Jerry High-Risk

Current Premium

$875

New Premium


$1,250

Understanding premium impacts

ThroughoutthisDiscussionGuidewellshowyouthreeillustrative drivers who will help us better understandthe potential premium impacts o the dierent optionswere presenting: Joe Low-Risk, Pam One-Crash andJerry High-Risk.Eachofthesedrivershasmorethan25 years o driving experience*, but a dierent recordo at-ault crashes.

TheDiscussionGuidewillshowyouseveraloptionsICBCcoulduseinanewpricingsystem.Foreachofthese options we will show you what each driverscurrent premium is, and what it could be under thenew system. When you read the premium impacts, itis important to bear in mind that inherent in all o the

options being presented is an underlying premiumshit that would result rom the move rom the currentsystem to a driver-based system. In the box below,we show what this underlying premium shit wouldbe or each imaginary driver, assuming ICBC were toimplement a new system using the middle o theroad options.

The premiums shown are based on a number oassumptions about each drivers situation and arean approximation o how a airer system could shitpremiums. The illustrations are only intended toshow the direction o premium changes and ordero magnitude.

Joe

Low-Risk

Pam

One-CrashThroughoutthisDiscussionGuideLow-Risk, Pam One-Crash, and Jethree drivers who will help us bettthe impacts o the dierent risk asoptions on their premiums.

Joeisalow-riskdriver.Hehasodriving experience, and is crash-rJoe pays a premium o $825. Joe under a driver-based system.

Pam also has 25 years of driving exhowever, she has been responsiblepast10years.Currently,PamspremPamcouldpay$675underadriver-

Jerryisahigh-riskdriver.Hehasresponsibleformultiplecrashes.Hto his 25 years o driving experienentitled to a discount on his insurapremium is currently $875. Jerry cunder a driver-based system.

(Note:Joe,PamandJerryarectusedforillustrationpurposesonlymay see dierent results based ondrivingrecord.Premiumswillvaryareas o the province and uses o

Premium comparison example

* Assumptions: our illustrative drivers are located in the Lower Mainland (Territory D) and rate their vehicles or pleasure use only (Rate Class 21).


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Discussion and Feedback: Topic 1 Driving Experience

Topic 1 Driving Experience

Driving experience is an obvious predictor o risk: itstands to reason that driving will improve with practiceand that a more experienced driver would be a lowerrisk and thereore might deserve a lower premium. An

inexperienced drivers risk o being responsible or acrash drops dramatically each year or most o therst 10 years, at which point it slows down.

Current System

The current ICBC system does not ully give credit ordriver experience. It gives credit or crash-ree drivingyears, but or drivers who have crashes, the eect o theirdriving experience is negated to some extent. In otherwords, our current discounts only recognize the length o

time a driver has gone without having a crash, not the truebenet o their additional driving experience.

The Problem

I the goal is to create a system that is air one thataccurately and transparently considers risk and assignshigher or lower premiums depending on risk then thecurrent system is overlooking a major risk indicator.

Potential Solutions

The most accurate and transparent solution woassign a dierent premium level or every year

although drivers might initially nd this more cThe simpler options such as grouping drivercategories send a less accurate price signal abenet o experience and mean that drivers wwait longer periods or the increased discountcredit or their sae driving.

Turn to page 18to provide input on the

Feedback Form

AverageClaimC

osts

Years of Driving Exper ience

0 5 10 15 20 25 30 35 40 45

Years o driving experience and predicted average claim costs


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Summary o potential driver experience solutions:

FEATURE POTENTIALSOLUTIONS PROS CONS

Drivingexperience:

How shouldexperiencebe counted?

A) Increase premium discount every year orthe rst 25 years

Very accurate: every year oexperience is recognized with agreater discount

Lower-risk drivers enjoy anadditional discount every year

Pricing is more detailedbecause discount table needsa new row or every year. This

makes it more dicult orcustomers to ollow.

B) Increase premium discount every year orthe rst 10 years, and then at ve-yearintervals until 25+ (0, 1, 2, 39, 1014,

1519, 2024, 25+)

This option recognizes thatexperience improves drivingdramatically in early years, lessso in later years

Discounts come less requentlyin the second decade

Discount table is stillmoderately detailed anddicult or customers to ollow

C) Increase premium discount only at ve-yearintervals (04, 59, 1014, 1519,

2024, 25+)

Pricing is simple or customersto understand

Not as accurate as Option A;does not recognize thedramatic risk reductionin the early years

Drivers wait ve years oreach additional discount

Discussion and Feedback: Topic 1 Driving Experience

0 5 10 15 20 25 30Years of Driv ing Expe rience

Premiums


Premiums


Premiums


Feedback Form


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Discussion and Feedback: Topic 2 Crashes

Topic 2 Crashes

Evidence shows that every at-ault crash you have andvirtually every crash you have ever had increases the riskthat you will be responsible or another crash in the uture.As shown in the graph to the right, the more crashes you

were responsible or in the past, the higher the likelihoodthat you will crash again in the uture.

But older crashes also matter in this risk assessment.For example, the statistics show that someone who wasresponsible or a crash nine years ago is 8% to 15% morelikely to have a crash in the next year than a driver who hashad no crashes.

This long-term risk actor is not ully refected in ICBCscurrent system. This means that drivers with a spotlessrecord are paying a higher cost than they would underthe potential options, while others who have a history o

crashes are paying less than their risk indicates they should.Like other insurance companies, ICBC oers drivers whohave many years o sae driving a ree crash in otherwords, i you have earned the best discount throughmany years o sae driving, we orgive the rst mistake,honouring your current discount even ater an at-aultcrash. There is no statistical basis or this practice: i youcause a crash even ater a long period o sae driving the likelihood that you will cause another in the next yearrises signicantly. Accordingly, drivers who have had nocrashes at all may nd it unair that they have to pay asmuch as drivers whose ree crash shows them to be a

higher risk.

This raises a series o questions about how to designa airer system that more accurately charges driversaccording to their level o risk:

2.1 How long should crashes count against yourdriving record?

2.2 How should older crashes be treated, relative tonewer crashes?

2.3 Should ICBC continue to oer lower-risk driversone ree crash?

2.4 During the transition rom the current systemto the potential new system, how shouldICBC treat crashes that occurred prior toimplementation o this program in 2014/2015?

2.5 How do we account or crashes by other driverswho dont have their own policy?

Turn to pages 19 23to provide input on the

Feedback Form

Minor crashesSometimesdrivershavecrashesthatinvolverepaircosts that are less than what the driver would haveto pay or in increased premiums. Today, ICBCallows its customers to repay the cost o thesecrashes and avoid having the crash count againstthem. In any new system, ICBC would continue toallow customers to make a choice about whetherthey want to make a claim or repay it.

0 1 2 3 4

Number of Previous Crashes by D

Likelihood

ofFut

ure

Crash

Future crash potential predicted by crash hi


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2.1 How long should crashes countagainst your driving record?

Current System

Drivers in the current system work their way gradually up or

down a rating scale, which grants them a better discounton their Basic vehicle coverage i they have no at-aultcrashes. Under this system, an at-ault crash counts againstthe vehicles history and it takes three years to recover tothe same discount level ater a single crash.

The Problem

Statistically, compared to a driver who has had no crashes,someone who has had even a single crash remains a higherrisk or as long as 15 years. Thereore, i higher-risk driversonly pay an increased premium or a relatively short time(usually three years), lower-risk drivers must pay more toabsorb the higher risk (and cost) that ICBC aces in the long

term.

Potential Solutions

Most drivers who have been responsible or a crash mightpreer that their crash history count or only a short period,while those drivers who have gone decades without a crashmight argue that they should be paying a lower premiumto refect their low risk. The choice, then, would be:

A short ve-year period o accountability

A middle-range 10-year period o accountability

A longer 15-year range period o accountability


FEATUREPOTENTIALSOLUTIONS

PROS CONS

PREMIUMIMPAUNDERADRIVER-BAS

Joe Low-Risk

NewPremium$675

Pam One-Cra

NewPremium$675

Crashes:

How longshouldcrashescount?

A) 5 years Crashes only aecta driving recordor ve years,then they areorgotten

Long-term saedrivers payan additionalpremium to makeup or the crash-prone driversdiscount

$700 $700

B) 10 years Long-term saedrivers receivegreater discounts

I you havecrashes, theyollow you or alonger period otime

$675 $675

C) 15 years Maximum credit(and discount) orlong-term saedrivers

Crashes will aectyour premium or15 years

$650 $650


Feedback Form

Summary o potential solutions or how long crashes should count:

Please reer to page 7 or more inormation about premium impacts an

Joe Low-Risk

Current Premium $825New Premium $675

Pam One-Crash


Jerry High-Risk

Current Premium $875New Premium $1,250



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Summary o potential solutions or older crashes:

FEATURE POTENTIALSOLUTIONS PROS CONS

Oldercrashes:

Howshouldoldercrashes betreated?

A) Older crashes count the same as newer crashes

Heres what happens to premiums ater one crash:

Pricing is simple or customersto understand, as all crasheshave the same impact

Not statistically accimpact o a crash opremium doesnt d

the risk diminishes

B) Older crashes count less than newer crashes

Heres what happens to premiums ater one crash:

The impact o a crashdiminishes over time, rewardingsaer driving behaviour

Pricing is more comcustomers to undeolder crashes cost newer ones

Premium

0 1 2 3 4 5 6 7 8 9 10

Years Insured

Older crashes count the

same as newer crashes

Premium

0 1 2 3 4 5 6 7 8 9 10

Years Insured

Older crashes count less

than newer crashes


2.2 How should older crashes be treated,relative to newer crashes?

Current System

Under the current system, crashes usually count or a

relatively short period (oten three years) and their impact isreduced in equal increments over that period.

The Problem

A system that more airly and accurately takes into accountdriver risk would count crashes or a longer period, butcould be structured so that the impact o older crashes isless than or recent crashes.

Potential Solutions

I crashes count or a longer period, some people mightthink it makes sense to treat older crashes dierentlythan newer ones, but doing so will make or a somewhat

more complicated system. The graph on page 13 showshow the predictive power o older crashes compares tonewer crashes.

The choice, then, would be:

Treatallcrashesthesame,or

Weighnewercrashesmoreheavily

A simple way to treat crashes (assuming, or example thatthey will count or 10 years) would be to assign greaterweight to crashes that occurred up to three years ago, andless to crashes that occurred our to 10 years ago.


Feedback Form


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2.3 One ree crash

Current System

Like many other insurance companies, ICBC has a policyo orgiving drivers i they have a single accident ater along period (generally more than 12 years) o sae driving.

The Problem

There are two problems with the curren

First, there is no statistical basis or a reA driver who is responsible or a crash ismore likely to be involved in another cra

year, even i he or she had previously enree period. Accordingly, drivers who trurecord are paying extra to allow ICBC to

Second, because o the way the currenworks, some B.C. drivers can have as mthree at-ault crashes without having th(see table on page 4).

Based on our research, other insurers olong-term sae drivers2 as either part oor as a separate coverage option. The ranges rom $35 to $65 annually.

2 The norm in Canada is that the driver must have been licensed with no

Forgiven, but not orgotten

I you have a crash ater a long period o saedriving, you are currently orgiven: you keep yourmaximum discount.

But ater a second crash, you might ace a premiumincrease because you have had two crashes not one.

In other words, ICBC orgives the premium impactoftherstcrashaslongasitisanisolatedincident but does not orget that the crash happened.

I the crash marks the beginning o a new trend(e.g., two or more crashes), it will still be refectedin your premium.

Premium

0 1 2 3 4 5 6 7 8 9 10

Years Insured

Older crashes count less than newer crashes

Older crashes count the same as newer crashes


Feedback Form

Premium impact o one crash over 10 years

Newer crashes

(0 to 3 Years)

Older crashes

(4 to 10 Years)

1 2 3+

Number of Previous Crashes by Driver

Likelihood

ofFuture

Crash

Older crashes also count but are less risky

d db k C h


16/28


Summary o potential solutions or crash orgiveness:


Potential Solutions

There are three potential solutions. ICBC could:

cancel the ree crash

continue with a single ree crash or drivers who go10 years without a claim

continue to allow one ree crash, but allow drivers theopportunity to waive their right to a ree crash in returnor a lower premium


Feedback Form

FEATUREPOTENTIALSOLUTIONS

PROS CONS

PREMIUMIMPACTSUNDERADRIVER-BASEDSYSTEM

Joe Low-Risk

NewPremium$675

Pam One-Crash

NewPremium$675

Jer

Ne

Freecrashes:

ShouldICBCoffer afree crash?

A) No ree crash Statisticallyaccurate: everycrash impactspremium

Drivers withoutcrashes receivethe discountthey deserve

Driver whomakes a singlemistake ateryears o saedriving pays ahigher premium

$625 $925

B) One ree crash

earned ater

10 years o

sae driving

Drivers whomake a singlemistakedont pay a

higher premium

Not statisticallyaccurate:drivers whodont have

crashes dontreceive the bestdiscount

$675 $675

C) One ree crash

earned ater

10 crash-ree

years, but

drivers can

waive this

eature to

save money

More choice:drivers candecide whetherthey wouldrather get oneree crash orsave money

More complex:drivers haveto make adecision aboutwhether towaive theirree crash

Drivers who waive the ree crash could save $35$

our research into what other insurers charge or

this beneft)3

3 This crash orgiveness eature oered by the other insurers has varying eligibilitycriteria and coverage limitations. The estimate provided is or discussion purposes only.

Please reer to page 7 or more inormimpacts and the illustra

Joe Low-Risk


Pam One-Crash


Jerry High-Risk

Current Premium $875New Premium $1,250


Di i d F db k T i 2 C h


17/28


2.4 During the transition, how shouldICBC treat crashes that occurred prior toimplementation o this program in2014/2015?

ICBC is working to have its new Basic vehicle insurancepricing system ready or implementation in 2014/2015.

The Problem

Some drivers may object to the idea that they would becharged in the uture or a crash that occurred beore thechange o policy takes eect. But there is a trade-o: ihigher-risk drivers rates dont ully refect their past crashhistory, lower-risk drivers savings will also take time to beimplemented, so lower-risk drivers might object i ICBC didNOT implement a change relatively quickly.

Potential Solutions

One option would be or ICBC to cap the impact o thenew rules on crashes that happened beore implementationduring a transition period, so higher-risk drivers premiumswould increase by no more than a specic amount (say5% or 10%) per year. In such a system, higher-risk driverswould have a period o time in which to gradually move totheir higher premium. They may choose to improve theirdriving habits to reduce their premiums over time. Theother option is to count all crashes that happened prior toimplementation using the new rules so that the highest-riskdrivers pay a higher premium right away, and the lowest-risk drivers see lower premiums right away.

Why not start rom scratch?

I we treat everyone as i they have never had a crashon the day the new rules come into eect, every driverwith the same amount o experience would get the samepremium discount. Two things would happen in the rstyear ater any new rules come into eect:

1. Lower-risk drivers who have earned a good discountover many years o crash-ree driving under the current

system would pay a much higher prewould share the same discount withmany crashes, and

2. Higher-risk drivers with multiple cras

much lower premium because they wsame discount as drivers who have n


Summary o potential solutions or how to treat crashes that occurred 2014/2015 in the transition to a new system:


Feedback Form

FEATUREPOTENTIAL

SOLUTIONS

PROS CONS

PREMIUMIMPAUNDERADRIVER-BAS

Joe Low-RiskNewPremium

$675

Pam One-CraNewPremium

$675

How shouldICBCtreatcrashes thatoccurredprior toimplementationof this programin2014/2015?

A) Crashes that

occurred

prior to

implementa-

tion count

using the

new rules

Pricing is accurate

Lower-risk driverspay less, higher-risk driverspay more

Older crashesmay have a largerand longer-lastingimpact or somecustomers

$675 $675

B) Crashes that

occurred

prior to im-

plementation

count, butthe impact

is capped (in

this example,

the cap

is 10%)

Premium paidwill not changesignicantly romyear to year (will

take both lower-risk and higher-risk drivers longerto get to theirnew rate)

Rules arecomplicated orcustomers

To balance,lower-risk driverswait longer to getthe best discount;increases tohigher-risk driversare more gradual

$745 $745

Please reer to page 7 or more inormation about premium impacts an

Di i d F db k T i 2 C h


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2.5 Other driver crashes

Current System

ICBCs current pricing system only captures inormationabout the crash history o the registered owner and themain driver (also reerred to as the principal operator). We

use no inormation about others (e.g., amily members,employees) who may drive the vehicle regularly. Yet about20% o crash-related claims involve other drivers.

Problem

When other drivers are responsible or crashes, the vehicleowner pays the increased premium, while the driverwho caused the crash may drive another vehicle at noadditional expense.

Potential Solutions

Under a driver-based system, a crash would ollow thedriver, rather than impact the vehicles premium. I the

driver does not have a vehicle insured with ICBC, ICBCcould charge a premium directly, either against the vehicleinvolved in the crash (as occurs today) or against thedriver who had the crash (by sending a premium bill inthe mail). Either way, i the driver later insured a vehicle otheir own, they would also pay a premium that takes thecrash into account. The challenge is to connect chargesdirectly to crashes and to make it clear that they are notpunishment, but rather an attempt to charge a premiumthat refects the uture risk, as predicted by the drivingrecord o the person who had the crash.

Summary o potential solutions or other drivers who dont have their own p

FEATURE POTENTIALSOLUTIONS PROS CONSANNUAL

ONPRE

Otherdrivercrashes:

An other driver isdefned as someonewho crashes avehicle who isntthe owner/principaloperator o thevehicle This otherdriver may be aamily member or anunrelated person,

such as a neighbouror an employee

A) Other driver crash

has no impact on the

owners premium;

however, an additionalpremium or all ICBC

policies would apply

Owner doesnt pay morewhen someone else

crashes his or her car

No incentive or ownersto restrict the use o

their vehicles by higher-

risk drivers

Everyone who insuresa vehicle pays more to

absorb the higher risk

Owner: no ee

Other driverimpact; howev

increased prem

or she takes ou

All ICBC policipremium incre

average o$5

B) Owner pays more or

insurance i an other

driver crash occurs

and the driver doesnt

have their own vehicle

insurance with ICBC

(on which they would

pay a higher premium)

Provides incentive toowners to take care in

who uses their car

Owners whose vehicleis crashed by an other

driver pay more or

insurance

Some drivers may evaderesponsibility

Owner: pays atime premium

Other driverimpact; howev

increased prem

or she takes ou

C) Driver gets aseparate bill o$500

i they crash someone

elses vehicle and

dont have ICBC Basic

insurance o their own

Owners who dont haveother drivers or whoseother drivers have not

been involved in crashes

receive an improved

discount

Owners whose vehicle iscrashed by a borrower

or amily member dont

have to pay more or

insurance

No incentive or ownersto restrict the use otheir vehicles by higher-

risk drivers

Driver who crashes aborrowed car and gets

a bill in the mail may

object to $500 direct

charge

Owner: no ee Other driver

premium o$5

an increased p

he or she take


Feedback Form

Note: ICBC currently provides insurance coverage or you and your vehicle w

Discussion and Feedback: Topic 3 Premiums or Driving Violations


19/28


Discussion and Feedback: Topic 3 Premiums or Driving Violations

Topic 3 Premiums or Driving Violations

Driving violations (both Criminal Code oences and MotorVehicle Actviolations) are a strong statistical indication othe risk that someone will have a crash in the uture.

Current System

ICBC collects insurance premiums or driving violations.Less than 1% o people already pay increased premiums orserious driving violations.

Consistent with the proposed driver-based system wherehigher-risk drivers would pay more and lower-risk driverswould pay less, ICBC is seeking public input about whetherhigher-risk drivers who have serious convictions such asexcessive speed, impaired driving and street racing shouldpay higher insurance premiums.


Feedback Form

Conclusion

ICBC has presented several options to it sets premiums or Basic vehicle insurCustomers have told us they want loweless or their vehicle insurance, and hig

pay more.Our goal is to have a system that is airand that continues to provide universanon-discriminatory insurance or our culook orward to input rom British Columupdate our Basic vehicle insurance cov

What happens to the moneycollected rom trafc tickets?ThenesfromtrafcticketsinB.C.arecollectedby ICBC on behal o the provincial government

and all o the money is transerred to municipalgovernments to help oset policing costs.

ICBCs Basic Vehicle Insurance Rating System Feedback Form T t 8 9


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18 Basic Vehicle Insurance Rating System. 2012 Consultation and Engagement Feedback Form.

ICBC s Basic Vehicle Insurance Rating System Feedback Form

TheinputthatyouprovidethroughthisFeedbackFormwillbeconsidered,alongwithtechnical,nancialandpolicyconsiderations,asICBCrenesitsBasicvehicleinsuranceratingsystem.

Topic 1: Driving Experience

DrivingExperienceHowisdrivingexperiencecounted?

Driving experience is a predictor o risk. It stands to reason that driving will improve withpractice and that a more experienced driver would be a lower risk and thereore mightdeserve a lower premium. ICBC wants input about how driving experience should becounted when determining Basic insurance rates.

Q1.Howshoulddrivingexperiencebecounted?Please indicate your level o agreement with each option:

OPTIONA

Q1a. Increase premium discount everyyearor the frst 25 years

Strongly AgreeSomewhat

AgreeNeither AgreeNor Disagree

SomewhatDisagree

StronglyDisagree

Please provide any comments to explain the reasons or your agreement or disagreement.

OPTIONB

Q1b. Increase premium discount everyyearfortherst10years, and then at fve

intervals until 25+ (0, 1, 2, 39, 1014, 1519, 2024, 25+)



SomewhatDisagree

Please provide any comments to explain the reasons or your agreement or disagree

OPTION C

Q1c. Increase premium discount onlyatve-yearintervals (04, 59, 1014, 1519



SomewhatDisagree


Turn to pages 8 9or more inormation

on this topic

ICBCs Basic Vehicle Insurance Rating System Feedback Form Turn to page 11


21/28

Basic Vehicle Insurance Rating System. 2012 Consultation and Engag

Topic 2: Crashes

At-FaultCrashesHowandwhatcrashescountindeterminingBasicinsurancerates?

Evidence shows that every at-ault crash you have and virtually every crash you have everhad increases the risk that you will be responsible or another crash in the uture. ICBC is

interested in getting input rom the public and stakeholders about how and what crashesshould impact the assessment o driver risk in determining Basic insurance rates.

Q2.Howlongshouldcrashescountagainstyourdrivingrecord?Please indicate your level o agreement with each option.

OPTIONA

Q2a Crashes count or a totalofveyears



SomewhatDisagree

StronglyDisagree


OPTIONB

Q2b. Crashes count or a totalof10years



SomewhatDisagree

Please provide any comments to explain the reasons or your agreement or d

OPTION C

Q2c. Crashes count or a totalof15years



SomewhatDisagree


ICBC s Basic Vehicle Insurance Rating System Feedback Form Turn to page 11or more inormation

on this topic



22/28


Q3.Howshouldoldercrashesbetreated,relativetonewercrashes?Please indicate your level o agreement with each option.

OPTIONA

Q3a. Older crashes count the same as newer crashes

Strongly Agree SomewhatAgree

Neither AgreeNor Disagree

SomewhatDisagree

StronglyDisagree


OPTIONB

Q3b. Older crashes count less than newer crashes



SomewhatDisagree


ICBC s Basic Vehicle Insurance Rating System Feedback Form Turn to page 12or more inormation

on this topic

ICBCs Basic Vehicle Insurance Rating System Feedback Form Turn to pages 13 14


23/28


Q4.ShouldICBCcontinuetoofferlower-riskdriversonefreecrash?Please indicate your level o agreement with each option regarding one ree crash.

OPTIONA

Q4a. ICBC should oer no free crash

Strongly Agree SomewhatAgree Neither AgreeNor Disagree SomewhatDisagree StronglyDisagree


OPTIONB

Q4b. ICBC should oer one free crashearnedafter10years o crash-ree



SomewhatDisagree


OPTION C

Q4c. ICBC should oer onefreecrashearnedafter10years o crash-ree

can waive this eature to save money

Strongly Agree SomewhatAgree Neither AgreeNor Disagree SomewhatDisagree


ICBC s Basic Vehicle Insurance Rating System Feedback Form Turn to pages 13 14or more inormation

on this topic



24/28


Q5.Duringthetransitiontoanewpricingsystem,howshouldICBCtreatcrashesthatoccurredpriortoimplementationofthenewsystemin2014/2015?Please indicate your level o agreement with each option.

OPTIONA

Q5a. Older crashes count using the new rules



SomewhatDisagree

StronglyDisagree


OPTIONB

Q5b. Older crashes count, but the impact on insurance premiums is capped



SomewhatDisagree


g y Turn to page 15or more inormation

on this topic

Turn to page 16ICBCs Basic Vehicle Insurance Rating System Feedback Form


25/28

Q6.Howdoweaccountforcrashesbyotherdriverswhodonthavetheirownpolicy?

ICBCs current pricing system only captures inormation about the crash history o theregistered owner, including crashes that other drivers may have had in the owners vehicle.No inormation is used about other drivers (e.g., amily members, employees, etc.) who maydrive the vehicle regularly, yet about 20% o crashes involve other drivers. ICBC is interested

in getting input on how other driver crashes should impact the new pricing structure.

Please indicate your level o agreement with each option.

OPTIONA

Q6a.Other driver crashes have no impact on the vehicle owners insurance premium, but the cost

continues to be spread across all other drivers



SomewhatDisagree

StronglyDisagree


OPTIONB

Q6b.Ownerpaysaone-timepremiumof$500 i an other driver crash oc

doesnt have their own vehicle insurance (on which they would pay a higher pr



SomewhatDisagree


OPTION C

Q6c. Drivergetsaseparatebillof$500 i they crash someone elses vehic

their own ICBC Basic vehicle insurance



SomewhatDisagree


p gor more inormation

on this topic

g y




26/28


Topic 3: Driving Violations

Driving violations (both Criminal Code oences and Motor Vehicle Actviolations) are anexcellent statistical indication o the risk that someone will have a crash in the uture. ICBCcollects insurance premiums or driving violations. Less than 1% o people already payincreased premiums or serious driving violations. Consistent with the proposed driver-based system where higher-risk drivers would pay more and lower-risk drivers would pay

less, ICBC is seeking public input about whether higher-risk drivers who have seriousconvictions such as excessive speed, impaired driving and street racing should pay higherinsurance premiums.

Q7.Please indicate your level o agreement with higher-risk drivers who have seriousconvictions such as excessive speed, impaired driving and street racing paying higherinsurance premiums.



SomewhatDisagree

StronglyDisagree


Additional comments

Please provide any additional comments:

gor more inormation

on this topic


27/28


Additional comments

continued:

You are (please select one):

ICBC Customer

ICBC Employee

Autoplan Broker

Other

Please provide your contact inormation (optional):

Name:

Email:

Phone:

Mailing Address:

Postal

Consent to use inormation

I consent to the collection and use o my personal inormation by ICBCo contacting me and keeping me updated about changes to the Basrating system.

Signature: Date:

Personal inormation is collected pursuant to Section 26 o the Freedom of Information and Prot

or the purposes o obtaining customer eedback regarding planning and evaluating changes to

rating system. I you have any questions about how ICBC collects, uses or discloses your persona

contact ICBCs Privacy and Freedom o Inormation department at 604-661-6828.


28/28

publicengagemepublicengageme

How input will be used

Your views are important to us and will help shape the uture o our Basic vehicrating system. Input received through consultation and engagement will be coalong with technical, nancial and policy considerations as ICBC renes its Basinsurance rating system.

Public and stakeholder eedback will be receivedrom May 14 June 22, 2012

We invite you to provide eedback on ICBCs Basic vehicle insurance ratsystem through the ollowing consultation and engagement opportuniti

DiscussionGuideandFeedbackForm

StakeholderMeetings

PublicOpenHouses

Onlinefeedbackform:publicengagement.icbc.com

Writtensubmission:Email:[email protected] Mail:P.O.Box4004,Vancouver,B.C.V6B3Z4

Phone:604.982.6153,1-855-982-6153toll-free

Webinar

The deadline to submit your eedback is June 22, 2012.

discussion guide - may 2012

Documents