Regulating Fair Competition in BC's Optional Auto Insurance Market

The British Columbia Government has now introduced and passed legislation amending ICBC's governing statute.  The new legislation addresses certain concerns that private auto insurers have regarding British Columbia's optional insurance market. Most importantly, the British Columbia Utilities Commission will be responsible for ensuring fair competition in the optional auto insurance market. ICBC will continue to be responsible for basic auto insurance in the Province, but in that regard the Utilities Commission will oversee the setting of premiums.

To ensure fair competition, the Utilities Commission has been given authority to prohibit ICBC from taking any action that would reduce competition in the optional insurance market.  The Utilities Commission also has the power to order ICBC to take those steps the Commission deems necessary to maintain or enhance competition.  

A private auto insurer is entitled to complain to the Utilities Commission if the private auto insurer feels that ICBC is acting in a non-competitive manner. The Utilities Commission may then hold a hearing, following which an order may issue prohibiting ICBC from continuing with those activities the Commission determines to be non-competitive in nature. Under certain circumstances, the Utilities Commission may also issue interim orders.  However, before an interim order is made, the Commission must be satisfied that a reduction of competition may occur which cannot be adequately remedied by a subsequent order, or which may result in the elimination of an ICBC competitor from the optional insurance market. 

To further promote competition, ICBC must take steps, satisfactory to the Utilities Commission, so as to ensure that ICBC's optional insurance business is not supported by its other insurance business, including primary coverage. If necessary, the Utilities Commission may issue orders regarding ICBC's accounting practices so that its optional insurance business is clearly segregated from its other insurance activities.

So far as ICBC's premiums are concerned, ICBC will set them, but the Utilities Commission may regulate and fix basic premium rates as it deems necessary.  However, the provincial cabinet will have authority to issue orders to the Utilities Commission establishing financial outcome targets for ICBC, as well as factors, criteria and guidelines the Utilities Commission must follow when regulating and fixing premiums for ICBC.  

Clearly, the intent of the new legislation is to promote competition in the optional insurance market.  The overall impact and effectiveness of the new legislation will depend on how stringently the Utilities Commission enforces its mandate, and how proactive private auto insurers are in requiring ICBC to act in a competitive manner.

A copy of the Third Reading of the Act can be found on the Legislative Assembly's website at:
http://ww.legis.gov.bc.ca/37th4th/3rd_read/gov58-3.htm

Readers with any questions regarding the legislation are welcome to contact Larry Munn at 604-643-3160. Larry focuses on insurance regulatory matters as part of his practice.