The government-operated auto insurance system in the Canadian province of British Columbia has raised its average rates by 22%, and the reason is basically the same given for auto insurance increases in the United States--a sharp jump in liability claims and pay-outs.
Rates in British Columbia, where the public system has a monopoly, nonetheless remain low in comparison to private company rates in many urban areas in California.
Even after the increase, the annual premium on a 1987 Oldsmobile Cutlass Supreme in Vancouver carrying $700,000 liability (in American dollars) and a $210 deductible for collision, with the driver having a clean record for four years, will be $452, an $81 increase. The same coverage on a 1975 Dodge Dart goes to $262, up $59.
By comparison, a driver in West Los Angeles with a similar safe driving record would pay a leading insurer for similar coverage about $1,300 a year for the Oldsmobile and $1,086 a year for the Dodge.
Nonetheless, the rate increases in British Columbia have come as a surprise to the people there after five years of annual increases ranging from 2% to 6%.
The Insurance Corp. of British Columbia, in announcing the increases, said that a steadily rising number of claims paid and a higher average cost of each claim had necessitated the rate hikes.
"Since 1983, the estimated cost of injury-related claims has soared by 61% to $472 million (Canadian, or U.S. $330 million) by the end of 1986, the last full year reported," the corporation said in a statement. "The cost of repairing vehicle damage has increased by 27%. . . . The pattern has continued in 1987 and looks like it will carry on into 1988."
Drivers in British Columbia who accumulate tickets and accidents can pay far more than the basic rates--as high as $1,750 a year.
The amount of liability coverage required of British Columbia drivers is far higher than the $15,000 individual/$30,000 multiple party coverage required under California's mandatory insurance law.
British Columbia drivers must carry at least $140,000 in liability insurance. But this, unlike the California minimums, includes rehabilitation, medical costs and income support of $101.50 a week in case of injury if the victim is a wage earner or a homemaker.
British Columbia has no age discrimination in insurance. A newly licensed young driver pays no more than an experienced older driver, so long as he or she has no accidents.
The nonprofit British Columbia system pays commissions to private agents who sell the insurance. But it plows all of its investment income back into the system, taking care of virtually all of its administrative costs and commissions. Almost all of the money that it gets in premiums is paid out in claims.
The state monopoly controls all centers evaluating automobile damage and authorizing repairs, and so is apparently able to better control the fraud that is believed endemic in California and other American states.