Media Commentary on New Basic Rate Design. August 28, 2018.
Some of the key media reporting and comments on the changes to the Basic rate design announced on August 9, 2018.
Some of the key media reporting and comments on the changes to the Basic rate design announced on August 9, 2018.
The new Basic premium model targets younger drivers, and at-fault drivers to give a financial benefit to older drivers. More comments are included in Occasional Paper No. 59.
The government's decision to postpone a general rate increase until April 2019 will reduce ICBC's already low capital reserve by perhaps $150 million in 2018/19.
A short commentary on the regulator's 18 July 2018 approval of the purchase of Teck's interest in the Waneta Dam.
This paper reviews the positive 2017/18 annual reports of the public auto insurers in Saskatchewan and Manitoba for both the compulsory Basic and the optional programs. This contrasts with ICBC's forecasted combined loss of $1.4 billion.
Expensive electricity was a major issue in the recent Ontario election. The new government succeeded in forcing the board and CEO Mayo Schmidt to resign, but lower prices have only been possible by transferring cost to taxpayers and future generations; https://www.theglobeandmail.com/canada/article-entire-ontario-hydro-one-board-to-resign-ceo-to-step-down/ and https://www.theglobeandmail.com/opinion/article-doug-ford-kneecaps-hydro-one/ and https://www.cbc.ca/news/canada/toronto/doug-ford-hydro-one-1.4743097 and https://www.theglobeandmail.com/business/article-doug-ford-used-legislative-threat-to-oust-hydro-one-ceo-board/
This paper examins ICBC's main accountability reports in light of the accountability model adopted by government in the early 2000's. The level of public accountability is poor, and the government should require ICBC to make significant improvements.
A comment on minister Mungall's statement and the staff review of BC Hydro's costs.
My article published by The Tyee online journal; https://thetyee.ca/Analysis/2018/06/07/ICBC-Changes-Insurer-Woes/?utm_source=daily&utm_medium=email&utm_campaign=070618
This paper reviews the key results of the government's public opinion survey on potential changes to ICBC's driver penalties and the design of Basic rates.
Barrie McKenna in the Globe and Mail political meddling for causing the high price of electricity in Ontario; https://www.theglobeandmail.com/business/commentary/article-blame-political-meddling-not-ceo-pay-for-ontarios-dysfunctional/
The three main politic parties in Ontario are promising to reduce electricity prices, but are being vague as to what this will cost. It's time for the voters to become educated consumers.
A comment in response to Vaughn Palmer's article about the BC Investment Management Corporation and the well-funded public pension plans.
McClearn's article in the Globe and Mail provides a useful summary of many of the issues involved in the accounting dispute between the ontario auditor general and the government. Similar issues exist in British Columbia.
Between 2010 and 2015 the provincial government appropriated almost $1.2 billion of Optional policyholders' capital. Now -- with the province's finances healthy and the ICBC capital reserves almost eliminated -- would seem an appropriat time to return the funds. Occasional Paper No. 56 estimates the Basic and Optional capital shortfalls to 2021/22.
My comments on the Fraser Institute's report "The Decline and Fall of ICBC."
The recent announcement of an increase in the fare subsidy for seniors on the BC Ferries prompted me to review an earlier estimate on the cost of the 25% seniors' subsidy at ICBC's Basic insurance. If the government funded the sudsidy it would relieve some of the pressure on Basic rates.
This 'Commentary' paper reviews the Ontario and BC public accounts committee discussion of the oppositin by the two auditors general of the application of reguatory accounting, and the impact to the governments' financial statements.
Occasional Paper No. 54 looks at the current design for pricing risk and some of the changes being suggested in the current public consultation.
Auditor General Carol Bellringer issued a report, http://www.bcauditor.com/sites/default/files/publications/reports/FINAL_BCUC.pdf, that reminds the government that five key recommendations of the 2014 independent task force remain outstanding. In August Ms. Bellringer qualified the government's 2016/17 financial statements, in part because BC Hydro's deferral accounts were not overseen by an independent regulator. The Canadian Press provided a limited summary (http://vancouversun.com/pmn/news-pmn/canada-news-pmn/b-c-auditor-offers-advice-on-utilities-commission-after-previous-studies/wcm/c65203d2-1811-4418-ab5b-f55f3002d5d7. DeSmog Canada's report was more comprehensive; https://www.desmog.ca/2018/03/15/auditor-general-nudges-b-c-amend-act-exempted-site-c-dam-independent-review
My comments on certain aspects for the latest proposals to make Basic insurance rates "fairer." It seems that most of the proposals will result in less generous discounts and greter revenue for ICBC.
Rob Shaw of the Vancouver Sun summarizes the Utilities Commission's decision http://vancouversun.com/news/politics/b-c-utilities-commission-rejects-b-c-hydro-rate-freeze; Les Leyne of the Tmes Colonist comments http://www.timescolonist.com/opinion/columnists/les-leyne-ndp-s-hydro-rate-freeze-thaws-in-a-hurry-1.23192381. My comments are also attached.
ICBC's 2017/18 to 2020/21 financial forecast shows the combined capital reserve falling to dangerously low levels. However many inconsistencies make the forecast suspect. Also included is Acting CEO Nicolas Jimenez's email of March 15th, my reply of March 19th and his reply of March 28th.
The national public sector accounting rules require that ICBC's net income or loss be counted in the government's revenue. The increase in the net loss reduces revenue, but there is no change in the actual cash being transferred (which is nil). This accounting anomoly requires further review.
On 6 February 2018, minister responsible David Eby announced major changes to injury claims process and coverage, with expanded no-fault accident benefits and monetary limits, and a $5,500 cap on pain and suffering claims for "minor" injuries. The government expects that these changes will reduce annual claims costs by approximately $1.0 billion.
This paper suggests that injury claimants received only 57% of the $2.0 billion paid by ICBC in 2015 for no-fault accident benefits and injury claims. The balance was absorbed in 'transaction' costs.
This paper discusses the auto injury claim models in the states of New South Wales and Victoria, and in New Zealand, with possible lessons for BC.
On 28 January 2018 (a Sunday!) ICBC posted its third-quarteroperating results for 2017/18. The loss of $935 million, with a forecast of near $1.3 billion by year-end sparked a series of media reports; http://theprovince.com/news/bc-politics/mike-smyth-shocking-massive-losses-revealed-at-icbc-huge-rate-hikes-feared,
http://vancouversun.com/opinion/columnists/vaughn-palmer-eby-suggests-major-reforms-to-clean-inherited-icbc-mess, https://www.theglobeandmail.com/news/british-columbia/ag-david-eby-vows-reform-to-icbc-to-avoid-massive-rate-hikes/article37784040/, https://www.theglobeandmail.com/news/british-columbia/government-changes-to-tackle-deficit-not-enough-icbc-chair/article37800884/, https://www.theglobeandmail.com/news/british-columbia/icbcs-financial-woes-blamed-on-christy-clark-era-rate-smoothing/article37813885/http://vancouversun.com/news/national/ian-mulgrew-dont-blame-us-and-dont-believe-icbc-lawyers-insist
http://www.timescolonist.com/opinion/columnists/les-leyne-eby-pulls-alarm-on-icbc-s-dumpster-fire-1.23158279, http://vancouversun.com/opinion/columnists/vaughn-palmer-a-liberal-timeline-that-would-make-the-sopranos-envious, http://vancouversun.com/news/local-news/repair-shops-argue-used-parts-are-piece-in-fixing-icbc-finances,
In this article, published by the Tyee, I advocate the creation of a Financial Accountability Office as an independent officer of the legislture, modelled on the Ontario agency: https://thetyee.ca/Opinion/2018/01/30/One-Step-Plan-Boost-BC-Accountability/?utm_source=daily&utm_medium=email&utm_campaign=300118
My Commentary on how former fiance minister de Jong was calling the shots on ICBC's finances. See also http://vancouversun.com/opinion/columnists/vaughn-palmer-blame-game-aimed-at-de-jong-and-the-restless-candidates and http://vancouversun.com/opinion/columnists/vaughn-palmer-liberals-plan-to-delay-the-fix-at-icbc-fails-miserably
Brady Yauch of the Consumer Policy Institute discribes how electricity pricing in Ontario is now determined by politics rather than economics. BC Hydro rates have been set by political decisions since 2012 when the governemt ordered the regulator to approve lower than required rates. https://cpi.probeinternational.org/2017/11/09/its-the-end-of-energy-regulation-in-ontario-as-we-know-it/
BC Auditor General Carol Bellringer is preparing to become BC Hydro's external auditor, which will put more pressure on the government to allow BC Hydro to conform to national public sector accounting standards. See Les Leyne http://www.timescolonist.com/opinion/columnists/les-leyne-watching-b-c-hydro-is-a-growth-industry-1.23137605 and Vaughn Palmer http://vancouversun.com/opinion/columnists/vaughn-palmer-bellringer-anxious-to-plug-into-b-c-hydros-accounts
ICBC recently posted its second quarter 'Statement of Operations,' which is highly deficient as a quarterly report from such an important Crown corporation. Occasiona Paer No. 50 compares the results with Saskatchewan's compulsory insurance program in an attempt to understand the reasons for the continuing losses.
The government should lower the minimum capital targets to reduce the current and forecasted capital deficiency, Given the nature of the Basic monopoly, and the near monopoly enjoyed by the Optional program, the targets should be lower, thereby reducing the pressure on future rates.
The Alberta government has limited the 2017/18 increase in the private vehicle insurance rates to 5%. It stated that the previously allowed 10% maximum increase was not inline with its affordability priority. Background and implications are provided.
This paper provides a high-level review of how ICBC's costs out-stripped revenues from 2012 to 2016/17, and focusses in bodily injury claims costs.
The paper suggests that capping pain and suffering claims for minor soft tissue injury claims will not generate sufficient savings to treturn ICBC's finances and capital reerves to a satidfactory condition.
The Manitoba regulator recently approved a 2.6% increase in Basic vehicle rates for the coming year. This paper looks at how BC rate increases compare to the publicly-owned no-fault systems in Saskatchewan and Manitoba.
The government is planning changes to ICBC's insurance model to reduce costs. Occasional Paper No. 47 discusses areas where the government should re-imburse ICBC policyholders for current programs or policies that benefit the taxpayer.
On 30 November 2017, Rob Shaw of the Vancouver Sun reported that the government is actively considering a cap on claims for pain and suffering awards for minor soft tissue injuries; http://vancouversun.com/news/politics/government-considers-cap-on-minor-injury-claims-to-fix-icbc-finances The cap would be a key part of a strategy to prevent the massive losses forecast for the compulsory Basic insurance program as discussed in http://www.bcpolicyperspectives.com/media/attachments/view/doc/commentary_icbc_s_28_nov_2017_basic_forecast_29_nov_2017/pdf
A new ICBC forecast of the Basic program shows major rate hikes are required to keep the capital reserve from being fully depleted within four years.
The current government's plan to freeze BC Hydro rates is the latest example of how governments have succumbed to the alure of short-term gain by manipulating BC Hydro's finances. Occasional Paper No. 46 traces the key events since 2011.
Can the BCUC approve BC Hydro's request to withdraw the 3% rate increase for 1 April 2018? I argue that it should not approve the request; includes final submission of 11 January 2018.
As a follow-up to Occasional Paper No. 45, this paper looks more deeply at the question of affordability in the pricing of BC Hydro's electricity.
Andrew MacLeod of The Tyee reports that Finance Minister Carole James intends to fix BC Hydro's accounting practices, but it will take time; https://thetyee.ca/News/2017/10/25/Fixing-BC-Hydro-Accounting/?utm_source=daily&utm_medium=email&utm_campaign=251017
This paper discusses some aspects of the new plan to freeze BC Hydro rates for 2018.
Resource economist Robert McCullough's testimonoy before the Site C panel on October 14th http://www.sitecinquiry.com/wp-content/uploads/2017/10/00614_TTP-2_2017_10_14_Vancouver_TP-Transcripts-V14.pdf pg. 1562 to 1581; opinion piece in the Vancouver Sun of October 30th http://vancouversun.com/opinion/op-ed/opinion-site-c-proponents-fall-prey-to-sunk-costs-fallacy
The Auditor General has added a new reason to qualify her opinion of the government's 2016/17 financial statements; the fact that the 'prescribed' accounting standards do not conform to the public sector accounting standards. Read more in Occasional Paper No. 44.
The Tyee published my piece which describes the Ontario Auditor General's special report on a government scheme to subsidize electricity rates, and how electricity rates are subsidized in British Columbia; https://thetyee.ca/Opinion/2017/10/24/Will-NDPEnd-BC-Hydro-Wild-West-Accounting/?utm_source=daily&utm_medium=email&utm_campaign=241017 also Andrew MacLeod's comments from Carole James https://thetyee.ca/News/2017/10/25/Fixing-BC-Hydro-Accounting/?utm_source=daily&utm_medium=email&utm_campaign=251017
In a special report the Ontario Auditor General severely criticised that government's new regulatory deferal scheme; what would she make of the accounting practiced at BC Hydro to surpress the true cost of electricity?
This email informs Auditor General Bellringer of recent developments respecting BC Hydro's accounting for future unbilled and uncollected revenue.
The use of deferral accounting allows debt to be transformed into and asset, a practice that the BC Lberal government abused with respect to BC Hydro's books. There are there lessons for the new NDP government in the Ontario Auditor General's recent report; http://www.auditor.on.ca/en/content/specialreports/specialreports/FairHydroPlan_en.pdf See media reaction; http://ottawacitizen.com/news/local-news/reevely-hiding-billions-in-hydro-debt-unacceptable-ontarios-auditor-general-says and http://nationalpost.com/pmn/news-pmn/canada-news-pmn/auditor-general-set-to-report-on-ontarios-25-per-cent-hydro-bill-cuts.
ICBC does not publish multi-year financial forecasts, but Occasional paper No. 42 procides a scenario of the capital deletion to 31 march 2020. Little wonder that finance minister James is concerned.
ICBC's forecast for 2017/18 shows a continuation in th loss of capital. Occasional Paer No. 41 traces the loss by program from 2010 to 2017/18, and confirms the structural deficit of approximately $400 million per year in the Basic program.
Comparing auto insurance prices across provincial jurisdictions is a difficlut task. Occasional Paper No.40 shows that the methodology used by Mike Milke in a recent Canadian Taxpayer Federation report is flawed.
Dr. Rose Devlin's 25 July 2017 report "A Comparison of Automoble Regimes in Canada" is posted with the permission of the Trial Lawyers Association of British Columbia.
Attorney General David Eby unveiled the 2017 Basic and Optional rate increases, and outlined a multi-year plan to restore ICBC's finances, with regular reports on progress; http://vancouversun.com/news/local-news/attorney-general-to-announce-changes-to-insurance-corp-of-b-c and http://www.cbc.ca/news/canada/british-columbia/icbc-rate-increases-eby-1.4275970 and http://www.timescolonist.com/news/local/icbc-rates-to-rise-6-4-per-cent-typical-motorist-to-pay-57-more-1.22443523
The recently released 2016/17 annual report shows that the financial condition at the public insurer is going from bad to worse, as outlined in Occasional Paper No. 39.
A more detailed review of the Ernst Young report raises serious concerns about the costing methodology, and the savings that might be achieved by capping pain and suffering awards on minor injury claims. The are discussed in Occasional Paper No.38.
Ariticle by Geordon Omand of the Canadian Press reviews the declining financial condition of ICBC; https://www.theglobeandmail.com/news/british-columbia/british-columbias-once-feted-public-auto-insurer-in-financial-crisis/article35978986/ The story was published by the Globe and Mail and Postmedia papers.
This paper reviews the Ernst Young report's options to increase the affordability of auto insurance. It questions some of the proposed cost savings and recoomends the adoption of Saskatchewan's dual Basic model.
The Times Colonist editorial correctly blames the Liberal government for allowing ICBC's finances to rapidly deteriorate, and warns of hard choices to come; http://www.timescolonist.com/opinion/editorials/editorial-hard-choices-ahead-for-icbc-1.21569689.
My comments on the financail aspects of the July 10, 2017 Ernst Young report on ICBC are included in Occasional Paper N0. 36, distributed on July 30, 2017.
After being leaked to Postmedia, the government released the July 1o, 2017 Ernst Young report on ICBC; http://www.icbc.com/about-icbc/company-info/Documents/Affordable-and-Effective-AutoInsurance-Report.pdf CKNW interviews with Minister Eby, Liberal MLA Wilkinson and Richard McCandless;http://globalnews.ca/news/3620885/icbc-considering-raising-car-insurance-premiums-by-30-per-cent/ and Vaughn Palmer's comments http://vancouversun.com/opinion/columnists/vaughn-palmer-eby-considers-safer-technology-versus-hiking-icbc-rates. Chuck Byrne's (Insurance Brokers Association) comments; http://www.insurancebusinessmag.com/ca/news/auto/report-is-great-opportunity-for-icbc-to-bring-in-reforms-74363.aspx
My article in The Tyee discusses the possible cost to BC Hydro ratepayers of either proceeding or cancelling the Site C project; https://thetyee.ca/Opinion/2017/07/13/How-Much-Will-Site-C-Gambling-Debt-Cost/?utm_source=daily&utm_medium=email&utm_campaign=130717
This report provides some context about the absolute change in GHG emissions from 2005 to 2015; suggesting that a more in-depth review is required.
Occasional paper No. 34 reviews the likely impact of three major hydroelectric infrastructure projects on electricity rates.
What impact will the Site C project, whether it proceeds or is cancelled, have on BC Hydro's operating budget, and what are the options to pay for it? Occasional Paper No. 33 provides a high-level look at these questions.
Reprint of my article in today's Tyee; https://thetyee.ca/Opinion/2017/06/16/NDP-Faces-Mess/?utm_source=daily&utm_medium=email&utm_campaign=160617
Bill Tieleman, writing in The Tyee, highlights the financial problems facing the new NDP government. At the top of the list are BC Hydro and ICBC; https://thetyee.ca/Opinion/2017/06/13/Clark-Leaves-List-for-Horgan/?utm_source=daily&utm_medium=email&utm_campaign=130617
Given the pending change in government, I recommended that the BC Utilities Commission not approve any of the discreationary items in BC Hydro's F17 to F19 rate request.
In May, Manitoba Hydro requested a rate increase of 7.9% for 2017 and 2018, with an indication of the same increase for the following three years. The publicly owned power utility is facing a major deterioration inits finances due to major capital projects and a flat demand. What lessons may a new government in BC learn from the Manitoba experience?
During the April 11, 2016 Question Period the minister of energy attempts to defend BC Hydro borrowing 100% of the dividend paid to the government; https://www.youtube.com/watch?v=MLNr3RkqPyA, and https://www.youtube.com/watch?v=qs3jntTrgNI
This paper reviews the recent report of the Ontario Financial Accountability Office on that government's plan to use a deferral account to surpress electricity rates. A comparison to the revenue deferral practiced by BC Hydro is also provided.
The Green party has to help restore an ethical approach to government, which will not happen by keeping the Liberals in power. A slightly revised version was printed in The Tyee on May 18, 2017; https://thetyee.ca/Opinion/2017/05/18/End-BC-Hydro-ICBC-Shell-Games/?utm_source=daily&utm_medium=email&utm_campaign=180517
A Fact Check on Hon. Bill Bennett's comments on the Jon McComd (CKNW) show, commenting on rate increases and BC Hydro's debt.
My article in the Tyee reviews the implications of the Liberal Party's four year revenue estimates for BC Hydro and ICBC;https://thetyee.ca/Opinion/2017/05/01/Rate-Increases-BC-Hydro-ICBC/?utm_source=daily&utm_medium=email&utm_campaign=020517
A report by David Marshall recommends an over-haul of the Ontario system to focus on the management of injury claims to improve the efficieny and effectiveness of the auto insurance system. Useful, but the cross Canada premium comparisons are questionable. http://www.fin.gov.on.ca/en/autoinsurance/fair-benefits.pdf and https://news.ontario.ca/mof/en/2017/04/ontario-releases-report-on-auto-insurance.html
On April 19th finance minister de Jong stated that the coming four-year rate increase requirement for BC Hydro is 28%, and close to 70% for ICBC's Basic program. The government's rate suppression policy has postponed the financial reckoning.
Marvin Shaffer criticizes the Liberal government's politicization of BC Hydro; http://vancouversun.com/opinion/op-ed/opinion-politics-versus-good-governance-for-b-c-hydro
This paper attempts to summarize the election platforms of the three main parties, and what they say or imply about BC Hydro and ICBC.
This paper reviews the last four years capital depletion and the growth in the claims backlog at ICBC.
ICBC announced a toughing of its Basic insurance discounts for 2018, which will result in higher insurance for at-fault drivers; good drivers will be big losers.
A generally negative survey of the no-fault auto insurance business in Ontario, by the Globe and Mail; http://www.theglobeandmail.com/report-on-business/rob-magazine/the-real-reason-ontarios-auto-insurance-rates-are-so-high/article34560827/
A detailed review of ICBC's three-year forecast shows alarming loss of capital; immediate and longer-term initiatives are suggested to restore ICBC's finances to a healthy condition.
The new provincial government must make the restoration of ICBC's financial health a priority, as capital reserves are now below the regulatory minimums,and rake shock looms.
A review of the financial impacts of the cold and snowy winter on the finances of BC Hydro and ICBC.
Big banks have been pursuing questionable tactics to enhance revenue and profits, but BC Hydro has a unique way to achieve its revenue targets.
This paper suggests that BC Hydro's annual target rate increase of 2.6% is optimistic, as is the 10-year financial plan.
This Fact Check concludes that ICBC's claim that fraud is costing $600 million annually is significantly exggerated.
In 2011, the government's Internal Audit and Advisory Services group conducted a review of ICBC's operations, and published its report in August; http://www.fin.gov.bc.ca/iaas/pdf_docs/ICBC_Review_2012.pdf
This paper reviews Mr. Crombie's comments in a recent interview as reported by Keith Baldrey in the Burnaby News of March 6, 2017.
AMPC submissions of 2013 and 2017 call for BC Hydro to moderate cost and rate increaes; http://www2.gov.bc.ca/assets/gov/farming-natural-resources-and-industry/electricity-alternative-energy/electricity/iepr/iepr_submission-association_of_major_power_consumers_round_1.pdf and http://www.bcuc.com/Documents/Proceedings/2017/DOC_48816_C9-7_AMPC-Evidence.pdf
The Globe and Mail is not impressed by the Ontario government's move to reduce the cost of electricity; http://www.theglobeandmail.com/opinion/editorials/lower-electricity-rates-dont-fall-for-premier-wynnes-power-move/article34195391/ and http://www.theglobeandmail.com/news/national/will-kathleen-wynnes-last-ditch-hydro-fix-just-add-to-the-mess/article34182155/ also an editorial by The National Post; http://news.nationalpost.com/full-comment/national-post-view-kathleen-wynnes-liberals-bail-themselves-out-with-public-money-again
On 2 March 2017 the Ontario government announced new measures, including a greater taxpayer-funded subsidy, to moderate the rise of electricity prices; http://www.theglobeandmail.com/news/national/ontario-wynne-slashes-hydro-rates-residents/article34183180/
On March 3, 2017, Policy Options published my article comparing how the governments of Ontario and BC are subsidizing electricity prices: http://policyoptions.irpp.org/magazines/march-2017/how-bc-politicized-electricity-rates/
This paper explores BC Hydro's flat domestic sales and its high profits during the last five years, and suggests that the recording of future ubapproved and unbilled revenue helps explain the healthy bottom line.
Keith Baldrey, in the North Shore News, writes about the looming financial crisis at ICBC;http://www.nsnews.com/opinion/columnists/baldrey-get-ready-for-massive-icbc-rate-hikes-1.10685159
A report in Bloomberg Businessweek describes how rising claims costs are forcing auto insurance price increases, providing opportunity for new entrants to the market; https://www.bloomberg.com/news/articles/2017-02-16/insurance-bills-rise-as-texters-crash-cars
Minister Stone attempts to defend ICBC's deficit forecasts during Question Period on February 22, 2017.