SGI offers B.C. customers a range of insurance products – why can’t ICBC?

Tuesday, August 25, 2015

By Annette Toth, Vice-President and Iain Reeve, Research Officer

In July, Saskatchewan Government Insurance (SGI) — the province’s public insurance company that specializes in compulsory auto insurance — started selling a variety of insurance products in British Columbia. This move represents a significant change to B.C.’s insurance market, as it allows a Crown Corporation from another province to operate within B.C.’s borders. Could it also point to a potential direction for ICBC? Could ICBC emulate SGI’s model by diversifying its insurance offerings to other areas and competing in other markets? What benefits could this have for the Corporation, its customers, and all British Columbians?

Like ICBC, SGI holds a monopoly on compulsory auto insurance, while also offering optional extended auto insurance in a competitive market. This is where the similarities end, as unlike ICBC, SGI offers a wide range of individual and business insurance products through brokers on the open market. For individual customers, this includes home, condo, tenant and risk reduction insurance. They also provide a variety of commercial and industrial insurance products to businesses, including transportation, property, building, and liability insurance. SGI proudly touts itself as a major Western Canadian insurance force and its representatives speak openly about the benefits of expanding the depth and range of their insurance offerings.

Besides a brief period in its early inception where ICBC dealt in home insurance, its offerings have remained limited: compulsory and optional auto insurance. There are at least three good reasons that ICBC should seriously investigate the possibility of expanding its insurance offerings within British Columbia and beyond.

First, as SGI notes, and as innumerable insurance companies have demonstrated for years, increasing the number of products you offer and doing so in many different jurisdictions, stabilizes insurance companies. This product diversification could insulate ICBC from major shifts or downturns in auto insurance such as the innovation of autonomous vehicles. The arrival of these vehicles could dramatically reduce the number of vehicle collisions and eventually even eliminate the need for personal specialized auto insurance. While we should all welcome any new technology that would save thousands of lives and prevent millions of dollars in property damage, an exclusive reliance on auto insurance could make ICBC vulnerable when this technology arrives.

Second, diversification could lower optional rates for British Columbians in a time when the increasing cost of bodily injury claims and the rise in the representation rate is driving them up. ICBC has little flexibility in these circumstances — an increase in claim costs must lead to higher rates unless the difference is made up from external funding or cutbacks elsewhere. However, if ICBC could spread out their risk across many insurance portfolios, trends and changes in one area may not have as direct an impact on rates. Further, packaging or bundling of other forms of insurance could keep optional costs low and yield further savings for customers.

Third, as SGI shows, expansion into business insurance could not only diversify ICBC’s portfolio of insurance, but also provide economic benefits by providing an avenue, as BC Hydro does, to incentivize certain types of business without needing to provide broad-based tax reductions to all corporations. It could also provide another stream of revenue to support government services.

While much more research would need to be done to determine the exact right expansion possibilities for ICBC, we feel it is worth examining to secure the future of the Corporation, and the best value and service for British Columbians.

Note: this article first appeared in the Summer 2015 edition of the Local Voice and contained a typo in the fourth paragraph which has been corrected. 

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