Government-run auto systems provide the most generous benefits for consumers.

Government insurers operate more efficiently. They have lower operational expenses.

FACT: The fact is that there are no economies of scale in government-run auto insurance systems. ICBC’s 2006 Revenue Requirements Application (revised filing of January 27, 2006) states that “ICBC’s success in reducing operating expenses was achieved through eliminating costs and DEFERRING [caps added by author] expenditures on maintenance, facilities and technology infrastructure, and investment in people.” The argument for “economies of scale” misrepresents the fact that ICBC has simply deferred some expenses where private insurers are committed to continually serving consumers through investing in technology and people. Furthermore, the ICBC Application states that, “The cost reductions which were implemented at ICBC are NOT [caps added by author] sustainable….ICBC is faced with inflationary pressures and in addition must increase spending to address expenditures that were deferred in recent years.”

ICBC’s reported operating expense ratio includes commissions and taxes, but excludes general expenses related to claims. In contrast, the operating expenses reported by the private auto insurance industry include all expenses.

When these differences in reporting are taken into consideration, the private industry’s expense numbers compare very favourably to ICBC’s, and where they are higher, this can almost wholly be attributed to:

• ICBC’s tax status as a Crown corporation – it doesn’t pay income tax;
• accounting changes at ICBC that have moved items out of expenses into claims; and
• lower commission rates that ICBC can afford to pay brokers as a result of holding a monopoly on mandatory auto insurance coverage.