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British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.157.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.157.1 Reference: APPLICATION Exhibit B-3, 2013.1 RR BCUC.1.2.1, 2013.1 RR BCUC.1.3 Approval Sought – Capital Management Plan In 2013.1 RR BCUC.1.2.1, ICBC states: “ICBC needs to have a new Basic insurance Capital Management Plan (Basic Capital Management Plan) in place sufficiently in advance of filing in order for the 2014 revenue requirements application to reflect the new plan. Otherwise, as a practical matter, an evidentiary update may be required.” In 2013.1 RR BCUC.1.3, ICBC states: “The Commission should also be cognizant of the May 31, 2014 deadline for approving the new Basic Capital Management Plan.” [Emphasis added] The 2014 Revenue Requirement application is anticipated to be filed on or before May 31, 2014. Assuming that a Commission decision is not issued until after March 15, 2014, will ICBC file the Policy Year 2014 actuarial rate indication based on the current Basic Capital Management Plan or the proposed new Basic Capital Management Plan? Response:
As stated in 2013.1 RR BCUC.1.2.1, the ideal scenario for ICBC would be if the Commission
were able to issue an order with respect to the proposed Basic insurance Capital Management
Plan (Basic Capital Management Plan) as soon as practicable after the hearing, with reasons
for decision to follow along with the rest of the Commission’s decision on the 2013 rate change.
This would permit ICBC to prepare the 2014 Revenue Requirements Application with
knowledge of the approved Basic Capital Management Plan.
In the event that the Commission is unable or not inclined to take that approach, ICBC will file
the policy year 2014 actuarial rate indication based on the proposed new Basic Capital
Management Plan. If necessary, following the Commission’s decision, an evidentiary update
may be required.
As stated in 2013.1 RR BCUC.1.2.1 the parameters of the rate smoothing framework are such
that the Commission’s determinations in this Application regarding the specific provisions of the
new Basic Capital Management Plan will only have the potential to materially affect the rate for
policy year 2014 if the rate change to cover costs is within the rate change band and below the
rate change ceiling. This could occur if, for example, there were a large favourable loss cost
forecast variance. ICBC is not anticipating such a favourable variance.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.157.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.157.2 Reference: APPLICATION Exhibit B-3, 2013.1 RR BCUC.1.2.1, 2013.1 RR BCUC.1.3 Approval Sought – Capital Management Plan In 2013.1 RR BCUC.1.2.1, ICBC states: “ICBC needs to have a new Basic insurance Capital Management Plan (Basic Capital Management Plan) in place sufficiently in advance of filing in order for the 2014 revenue requirements application to reflect the new plan. Otherwise, as a practical matter, an evidentiary update may be required.” In 2013.1 RR BCUC.1.3, ICBC states: “The Commission should also be cognizant of the May 31, 2014 deadline for approving the new Basic Capital Management Plan.” [Emphasis added] According to the 2013 Government Directive regarding Rate Smoothing, please confirm that the Commission is not required to approve the proposed new Basic Capital Management Plan on or before May 31, 2014. In other words, ICBC is directed by Government to seek Commission approval of the new Basic Capital Management Plan (which ICBC has done) before May 31, 2014, and the Commission may make a decision after May 31, 2014 if the review of it requires such time. If not confirmed, please specify the requirement to the Commission and explain. Response:
It is ICBC’s interpretation that the following statement in the Government directive of March 19,
2013 with respect to Rate Smoothing approved by Order in Council 153/13, March 18, 2013 (the
2013 Government Directive regarding Rate Smoothing) requires ICBC to submit to the
Commission the revised Capital Management Plan in order that the Commission’s approval is
received by May 31, 2014.
However, ICBC should bring forward to the Commission for approval by May 31, 2014, a revised Basic Capital Management Plan that continues to protect the solvency of Basic insurance while also improving ICBC's ability to use Basic capital to promote more stable and predictable Basic rates.
ICBC considers that, had government intended otherwise, it would have stated “ICBC should,
by May 31, 2014, bring forward a revised Basic Capital Management Plan to the Commission
for approval.”
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.158.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.158.1 Reference: APPLICATION Exhibit B-3, 2013.1 RR BCUC.4.1 Future Process In 2013.1 RR BCUC.4.1, ICBC states: “The Commission should consider using a process akin to the Streamlined Revenue Requirement Application (SRRA) process… Since the range of outcomes is limited, incurring the cost associated with a full regulatory process may not be warranted.” Please provide a preliminary draft regulatory timetable that is consistent with the rate smoothing framework to meet the annual rate application requirement of May 31 and the setting of rates to be effective August 1. Response:
Please see Attachment A – Preliminary Draft Regulatory Timetable, which is consistent with the
rate smoothing framework to meet the annual rate application requirement of May 31 and the
setting of rates to be effective August 1. The preliminary draft regulatory timetable is similar to
the regulatory timetable for a streamlined revenue requirement application process. Note that,
while rates must be effective August 1, this can be achieved with interim rates and a process
that extends beyond August 1.
ICBC’s Information Request Response
Insurance Corporation of British Columbia
December 23, 2013
2013.2 RR BCUC.158.1 – Attachment A – Preliminary Draft Regulatory Timetable
Preliminary Draft Regulatory Timetable
Action Timing Example for 2014
Notice to Commission staff and
intervenors [ICBC believes this
step is unnecessary in the rate
smoothing framework]
Two weeks prior to filing May 17, 2010
Filing By May 31 May 30, 2014
Advertisement Three working days after filing June 4, 2014
ICBC informal presentation Within one week after filing June 6, 2014
Interim Rate Decision Within one week after filing June 6, 2014
Matters of interest from BCUC and
intervenors
One week prior to Review
Working Session
June 12, 2014
Review Working Session (RWS) In third week after filing June 19, 2014
Information requests (IRs) Seven working days after RWS June 30, 2014
ICBC letter on disputed IRs (if
required)
Three working days after date
IRs are filed
July 4, 2014
Intervenors comments on disputed IRs (if required)
Five working days after date IRs are filed
July 8, 2014
BCUC ruling on disputed IRs (if
required)
Eight working days after date
IRs are filed
July 11 , 2014
ICBC responses to IRs Three weeks after date IRs are
filed (or seven working days after IR ruling, if required)
July 21, 2014
Rates Implemented Effective November 1 August 1 November 1, 2010
August 1, 2014
Intervenor Letters of Comment
(LOC)
Ten working days after ICBC
responses to IRs
August 5, 2014
ICBC Reply Submission Nine working days after LOC August 18, 2014
Commission Order Two weeks after ICBC Reply
Submission
August 31, 2014
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.158.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.158.2 Reference: APPLICATION Exhibit B-3, 2013.1 RR BCUC.4.1 Future Process In 2013.1 RR BCUC.4.1, ICBC states: “The Commission should consider using a process akin to the Streamlined Revenue Requirement Application (SRRA) process… Since the range of outcomes is limited, incurring the cost associated with a full regulatory process may not be warranted.” Recognizing that the 2014 Revenue Requirements could be affected by the current transitional period, is it reasonable to anticipate that a process similar to the SRRA process could possibly be used as early as 2015? Response:
ICBC believes it is reasonable to anticipate that a process similar to the streamlined revenue
requirements application process could be used as early as the next proceeding in 2014.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.158.3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.158.3 Reference: APPLICATION Exhibit B-3, 2013.1 RR BCUC.4.1 Future Process In 2013.1 RR BCUC.4.1, ICBC states: “The Commission should consider using a process akin to the Streamlined Revenue Requirement Application (SRRA) process… Since the range of outcomes is limited, incurring the cost associated with a full regulatory process may not be warranted.” In light of the Special Direction IC2 to the BC Utilities Commission, BC Regulation 307/2004, as amended (Special Direction IC2), what should the Commission do (if anything) with the original SRRA process? Response:
ICBC believes the Commission does not need to do anything with the original streamlined
revenue requirements application process, recognizing that some elements of it would not be
directly applicable under the rate smoothing framework (e.g., ICBC could not ask for a Basic
insurance rate decrease under rate smoothing). As stated in response to information request
2013.2 RR BCUC.158.2 ICBC believes that the streamlined revenue requirements application
process could be adapted for use, possibly as early as 2014, to review all rate applications
under the rate smoothing framework.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.159.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 3
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.159.1 Reference: APPLICATION Commission Order G-141-13 Exhibit B-3, 2013.1 RR BCUC.24.6 Interim Rate and Permanent Rate By Order G-141-13, the Commission approved the requested Basic rate increase to apply on an interim basis. The Commission will determine the manner by which any variance between the approved interim rate and the approved permanent rate, will be refunded or collected at the time it renders its Decision on the Application. In 2013.1 RR BCUC.24.6 – Attachment A, ICBC provides a sensitivity analysis summary of different scenarios. 159.1 Suppose the Commission determines a permanent rate that is different than the interim rate, is there a minimum rate change difference that should be considered to cover the administrative cost of refunds or collections? If so, please provide the minimum rate change for refunds and collections that is practical. Please describe in the case of (i) refunds and (ii) collections if any different. Compare the current proposal with the proposals ICBC has made in past applications (if any). 159.1.1 What is the appropriate course of action if the permanent rate is different from the interim rate but does not meet the minimum rate change threshold if any? Is it possible to defer the difference in the next rate application? Please describe in the case of (i) refunds and (ii) collections if any different. Response:
159.1 In the event that the Commission determines that the permanent Basic insurance rate change
should be different than the interim Basic insurance rate change, ICBC would accommodate the
difference by activating and utilizing the Customer Credit Refund System (CCRS). Although
the CCRS is a fully functional system, ICBC would incur costs associated with testing the
system once the Commission makes its final decision on Basic insurance rates. These costs
are anticipated to be approximately $200,000, or .01% of the 2013 forecast Basic insurance
revenue. ICBC does not view these costs to be material for the purpose of determining a
minimum rate change difference.
ICBC does not foresee any other significant administrative costs except for those that may be
associated with issuing refund cheques. ICBC had previously calculated an estimate; please
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.159.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 3
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
see Attachment A – Response to Information Request 2012.1 RR BCUC.3.1.1. ICBC has now
updated the calculation using 2013 information. If all customers were to receive a refund
cheque, then the estimated costs to ICBC would now be approximately $1.7 million. However,
ICBC does not view that the cost of issuing refund cheques should be considered in the
determination of the minimum rate change threshold. ICBC expects that a significant number
of refund cheques are only likely to be required in the event the Commission’s final rate decision
reduces the Basic insurance rate increase from the interim increase amount of 4.9% to a rate
increase of 2.3% or less (based on a Basic insurance average premium of $757 before applying
the interim rate increase).
ICBC’s current proposal differs from proposals in past revenue requirements applications by
now including the automated capability to not only process refunds (as was developed in 2007)
but also the capacity to bill higher Basic insurance rates than the approved interim Basic
insurance rates if the Commission so orders. The CCRS provides an efficient and cost effective
process for dealing with refunds and additional billings which is described in detail in the
Application, Appendix 1 A. The key provisions of the refund and additional billing processes are
described below.
For refunds, ICBC’s proposed process is as follows:
Fleet customers will be issued one refund cheque for all policies under the fleet
regardless of the amount.
Non-fleet customers with a refund amount of $20 or more will be issued a refund
cheque.
Non-fleet customers with a refund amount under $20 and who have an active payment
plan for the assessed policy will receive a credit to their payment plan.
Non-fleet customers with a refund amount under $20 and who are not on a payment
plan will have a credit held in their account for application against the next renewal for
that policy.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.159.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 3 of 3
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Customers with a refund held in their account may request a refund cheque within one
year of the Commission’s final decision and upon request, a cheque will be manually
prepared and sent out.
For additional billing, ICBC’s proposed process is as follows:
ICBC will only issue an additional billing if the billing amount is greater than $5.
Most non-fleet customers will be issued an invoice with the additional Basic insurance
premium to be included in their next renewal reminder notice.
Some non-fleet customers, such as those who renew their policies early or who cancel
their policies prior to a renewal reminder notice being generated, will be issued an
invoice.
Fleet customers will be issued a single invoice for all the vehicles in the fleet.
159.1.1
In the current proposal, ICBC does not foresee a minimum rate change threshold that needs to
be considered. In the case of additional billing, customers will only be billed if the additional
amount exceeds $5. The majority of customers will be notified of an additional billing at the time
of their renewal and this will not involve any significant additional costs to ICBC. In the case of
refunds, as discussed in the response to information request 2013.2 RR BCUC.159.1, unless
the Commission’s final rate decision results in a Basic insurance rate increase of 2.3% or less,
the majority of customers will receive their refunds through credits to either their existing
payment plan or to their next policy renewal and these processes will not involve any significant
additional costs to ICBC.
With respect to the question regarding whether it is possible to defer the difference to the next
rate application, ICBC is interested in this approach and will explore the option.
ICBC’s Information Request Response
Insurance Corporation of British Columbia
December 23, 2013
2013.2 RR BCUC.159.1 – Attachment A – Response to Information Request 2012.1 RR BCUC.3.1.1
British Columbia Utilities Commission Information Request No. 2012.1 RR BCUC.3.1.1 Dated 08 February 2012 Insurance Corporation of British Columbia Response Issued 12 March 2012
Page 1 of 1
01 December 2011 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing February 1, 2012
2012.1 RR BCUC.3.1.1 Reference: APPLICATION Exhibit B-1, Chapter 1, Appendix A, pp. 1 to 2 Refunds greater than $20 In paragraph 5, ICBC proposes that a refund of the interim increase greater than or equal to $20 per policy will be refunded to eligible policyholders by cheque, or by credit, with details described in paragraphs 6 through 9 in the same section. If the refund for all customers was larger than $20, what is ICBC’s estimate of the cost to process and deliver refunds? Please show your calculations. Response:
If the refund for all customers was greater than $20, the estimated cost to ICBC would be
approximately $1,493,540 to process and deliver the refunds. This assumes that 2 million (six
months of interim rates) customers would be impacted, and the following costs: 1) $.67232 per item (cheque stock - $.02814, envelope - $.01918, postage - $.5900, printing - $.03500); and 2)
total labor cost of $148,900 (project management, printing, and inserting). A cost not included
in this estimate is the interest that ICBC would pay customers on the refunded amount.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.159.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 3
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.159.2 Reference: APPLICATION Commission Order G-141-13 Exhibit B-3, 2013.1 RR BCUC.24.6 Interim Rate and Permanent Rate By Order G-141-13, the Commission approved the requested Basic rate increase to apply on an interim basis. The Commission will determine the manner by which any variance between the approved interim rate and the approved permanent rate, will be refunded or collected at the time it renders its Decision on the Application. In 2013.1 RR BCUC.24.6 – Attachment A, ICBC provides a sensitivity analysis summary of different scenarios. Generally speaking, if the Commission determines that one or more scenarios in the sensitivity analysis (e.g. 2013.1 RR BCUC.24.6) is more appropriate than what ICBC proposes, does ICBC require any additional time to confirm its rate indication and file a compliance update? If so, why is it necessary and how long would such process take? Response:
ICBC assumes that the question is referring to the Commission’s decision on the Application
which may direct ICBC to change one or more of the scenarios in the sensitivity analysis and
then expect a compliance filing a certain period of time subsequent to the decision. This is not
the process that has been followed in the past with the Commission’s decisions on Basic
insurance rates. However, should this occur and depending on the nature of the change
directed, ICBC may require a period of time to comply of anywhere from two to six weeks as
further explained below.
The actuarial rate level analysis supporting the current Application relies on a number of
assumptions, each of which are considered independently reasonable, and which taken
together reflect an appropriate and consistent view as at the filing date of the Application. The
rate sensitivities included in the Application, Chapter 3, Figure 3.16 and in the response to
information request 2013.2 RR BCUC.160.1.1 are based on changes to individual assumptions.
Certain assumptions are more foundational than others, and changes in these assumptions,
though reasonable, could lead to internal inconsistency in the actuarial rate level analysis, such
that it would not be consistent with accepted actuarial practice. Small changes in other
assumptions, which are relatively independent, would not lead to inconsistencies. If the
Commission determines that it should rely on alternative assumptions, it would be most
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.159.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 3
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
appropriate for ICBC to review and confirm that the full set of assumptions underlying the rate
indication analysis remain appropriate, or alternately to determine the full set of assumptions
most consistent with the alternative assumptions, rather than to apply the impact of updating an
individual assumption.
By way of further explanation, in arriving at a best estimate of future costs, informed judgement
is applied in the setting of certain assumptions. To the extent that different actuaries, each
familiar with the circumstances of the case, may select different assumptions, there can be a
range of reasonable estimates that are consistent with accepted actuarial practice. The
assumptions should be independently reasonable, and must be appropriate in the aggregate,
based on information available at the time.
Where individual assumptions are altered for the purpose of testing the sensitivity of the Basic
insurance rate indication, this does not necessarily result in an updated rate indication that
accords with accepted actuarial practice. Section 1720 of the Standards of Practice of the
Canadian Institute of Actuaries requires that an actuary select assumptions that are
independently reasonable, and appropriate in the aggregate. Alternative assumptions may be
selected for sensitivity testing, as has been done in Chapter 3, Figure 3.16 and in the response
to information request 2013.2 RR BCUC.160.1.1 and other information requests from the
Commission and Intervenors. In performing sensitivity tests on individual assumptions, other
assumptions are held constant, regardless of whether they are reasonable in combination with
the newly altered assumption.
Some alternative assumptions for which Basic insurance rate sensitivities have been provided
are relatively independent from other assumptions in the actuarial rate level analysis. For
example, changes in assumptions relating to the level of Basic equity. However, other elements
are not independent. For example, a change in the assumption used to select the bodily injury
claim frequency trend might create an inconsistency unless an adjustment were also made to
the accident benefits frequency trend to reflect the corresponding assumption. As another
example, a change in any assumption to reflect more recent information could give rise to a
temporal inconsistency, if information relevant to other factors had also emerged since the time
of the Application.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.159.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 3 of 3
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
In short, if the Commission determines that alternate assumptions should be used in the
actuarial rate indication analysis, ICBC should review or update the full set of assumptions
underlying the rate indication analysis in order to provide a rate level indication consistent with
accepted actuarial practice. Depending on the nature of the assumption that is being changed,
this could range from a very brief to a relatively involved exercise. Based on the scenarios that
have been discussed in the information requests this year, ICBC would expect to be able to
complete this process within two weeks for most of the scenarios requested. However, this
could extend to six weeks for a relatively involved exercise.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.160.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 3
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.160.1 Reference: ACTUARIAL RATE LEVEL INDICATION ANALYSIS Exhibit B-1, Chapter 2, p. 2-4 Exhibit B-3, 2013.1 RR BCUC 7.1 Loss Cost Trend In 2013.1 RR BCUC.7.1, ICBC was asked to explain why it assumes the new claim initiatives will exactly offset the impact of the acceleration in the incidence of higher represented claims – as opposed to assuming the new claim initiatives will partially offset the impact of the acceleration in the incidence of higher represented claims. In 2013.1 RR BCUC.7.1, ICBC states: “… ICBC’s demonstrated ability to successfully implement claims cost management strategies and initiatives provides evidence that it is reasonable to assume that the new claims initiatives will be able to fully offset the new cost pressures.” In 2013.1 RR BCUC.7.3, ICBC further states: “In response to the higher uncertainty, ICBC is currently making the assumption that the claims initiatives will be able to fully offset the cost pressures associated with the recent acceleration in the representation rate….ICBC believes that the claims initiative assumption is reasonable, and is neither pessimistic nor optimistic.” Can ICBC elaborate on how, exactly, the noted claim initiatives are intended to address the acceleration in legal representation that ICBC has identified. Given the “increased level of uncertainty surrounding the current forecast of BI severity, and hence overall claim costs, for PY 2013,” would ICBC find an alternate assumption, such as the claim initiatives will offset half of the cost impact of the acceleration in the representation rate to be within actuarial standards of practice? If not, why not? Response:
In the following ICBC provides a brief explanation how each noted claims initiative addresses
the acceleration in legal representation:
ICBC has committed to improving the customer interaction at the first notice of loss by
providing more information on the claiming process. The reason that this initiative can
potentially influence the legal representation rate is that it will help to address (resolve)
as many as possible of the customer’s immediate needs at first notice of loss and clearly
explain their benefits up front, so that customers will not have to wait or speculate on
their entitlements and will therefore have less reason to seek legal representation.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.160.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 3
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
ICBC has also provided faster and easier access to medical benefits and streamlined
the process for both customer and practitioner so that the customer can focus on
recovery. The reason that this initiative can potentially influence the legal representation
rate is that ICBC develops more effective relationships with stakeholders and they work
as a team to assure claimants that their immediate medical needs are being met,
allowing customers to focus on their recovery, reducing delays, and avoiding
unnecessary litigation.
ICBC has also launched various communication strategies to clarify the claims process
as well as to counteract negative lawyer advertising. The reason that this initiative can
potentially influence the legal representation rate is that it improves the customer’s
understanding of the process and clarifies the misperceptions of ICBC and the claims
process, created by lawyer advertising.
ICBC has also enhanced the language line to provide better access to customers where
English is not their first language. The reason that this initiative can potentially influence
the legal representation rate is that it better meets the needs of ICBC’s diverse
community, reducing the propensity to seek early legal representation and building trust
by understanding and meeting the needs of individual customers.
ICBC has also made changes to its organizational structure so that all unrepresented
claims are now under one Director allowing better and more consistent management of
this segment of claims. The reason that this initiative can potentially influence the legal
representation rate is that it will lead to a more consistent claims experience and timelier
claims resolution for unrepresented claimants.
As discussed in the Application, Chapter 3, and in the response to information request 2013.1
RR BCUC.7.1, the bodily injury (BI) claim severity trend line has been very stable over the past
several years. This is the net result of all forces, positive and negative, internal and external to
ICBC, which have had influence on BI severity over that time. As ICBC has continued in its
enhancement of claims management efforts, this provides some support for an overall tendency
for BI costs to return to this level of increase through adaptation of cost pressures within the
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.160.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 3 of 3
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
claims environment. ICBC therefore believes that in respect of the forecast for BI severity an
assumption that calls for a continuation of the stable trend line at about 6% is both a reasonable
and best estimate assumption.
An alternate assumption that claims initiatives will be unable to fully offset the cost impact of the
acceleration in the legal representation rate would be reasonable and remains in accordance
with accepted actuarial practice, although such an assumption may contain bias. In Chapter 3,
ICBC has explained that it is facing additional cost pressures relating to the recent acceleration
in the incidence of represented claims, and it is within reason to assume that these pressures
may result in a higher BI severity. However, ICBC believes that the claims initiatives will be able
to fully offset the cost pressures associated with the recent acceleration in the representation
rate. ICBC’s best estimate gives recognition to these initiatives and results in a continuation of
the stable trend line at a rate of about 6%.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.160.1.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.160.1.1 Reference: ACTUARIAL RATE LEVEL INDICATION ANALYSIS Exhibit B-1, Chapter 2, p. 2-4 Exhibit B-3, 2013.1 RR BCUC 7.1 Loss Cost Trend In 2013.1 RR BCUC.7.1, ICBC was asked to explain why it assumes the new claim initiatives will exactly offset the impact of the acceleration in the incidence of higher represented claims – as opposed to assuming the new claim initiatives will partially offset the impact of the acceleration in the incidence of higher represented claims. In 2013.1 RR BCUC.7.1, ICBC states: “… ICBC’s demonstrated ability to successfully implement claims cost management strategies and initiatives provides evidence that it is reasonable to assume that the new claims initiatives will be able to fully offset the new cost pressures.” In 2013.1 RR BCUC.7.3, ICBC further states: “In response to the higher uncertainty, ICBC is currently making the assumption that the claims initiatives will be able to fully offset the cost pressures associated with the recent acceleration in the representation rate….ICBC believes that the claims initiative assumption is reasonable, and is neither pessimistic nor optimistic.” Suppose in a less favourable situation the claims initiatives will offset half of the cost impact of the acceleration in representation rate, holding all else equal, how would this affect the rate indication? Response:
If it were assumed that claims initiatives would be unable to fully offset the cost impact of the
acceleration in the legal representation rate, this would lead to a higher forecast for bodily injury
(BI) severity, which represents a more conservative assumption than ICBC’s best estimate.
This response provides a scenario where the increase in the representation rate resumes its
long-term trend rate following the period of accelerated representation. Therefore, there is a
one-time upward shift in the cost structure as only half of the expected savings for Claims
initiatives materialize. This results in a one-time upward shift in BI severity, after which it
continues to increase at the long-term trend, and is similar to the second scenario described in
the response to information request 2013.1 RR BCUC.7.2.
This scenario would have an impact of +1.4 percentage points on the rate indication, assuming
all others assumptions are held consistent to those in the current Application.
Please see Attachment A – Sensitivity Summary for a list of sensitivity scenarios discussed in
the information requests.
ICBC’s Information Request Response
Insurance Corporation of British Columbia
December 23, 2013
2013.2 RR BCUC.160.1.1 – Attachment A – Sensitivity Summary
Sensitivity summary from Revenue Requirements Application for Policy Year 2013 (page 3-33)
Line Impact on
No. Rate Indication
1 Change new money rate from 3.75% to 2.75% +2.7 ppt
2 Change new money rate from 3.75% to 4.75% -2.6 ppt
3 Increase annual future severity trend by 1 ppt +2.1 ppt
4 Decrease annual future severity trend by 1 ppt -2.1 ppt
5 Increase ratio of ULAE to Loss and ALAE by 1ppt +1.0 ppt
6 Decrease ratio of ULAE to Loss and ALAE by 1ppt -1.0 ppt
7 Increase premium trend by 0.1 ppt -0.4 ppt
8 Decrease premium trend by 0.1 ppt +0.4 ppt
9 Increase BI annual future severity trend by 1 ppt +1.5 ppt
10 Increase BI annual future frequency trend by 1 ppt +1.6 ppt
"ppt" stands for "percentage point(s)"
Scenario
Sensitivity Summary from 2013.1 RR Round 1 Information Requests
Line Impact on
No. Rate Indication
1 Flat frequency for BI 1.5 ppt 2013.1 RR BCUC.24.6
2 Update New Money Rate to 3.81% -0.2 ppt 2013.1 RR BCUC.90.2.1
3 Update Yield on Basic Equity to 4.27% 0.0 ppt 2013.1 RR BCUC.90.3.1
4 Update Yield on Basic Equity and New Money Rate to Risk-Free Rate of 3.10% 0.5 ppt 2013.1 RR BCUC.95.3.1
5 Written Manual Premium Calculated From Two-Year Average 0.1 ppt 2013.1 RR BCUC.40.3
6 Remove Optional Transfer 0.6 ppt 2013.1 RR BCUC.64.1.1
7 Not Excluding Basic Component of $7 million pension amount 0.2 ppt 2013.1 RR BCUC.127.3
"ppt" stands for "percentage point(s)"
Sensitivity Summary from 2013.2 RR Round 2 Information Requests
Line Impact on Information
No. Rate Indication Request
1 Claims Initiatives unable to fully offset acceleration of legal representation 1.4 ppt 2013.2 RR BCUC 160.1.1
2 Claims Initiatives more than offset impact of representation rate -1.6 ppt 2013.2 RR BCUC 160.2
3 1/4 of LT downward trend after 2013 for BI frequency 0.8 ppt 2013.2 RR BCUC 164.1
4 LT downward trend after 2013 for BI frequency -1.6 ppt 2013.2 RR BCUC 164.3
5 Excluding Basic portion of general provision from Basic operating expenses -0.1 ppt 2013.2 RR BCUC 218.3
"LT" stands for long-term; "ppt" stands for "percentage point(s)"
Scenario
Scenario Information Request
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.160.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.160.2 Reference: ACTUARIAL RATE LEVEL INDICATION ANALYSIS Exhibit B-1, Chapter 2, p. 2-4 Exhibit B-3, 2013.1 RR BCUC 7.1 Loss Cost Trend In 2013.1 RR BCUC.7.1, ICBC was asked to explain why it assumes the new claim initiatives will exactly offset the impact of the acceleration in the incidence of higher represented claims – as opposed to assuming the new claim initiatives will partially offset the impact of the acceleration in the incidence of higher represented claims. In 2013.1 RR BCUC.7.1, ICBC states: “… ICBC’s demonstrated ability to successfully implement claims cost management strategies and initiatives provides evidence that it is reasonable to assume that the new claims initiatives will be able to fully offset the new cost pressures.” In 2013.1 RR BCUC.7.3, ICBC further states: “In response to the higher uncertainty, ICBC is currently making the assumption that the claims initiatives will be able to fully offset the cost pressures associated with the recent acceleration in the representation rate….ICBC believes that the claims initiative assumption is reasonable, and is neither pessimistic nor optimistic.” In a favourable scenario where new claim initiatives will more than offset the impact of the acceleration in the incidence of higher represented claims, holding all else equal, how would this affect the rate indication? Please state the assumptions and discuss whether or not these assumptions are within accepted actuarial practice. Response:
In order to construct a favourable scenario in which claims initiatives are able to more than
offset the impact of the acceleration in the incidence of represented claims, ICBC has
developed assumptions for a scenario in which the increase in legal representation rates is fully
arrested, resulting in a constant rate of legal representation going forward. As explained in the
response to information request 2013.1 BCUC.7.2, the recent acceleration in the representation
rate (from a +1.3 percentage point to a +2.8 percentage point annual increase) would have
about a 2% impact on bodily injury claim (BI) severity. Similarly, if legal representation rates
were to remain constant, ICBC would expect a theoretical BI severity trend of about 4% (2%
less than the current severity trend of about 6%). This scenario would have a -1.6 percentage
point impact on the PY 2013 rate indication, using all other assumptions from the current
Application.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.160.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
ICBC’s believes that representation rates are driven by additional external factors beyond
claims initiatives. Based on this belief as well as historical patterns in both legal representation
and BI severity, this scenario is quite optimistic, and does not represent an outcome that would
be reasonable to expect based on the current information. Therefore, this scenario would most
likely not be considered within accepted actuarial practice.
Please see the response to information request 2013.2 RR BCUC.160.1.1, Attachment A –
Sensitivity Summary for a list of sensitivity scenarios discussed in information requests.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.161.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.161.1 Reference: ACTUARIAL RATE LEVEL INDICATION ANALYSIS Exhibit B-3, 2013.1 RR BCUC.8.1 Indicated Rate Level Change In 2013.1 RR BCUC.8.1, ICBC provides the indicated rate change calculation by components. Please show the average premium of a policy (in $ dollars) that an average Basic Insurance policyholder pays at the current rate level and at the proposed PY 2013 rate level. Please show the calculations. Response:
Please see Attachment A – Average Premium at Current and Proposed PY 2013 Rate Level for
the average premium that Basic Insurance policyholders would pay at the current rate level and
at the proposed policy year 2013 rate level. These averages represent the mix of Basic
policyholders that are expected to purchase Basic insurance in policy year 2013.
Average premium represents the total premium dollars divided by the number of exposures. In
calculation of the number of exposures, policies that are effective for less than one year
contribute a fraction of one exposure unit, and trailer policies are not included (these policies are
small fixed dollar policies which would lower the average premium quite significantly if included).
ICBC’s Information Request Response
Insurance Corporation of British Columbia
December 23, 2013
2013.2 RR BCUC.161.1 – Attachment A – Average Premium at Current and Proposed PY 2013 Rate Level
2013.2 RR BCUC.161.1 - Attachment A - Average Premium at Current and Proposed PY 2013 Rate LevelFor policies effective November 1, 2013
(a) (b) (c) = (a) / (b) * 1000 (d) = (c) * 1.049
Projected PY 2013
Premium at Current
Rate Level
($ 000's)
Exhibit
Reference Exposure
Exhibit
Reference
Projected PY 2013
Average Premium at
Current Rate Level
($)
Proposed PY 2013
Average Premium at
+4.9% Rate Level
($)
Plate Owner Basic
(1) Third Party Liability / UMP 2,092,658 B.1.1 2,984,159 B.1.1 701 736
(2) Part 7 181,425 B.1.1 2,984,159 B.1.1 61 64
(3) Plate Owner Basic Total 2,274,083 (1) + (2) 2,984,159 B.1.1 762 799
Manual Basic
(4) Third Party Liability / UMP / Part 7 51,987 B.3.1 48,313 B.3.1 1,076 1,129
(5) Collision / Specified Perils 2,811 B.3.1 6,589 B.3.1 427 448
(6) Manual Total 54,798 (4) + (5) 48,313 B.3.1 1,134 1,190
(7) TOTAL BASIC 2,328,881 (3) + (6) 3,032,471 (3) + (6) 768 806
Notes:
(b) Exposure for Plate Owner Basic is the sum of Personal and Commercial-Power Units
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.161.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.161.2 Reference: ACTUARIAL RATE LEVEL INDICATION ANALYSIS Exhibit B-3, 2013.1 RR BCUC.8.1 Indicated Rate Level Change In 2013.1 RR BCUC.8.1, ICBC provides the indicated rate change calculation by components. In separate tables, please show the average premium and median premium of a policy (in $ dollars), for the period from 2007 through the proposed PY 2013 rate level, that is attributable the following:
• Plate Owner Basic Third Party Liability; • Plate Owner Part 7; • Manual Basic Third Party Liability / Part 7 Coverage; • Manual Basic Collision and Specified Perils.
Response:
The tables below summarize average and median written premium by coverage for Plate Owner
Basic insurance excluding trailers. Average premium is calculated as the written premium in the
calendar year divided by written exposures. The median premium for Plate Owner Basic
insurance is the median of full-year policies only, in order to make it more comparable to the
average premium.
Plate Owner Basic Third Party Liability
2007 2008 2009 2010 2011 2012 2013 YTD
Average Premium $635 $650 $651 $645 $630 $696 $701
Median Premium $621 $639 $646 $639 $623 $681 $681
Plate Owner Part 7
2007 2008 2009 2010 2011 2012 2013 YTD
Average Premium $73 $62 $56 $56 $54 $60 $61
Median Premium $71 $58 $57 $56 $56 $59 $62
The table below summarizes average written premium by coverage for Manual Basic. Average
written premium is calculated as the written premium in the calendar year divided by written
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.161.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
exposures. The median premium for manual policy coverages is the median of all policies,
including both annual and short term purchases. Short-term policies are included in determining
the median because they represent over half of manual policies. As a result, the median
premium for Third Party Liability/Part 7 coverage is much smaller than the average premium
due to a large number of short-term policies and low cost endorsements.
Manual Basic Third Party Liability / Part 7 Coverage
2007 2008 2009 2010 2011 2012 2013 YTD
Average Premium $977 $1,041 $1,063 $989 $985 $1,031 $1,060
Median Premium $57 $51 $57 $47 $47 $53 $53
Manual Basic Collision and Specified Perils
2007 2008 2009 2010 2011 2012 2013 YTD
Average Premium $456 $456 $443 $421 $390 $395 $427
Median Premium $377 $373 $363 $345 $321 $326 $357
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.162.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.162.1 Reference: ACTUARIAL RATE LEVEL INDICATION ANALYSIS Exhibit B-3, 2013.1 RR BCUC.12.1, 2013.1 RR BCUC.12.1.1 Prospective Adjustments In 2013.1 RR BCUC.12.1, ICBC states: “… the BC Gateway Program (which includes the Port Mann Bridge project) was considered for prospective adjustment but was excluded because ICBC was unable to acquire sufficient details of the estimated savings claimed by the project to determine an appropriate apportionment to claims costs.” [Emphasis added] In 2013.1 RR BCUC.12.1.1, ICBC also states: “Any incremental impact on claims frequency that this legislation might have had, however, would have occurred primarily in 2011, immediately after the introduction of the new laws. Since then, the resulting claims frequency has already been captured in current loss trends. Consequently, no additional incremental impacts are expected for PY 2013.” [Emphasis added] To consider prospective adjustments, it appears that in the early stage there are challenges to acquire sufficient details and in the later stage the trend would have been captured. Is it fair to say that qualified (and quantified) prospective adjustments are unusual occurrences? Response:
162.1
In deriving the indicated rate level according to accepted actuarial practice, ICBC develops a
best estimate of future costs. In arriving at this estimate, ICBC considers relevant and credible
information that is available at the time of the analysis. The inclusion of prospective
adjustments, for large scale changes that will affect future claims costs in a way significantly
different from the general trends, is an important part of this process. By their nature, since they
represent significant departures from general trends, items of this scope are unusual
occurrences.
Since 2011, ICBC has been conducting broad project scans with internal experts to ensure that
items appropriate for prospective adjustment are identified. This scan typically results in the
identification of many potential programs, projects and events for consideration. Such items
may include: planned or potential changes to infrastructure, legislation, taxation, or regulations;
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.162.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
programs targeting driver attitudes, awareness, and behaviour, including traffic law enforcement
initiatives; enhancements to claims handling and cost controls; safety improvements in vehicle
or road systems; changes in distribution or type of customers insured; and other environmental
factors such as shifts in social trends.
Most changes that occur in these categories are gradual, and therefore become slowly
recognized in the loss trends over time. An example of this would be the gradual infiltration of
new vehicle safety technologies into the BC vehicle fleet. However, sometimes large scale
changes occur more suddenly, over a relatively short period of time, and these may represent a
significant departure from the trends. The enhancement and expansion of the Intersection
Safety Camera Program in 2011 is an example of this type of change. It is important that these
latter cases be investigated and, if feasible, taken into account. This helps to ensure that rates
are set to cover the best estimate of expected future costs.
As noted above, changes that are sufficiently large scale to contribute to a departure from
general trends are by their nature unusual occurrences. When they do occur, there are many
differences in the type and availability of information (insurance and other) required to produce
credible estimates for the prospective adjustment process. Some changes will be relatively
easy to quantify (for example, sales tax changes), while others (such as major infrastructure
changes) will be inherently more difficult to quantify.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.162.1.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 4
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.162.1.1 Reference: ACTUARIAL RATE LEVEL INDICATION ANALYSIS Exhibit B-3, 2013.1 RR BCUC.12.1, 2013.1 RR BCUC.12.1.1 Prospective Adjustments In 2013.1 RR BCUC.12.1, ICBC states: “… the BC Gateway Program (which includes the Port Mann Bridge project) was considered for prospective adjustment but was excluded because ICBC was unable to acquire sufficient details of the estimated savings claimed by the project to determine an appropriate apportionment to claims costs.” [Emphasis added] In 2013.1 RR BCUC.12.1.1, ICBC also states: “Any incremental impact on claims frequency that this legislation might have had, however, would have occurred primarily in 2011, immediately after the introduction of the new laws. Since then, the resulting claims frequency has already been captured in current loss trends. Consequently, no additional incremental impacts are expected for PY 2013.” [Emphasis added] By policy year (PY) since PY 2010, please provide a list of all prospective adjustments that ICBC has considered. Please briefly describe the prospective adjustments that actually qualified as a prospective adjustment. Response:
Revenue requirements applications were submitted by ICBC for policy year 2010 (November 1,
2010 through October 31, 2011), policy year 2012 (February 1, 2012 through January 31,
2013), and policy year 2013 (November 1, 2013 through July 2014).
As noted in the response to information request 2013.2 RR BCUC.162.1, in 2011 ICBC began
conducting broad scans and project reviews with internal experts to ensure that all items
appropriate for prospective adjustment would be formally identified and considered for inclusion
in the rate indication analysis. For policy year 2010, this process was conducted less formally
and resulted in a shorter list of projects. For example, no large infrastructure projects were
included at that time because ICBC had no indication that credible and sufficiently accurate
projections of future claims impacts would be obtainable for such complex initiatives. The more
formal project scan and review strategy adopted in 2011 has been an important part of ICBC’s
ongoing efforts to improve the breadth and transparency of its process for determining
prospective adjustments.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.162.1.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 4
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
As described in the Application, Chapter 3, Exhibit E.0, candidate programs, projects and
events that have been identified are considered against specified criteria for inclusion in the rate
indication analysis. The candidates for prospective adjustment in each of the policy years
described above are provided below.
Policy Year 2010: Seven initiatives were considered in policy year 2010 and are listed below.
Of the seven considered, two qualified for inclusion: the conversion of the Provincial Sales Tax
(PST) and Goods and Services Tax (GST) to the Harmonized Sales Tax (HST), which was
introduced in BC on July 1, 2010, and the expansion and enhancement of the Intersection
Safety Camera Program. Intersection safety cameras have been operating in BC since 1999.
In 2010 and 2011, the number of camera locations was increased from 30 to 140, cameras
were installed at each location (rather than being rotated through the locations), and new digital
technology was introduced.
Candidate Included
(Yes or No)
Conversion of PST and GST into HST Yes
Intersection Safety Camera Program Enhancement Yes
Personal Electronic Device (PED) Legislation No
Enhanced Traffic Law Enforcement No
Graduated Licensing Program Enhancements No
ICBC’s Road Improvement Program (RIP) No
Claims Initiatives undertaken as a component of ICBC’s Transformation Program
No
Policy Year 2012: The following programs, projects, and events were considered as
candidates for prospective adjustment in policy year 2012. Of the listed candidates, only the
Intersection Safety Camera Program (described for policy year 2010, above) was included as a
prospective adjustment for policy year 2012. The scheduled installation of cameras had shifted
by the time of the Revenue Requirements Application for the 2012 Policy Year.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.162.1.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 3 of 4
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Candidate Included
(Yes or No)
Intersection Safety Camera Program Enhancement Yes
Canada Line No
Sea-to-Sky Highway No
Highway 1 Gateway Program No
Patullo Bridge No
Evergreen and Broadway Lines No
ICBC Road Improvement Program No
Personal Electronics Devices Ban No
Impaired driving initiatives No
Mandatory Electronic Stability Control on new vehicles No
Other vehicle safety technology improvements No
Driver Risk Premium and Driving Record Model No
Distracted driving trends – general increases in cellphone, text messaging, telematics use
No
Provincial motorcycle initiatives No
Regional or municipal transportation strategies (e.g., cycling) No
Claims Initiatives undertaken as a component of ICBC’s Transformation Program
No
Service provider agreements No
Demographic changes No
Other potential legislative changes No
Policy Year 2013: The programs, projects, and events considered as candidates for
prospective adjustment in policy year 2013 (November 1, 2013 through July 31, 2013) are listed
below. Of the projects considered, five qualified for inclusion. These projects are described in
detail in Chapter 3, Exhibit E.0, Section B.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.162.1.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 4 of 4
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Candidate Included
(Yes or No)
Taxable Costs and Disbursements initiative Yes
In-House Legal Counsel changes Yes
Elimination of HST and re-introduction of PST and GST Yes
Long-term benefits of Claims Transformation Program Yes
Transition impacts of Claims hierarchy and system change costs Yes
Evergreen Line No
Highway 1 Gateway Program No
Pattullo Bridge No
Massey Tunnel No
Enhancement of current road safety programs No
Taxi Technology Project No
Commercial vehicle safety and hazard management programs No
Evolution of safer vehicle technology in the BC vehicle fleet No
Social awareness and attitudes toward risky driving No
Service provider agreements No
Claim segmentation enhancements No
Changes in handling of minor damage claims No
Changes to the statutory discount rate No
Introduction of civil resolution tribunals No
New claiming attitudes and behaviours No
Other potential legislative changes No
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.162.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.162.2 Reference: ACTUARIAL RATE LEVEL INDICATION ANALYSIS Exhibit B-3, 2013.1 RR BCUC.12.1, 2013.1 RR BCUC.12.1.1 Prospective Adjustments In 2013.1 RR BCUC.12.1, ICBC states: “… the BC Gateway Program (which includes the Port Mann Bridge project) was considered for prospective adjustment but was excluded because ICBC was unable to acquire sufficient details of the estimated savings claimed by the project to determine an appropriate apportionment to claims costs.” [Emphasis added] In 2013.1 RR BCUC.12.1.1, ICBC also states: “Any incremental impact on claims frequency that this legislation might have had, however, would have occurred primarily in 2011, immediately after the introduction of the new laws. Since then, the resulting claims frequency has already been captured in current loss trends. Consequently, no additional incremental impacts are expected for PY 2013.” [Emphasis added] Does ICBC believe it can improve on acquiring sufficient details of a particular project? If so, how, or is it unnecessary as many prospective adjustments will eventually be captured in trends? Response:
ICBC believes that it is important to continue to investigate relevant future events for their
candidacy as prospective adjustments. Using all relevant and credible information available to
obtain the best, unbiased estimates of future expected claims costs and savings is fundamental
to the minimization of forecast variance. However, ICBC agrees that all relevant effects of such
future events on costs will eventually be captured in the loss trends. Therefore, ICBC believes
that the merits of conducting studies to establish credible estimates for the prospective
adjustment process must be weighed against the expense in time and resources that the
completion of such studies would require.
As discussed in the response to 2013.2 RR BCUC.162.1, one strategy that ICBC has
implemented to improve the acquisition of information required for prospective adjustments is a
project scan and review process with internal experts. This process, which was implemented in
2011, facilitates early identification of any upcoming events that may require prospective
adjustment. Through earlier identification ICBC will be in a better position to investigate the
feasibility of undertaking prospective adjustment studies for specific projects, work with its
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.162.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
business partners to help familiarize them as to its needs in this regard, and conduct the
necessary analyses when sufficient project information is available.
It should be noted, however, that major infrastructure projects, such as the Port Mann Bridge
project and Canada Line, may not be good candidates for prospective adjustment studies. As
explained in 2012.2 RR BCUC.140.2, filed in the response to information request 2012.2 RR
BCUC.140.1-2, estimation of claims impacts from these kinds of projects present particular
challenges due to their indirect relationship to claims costs. In fact, as detailed in 2012.2 RR
BCOAPO.26.1, there exist complex relationships between large infrastructure projects, claims
frequencies and severities, and other factors such as traffic volume and density, roadway and
intersection capacities, pedestrian and cyclist traffic volume, and vehicle speed. This
complexity is compounded by the fact project sponsors, whose attentions are focused on their
project requirements, are not necessarily inclined to participate in undertaking the complex
studies to isolate, estimate and attribute with sufficient accuracy the impacts that such projects
might be expected to have on ICBC’s claims costs. Also, given that the benefit of including any
particular prospective adjustment will eventually be captured in the trend, it is not clear that
ICBC would be providing value to its customers by taking on the expense of time and resources
required to establish appropriately accurate and credible estimates in such cases. However, if
the Commission deems it necessary, ICBC will continue to work with its partners, and the
sponsors of large infrastructure projects, so that over time they may become better able to
support the provision of data, or the production of traffic safety benefit projections, that serve not
only their own project cost benefit analysis requirements but that are also more directly
applicable to ICBC’s prospective adjustment process.
ICBC believes that it is necessary and important to continue to include prospective adjustments
in the rate indication analysis, whenever relevant and sufficient information is available to do so.
However, ICBC also believes that it is important to acknowledge that the overall rate impact
from all such events will eventually reflect the actual costs or savings they generate. This is
because ICBC’s Basic insurance business is a closed system, where any forecast variance will
offset future premium rates. Therefore, it is ICBC’s view that the expenses incurred, in time and
resources, to obtain credible estimates of sufficient accuracy for projects with future claims
impacts must be balanced against the short-term benefit of including a prospective adjustment
in a given policy year.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.163.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.163.1 Reference: ACTUARIAL RATE INDICATION ANALYSIS Exhibit B-1, Chapter 3, pp. 3-11 to 3-12 Exhibit B-3, 2013.1 RR BCUC.14.1.2 and 15.3 Mass Adoption of Smartphones In 2013.1 RR BCUC 14.1.2, ICBC states: “… Because smartphones are more distracting and because they are used more frequently they pose a different, far greater risk to drivers than do regular mobile phones.” In 2013.1 RR BCUC 15.3, ICBC states: “… It should be noted that while the results to date are disappointing they are not completely unexpected given the almost addictive dependency consumers are developing for their smartphones.” Is ICBC aware of any other jurisdictions that have relatively more success in addressing distracted driving including smartphone use while driving? Please describe if any. Response:
ICBC is reviewing best practices and program effectiveness in other jurisdictions as part of the
development of a comprehensive strategy for distracted driving. Please see the response to
information request 2013.2 RR BCUC.203.2.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.163.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.163.2 Reference: ACTUARIAL RATE INDICATION ANALYSIS Exhibit B-1, Chapter 3, pp. 3-11 to 3-12 Exhibit B-3, 2013.1 RR BCUC.14.1.2 and 15.3 Mass Adoption of Smartphones In 2013.1 RR BCUC 14.1.2, ICBC states: “… Because smartphones are more distracting and because they are used more frequently they pose a different, far greater risk to drivers than do regular mobile phones.” In 2013.1 RR BCUC 15.3, ICBC states: “… It should be noted that while the results to date are disappointing they are not completely unexpected given the almost addictive dependency consumers are developing for their smartphones.” If the use of smartphones while driving is more risky and causes more injuries than other behaviours, please explain if ICBC has diverted more funding to advertising and enforcement towards reducing smartphone use while driving compared to other risky behaviours. Response:
Advertising funding re-allocation for distracted driving will be reviewed as part of a
comprehensive strategy on distracted driving. Please see the response to information request
2013.2 RR BCUC.203.2.
ICBC will be supporting two provincial enforcement campaigns for distracted driving in 2014, as
a result of a recent update to the British Columbia Association of Chiefs of Police Provincial
Enforcement Campaign Schedule.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.164.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.164.1 Reference: ACTUARIAL RATE LEVEL INDICATION ANALYSIS Exhibit B-1, Chapter 3, pp. 3-8 to 3-14 Exhibit B-3, 2013.1 RR BCUC.24.1-1.2, 2013.1 RR BCUC.24.1.3, and 2013.1 RR BCUC.24.1.4 Exhibit A2-7, BI Frequency 2012 Revenue Requirements Excerpt ICBC’s Claims Costs/PY 2012 Loss Cost Variance In the responses, ICBC elaborates on its rationale for assuming that: “bodily injury frequency will remain flat through 2013 and resume a downward trend thereafter, but at half the rate of the pre-recession trend line.” 164.1 Would ICBC find an alternate assumption that bodily injury frequency will remain flat through 2013 and resume a downward trend thereafter, but at one-quarter of the rate of the pre recession trend line, to be within actuarial standards of practice? If not, why not? 164.1.1 Please recalculate the rate indication under this alternative assumption, holding all else equal. Response:
164.1
Prior to the recession in 2008 and 2009, ICBC observed bodily injury (BI) claims frequency to be
consistently declining at a rate of 3% to 4% per year. More recently, the BI frequency has
flattened. The Application, Chapter 3, Section B.1 discusses ICBC’s forecast of BI frequency,
including the effect of key factors that are expected to influence BI frequency during the forecast
period and the boundaries which form a reasonable range for the BI frequency forecast. ICBC’s
forecast of BI frequency is a middle of the road position between those boundaries and it is a
best estimate assumption that calls for a downward trend to resume, at half the rate of the pre-
recession trend. In light of the trends observed in the past, and uncertainty regarding the timing
of changes and full impact of interacting influences on BI frequency, ICBC believes that
anything in the range between a flat frequency through 2013 and a return to the full pre-
recession trend rate thereafter could be a reasonable assumption to make, and hence be
consistent with accepted actuarial practice. An assumption outside of this range would, based
on the historical experience, be relatively speculative and therefore would most likely not be
consistent with accepted actuarial practice.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.164.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Therefore, an alternate assumption where BI frequency remains flat through the end of 2013
and then resumes a trend at one quarter of the long-term pre-recession rate would be
considered reasonable and consistent with accepted actuarial practice, although such an
assumption may contain bias. It is within reason to assume that the influences of smartphone
adoption, the sustained drop in new vehicle sales and the end to the increasing number of
vehicles per household may continue to negate most of the impact from favourable long-term
influences. However, ICBC believes that the impact of smartphone adoption will soften enough
after 2013 to bring BI frequency closer than one quarter of the way back to the long-term
downward trend. ICBC’s best estimate gives recognition to this event by assuming that after
2013, bodily injury frequency will resume a downward trend at half of the pre-recession
downward trend rate.
164.1.1
An alternative scenario where bodily injury frequency remains flat through the end of 2013 and
then resumes a trend at one quarter of the long-term pre-recession rate would have a +0.8
percentage point impact on the PY 2013 rate indication. In this scenario, all assumptions other
than the change to the frequency trend remain the same as those outlined in the current
Application.
Please see the response to information request 2013.2 RR BCUC.160.1.1, Attachment A –
Sensitivity Summary for a list of sensitivity scenarios discussed in information requests.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.164.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.164.2 Reference: ACTUARIAL RATE LEVEL INDICATION ANALYSIS Exhibit B-1, Chapter 3, pp. 3-8 to 3-14 Exhibit B-3, 2013.1 RR BCUC.24.1-1.2, 2013.1 RR BCUC.24.1.3, and 2013.1 RR BCUC.24.1.4 Exhibit A2-7, BI Frequency 2012 Revenue Requirements Excerpt ICBC’s Claims Costs/PY 2012 Loss Cost Variance In the responses, ICBC elaborates on its rationale for assuming that: “bodily injury frequency will remain flat through 2013 and resume a downward trend thereafter, but at half the rate of the pre-recession trend line.” Would ICBC find an alternate assumption that bodily injury frequency will remain flat through the forecast period to be within actuarial standards of practice? If not, why not? Response:
As discussed in the response to information request 2013.2 BCUC.164.1, an alternate
assumption that bodily injury frequency will remain flat throughout the forecast period would be
considered reasonable and consistent with accepted actuarial practice, although such an
assumption may contain bias. It is within reason to assume that bodily injury frequency could
remain flat past 2013 given the recent upward pressures and flattened trend which have been
observed. However, ICBC believes that the upward pressure due to smartphone adoption may
soften somewhat in the near term, and other favourable influences such as young people
waiting longer to obtain their drivers’ licences, a growing awareness of the dangers of texting
while driving, and a new generation of highly effective crash avoidance technologies may help
to ease the pressure on frequency going forward. ICBC’s best estimate gives recognition to
these factors by assuming that after 2013, bodily injury frequency will resume a downward
trend, at half the rate of the pre-recession trend line.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.164.3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.164.3 Reference: ACTUARIAL RATE LEVEL INDICATION ANALYSIS Exhibit B-1, Chapter 3, pp. 3-8 to 3-14 Exhibit B-3, 2013.1 RR BCUC.24.1-1.2, 2013.1 RR BCUC.24.1.3, and 2013.1 RR BCUC.24.1.4 Exhibit A2-7, BI Frequency 2012 Revenue Requirements Excerpt ICBC’s Claims Costs/PY 2012 Loss Cost Variance In the responses, ICBC elaborates on its rationale for assuming that: “bodily injury frequency will remain flat through 2013 and resume a downward trend thereafter, but at half the rate of the pre-recession trend line.” 164.3 Would ICBC find an alternate assumption that bodily injury frequency will remain flat through 2013 and resume a downward trend thereafter, at the rate of the pre-recession trend line, to be within actuarial standards of practice? If not, why not? 164.3.1 Please recalculate the rate indication under this alternative assumption, holding all else equal. Response:
164.3
As discussed in the response to information request 2013.2 RR BCUC.164.1, an alternate
assumption that bodily injury frequency will remain flat through 2013 and then resumes a
downward trend at the full pre-recession trend rate would be considered reasonable and
consistent with accepted actuarial practice, although such an assumption may contain bias. It is
within reason to assume that the influences of safer vehicles, safer roads, and a growing
proportion of drivers in their safest years would result in a bodily injury frequency trend similar to
that observed historically. However, ICBC believes that there are significant events currently
dampening these favourable influences (namely the mass adoption of smartphones, fewer new
vehicles, and the end of increases in the number of vehicles per household), and that these will
continue to put some upward pressure on bodily injury claims frequency through the forecast
period. ICBC’s best estimate gives recognition to these significant events by assuming that after
2013, bodily injury frequency will resume a downward trend at only half of the pre-recession
downward trend rate.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.164.3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
164.3.1
The scenario in which bodily injury frequency remains flat through 2013 and then resumes a
pre-recession downward trend rate would have a -1.6 percentage point impact on the PY 2013
rate indication. In this scenario, all assumptions other than the change to the frequency trend
remain the same as those outlined in the current Application.
Please see the response to information request 2013.2 RR BCUC.160.1.1, Attachment A –
Sensitivity Summary for a list of sensitivity scenarios discussed in information requests.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.165.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.165.1 Reference: ACTUARIAL RATE LEVEL INDICATION ANALYSIS Exhibit B-1, Chapter 3, p. 3-10 Exhibit B-3, 2013.1 RR BCUC.25.1 Factors Influencing ICBC’s Claims Costs/PY 2012 Loss Cost Variance In 2013.1 RR BCUC.25.1, ICBC refers to the “Adjusted Loss Cost” that is used to calculate the loss cost forecast variance. Please provide (or show where they can be found in the 2013 Application), the calculations that support the Plate Owner Adjusted Policy Year 2012 Loss Cost as of both the 2012 Application and the 2013 Application for the BI coverage. Response:
Please see Attachment A - Policy Year 2012 Adjusted Loss Cost Calculations for the
calculations that support the policy year 2012 bodily injury (BI) adjusted loss cost at the “2012
Application” and at the “Current Application”.
The adjusted loss and allocated loss adjustment expense (ALAE) (numerator) adds prospective
adjustments, bulk, and large loss provisions to projected loss and ALAE. The adjusted
exposure (denominator) adds Manual Basic exposure to the Plate Owner exposure. The
adjusted loss cost, which is the adjusted loss and ALAE divided by the adjusted exposure, is
used to determine the BI component of the +6.6 percentage point loss cost forecast variance,
as shown in the response to information request 2013.1 RR BCUC.25.2.
ICBC’s Information Request Response
Insurance Corporation of British Columbia
December 23, 2013
2013.2 RR BCUC.165.1 – Attachment A – Policy Year 2012 Adjusted Loss Cost Calculations
2013.2 RR BCUC.165.1 – Attachment A – Policy Year 2012 Adjusted Loss Cost CalculationsBodily Injury
in "2012 Application"
(1) (2) (3)
Personal Commercial Total Source
(a) Loss Cost Prior to Adjustments ($) 473.85 762.13 495.61 2013.1 RR BCUC.25.1, Attachment A - Policy Year 2012 Loss Cost Components: Line (c)
(b) Exposure 2,721,406 221,788 RRA for the 2012 Policy Year Exh A.2.1: Line (1) Bodily Injury
(c) Projected Loss & ALAE Before Adjustments ($ 000's) 1,289,529 169,032 1,458,561 RRA for the 2012 Policy Year Exh A.2.1: Line (4) Bodily Injury
(d) Prospective Adjustments ($ 000's) (5,816) RRA for the 2012 Policy Year Exh A.2.1: Line (5) Bodily Injury Total
(e) Bulk & Large Loss Provision ($ 000's) 4,230 RRA for the 2012 Policy Year Exh A.2.1: Line (6) Bodily Injury Total
(f) Adjusted Loss & ALAE ($ 000's) 1,456,974 (c) + (d) + (e)
(g) Exposure (Plate Owner + Manual) 2,994,621 Line (b) + Manual Coverage exposures of 51,427¹
(h) Adjusted Loss Cost ($) 486.53 (f) / (g) * 1000
in "Current Application"
(1) (2) (3)
Personal Commercial Total Source
(i) Loss Cost Prior to Adjustments ($) 517.48 809.11 539.63 2013.1 RR BCUC.25.1, Attachment A - Policy Year 2012 Loss Cost Components: Line (k)
(j) Exposure 2,695,057 221,421 Policy year 2012 exposures reevaluated as at the current Application
(k) Projected Loss & ALAE Before Adjustments ($ 000's) 1,394,650 179,155 1,573,805 (i) * (j) /1000
(l) Prospective Adjustments ($ 000's) (7,406) Exhibit E.1: Line (e)
(m) Bulk & Large Loss Provision ($ 000's) 4,092 (k) * (Loading factor for bulk and large claims² - 1)
(n) Adjusted Loss & ALAE ($ 000's) 1,570,490 (k) + (l) + (m)
(o) Exposure (Plate Owner + Manual) 2,963,695 Line (j) + Manual Coverage exposures of 47,217³
(p) Adjusted Loss Cost ($) 529.91 (n) / (o) * 1000
² Source: Exhibit E.6: Line (6) Weighted Average
³ Manual Exposures estimated based on internal analysis from data provided in Exhibit B
¹ Source: Total exposures from response to information request in 2012.1 RR BCUC.6.1
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.166.1-2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 3
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.166.1-2 Reference: ACTUARIAL RATE LEVEL INDICATION ANALYSIS Exhibit B-1, Chapter 3, p. 3-19 Exhibit B-3, 2013.1 RR BCUC.31.1 Factors Influencing ICBC’s Claims Costs/PY 2012 Loss Cost Variance In 2013.1 RR BCUC.31.1, ICBC states: “ICBC has performed a correlation analysis between the existence of legal representation and the severity of BI claim exposures. Using claim exposures closed during calendar year 2012, ICBC found the correlation coefficient to be 0.50. This indicates a strong correlation between legal representation and higher severities, which is consistent with represented claims having greater higher cost on average.” 166.1 Please provide the analysis showing the derivation of the correlation coefficient. 166.2 What is the basis for equating a correlation coefficient of 0.50 with a strong correlation? Response:
166.1
Since one variable (the severity) is continuous and one variable (legal representation) is
dichotomous (yes or no), ICBC calculated the “point-biserial” correlation coefficient.
The formula for the point-biserial correlation coefficient is:
Where:
Mr is the mean severity for the represented claim exposures.
Mu is the mean severity for the unrepresented claim exposures.
St is the severity standard deviation for all claim exposures.
p is the proportion of claim exposures that were represented.
In the case of this analysis, these have the following values:
Mr = $36,232
Mu = $3,976
St = $30,896
p = 35.5%
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.166.1-2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Substituting these values in the formula above gives a point-biserial correlation coefficient (r) of
0.50.
As noted in the response to information request 2013.1 RR BCUC.31.1, the correlation analysis
was performed using claim exposures closed during calendar year 2012, excluding these with
more than $200,000 in bodily injury loss payments so as to obtain a result more relevant to the
Basic insurance coverage. The correlation analysis included 54,733 claim exposures, including
claim exposures closed without amount.
166.2
To support ICBC’s assessment that, in this situation, a correlation coefficient of 0.50 reflects a
strong correlation, two other views of the data are presented: a comparison of means and a
comparison of the severity distributions.
Comparison of means
In the case of this analysis, correlation refers to a statistical relationship between the two
variables considered, severity and legal representation. One convenient view of this is
assessing if the different levels of the legal representation variable (yes or no) are related to
statistically different values in the severity variable. This can be accomplished by testing the
statistical difference between the mean severity of the represented and the unrepresented
groups. ICBC performed an independent samples t-test which resulted in a p-value of
essentially zero. This result is indicative of a highly significant difference between the two
means.
Comparison of the severity distributions
ICBC prepared histograms to show the distribution of the severities for both the represented and
the unrepresented groups (Figure 1).
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.166.1-2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Figure 1: Claim exposures severity distribution for the represented and unrepresented groups
This comparison of these two distributions demonstrates graphically that claim exposures with
legal representation are associated with higher severities than claims exposures that are not
represented.
In conclusion, ICBC believes that the comparison of the means and the comparison of the
severity distributions support ICBC’s statement that there is strong correlation between legal
representation and severity.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.167.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.167.1 Reference: ACTUARIAL RATE LEVEL INDICATION ANALYSIS Exhibit B-1, Chapter 3, Exhibit B.0.2, p. 4 Exhibit B-3, 2013.1 RR BCUC.37.1 Description of the Average Premium Model In 2013.1 RR BCUC.37.1, ICBC acknowledges a decline in the modeled personal Part 7 average premium from 2013 to 2014 and attributes (in part) the decline to an expected lower proportion of motorcycle policies in 2014 compared to 2013. Has ICBC reflected this expected change in the proportion of motorcycle policies in the projected personal Part 7 average severity? If so, how? If not, why not? Response:
ICBC’s accident benefits and death benefits severity forecasts do not reflect a change in the
proportion of motorcycle policies during the 2013 policy year.
As described in the response to information request 2013.1 RR BCUC.37.1, an increase in the
proportion of motorcycles was projected for the 2013 calendar year due to the relatively dry
weather experienced in the second quarter. However, this period of dry weather is not part of
the 2013 policy year, which begins on November 1, 2013. The majority of the losses associated
with the 2013 policy year will occur in calendar years 2014 and 2015, for which normal weather
conditions have been assumed.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.168.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.168.1 Reference: ACTUARIAL RATE LEVEL INDICATION ANALYSIS Exhibit B-1, Chapter 3, Exhibit C.0.5, p. 3 Exhibit B-3, 2013.1 RR BCUC.42.1 Summary of Analysis/Plate Owner Basic Bodily Injury/Impact of Claims Initiatives on the Actuarial Data In 2013.1 RR BCUC.42.1, ICBC states: “ICBC cannot identify which specific (claims) initiative may have impacted individual case reserves.” Given ICBC’s response, what is the basis for ICBC attributing the relatively low average case reserves being set to changes in reserving practices/procedures? Response:
The basis for ICBC attributing the relatively low average case reserves to changes in reserving
practices is that clear, significant claims operational changes have occurred that have resulted
in lower average case reserves. The response to information request 2013.1 RR BCUC.42.1
included some additional context that is not included in the isolated quote above. The response
points out that there have been many initiatives to address new and emerging cost pressures,
and that “ICBC cannot identify which specific initiative may have impacted the individual case
reserves”. The response did clarify that “the impact of the functional organizational model,
Claims hierarchy, increased Centralized Claims Injury Centre expansion, and revised BI [bodily
injury] adjuster authority has been more noticeable on case reserving of newly initiated claims.”
A further discussion on the Claims initiatives and their relationship to individual case reserves
can be found in the responses to information requests 2013.1 RR BCUC.43.2.1, filed in the
response to information request 2013.1 RR.BCUC.43.1-2.1, and 2013.1 RR BCUC.43.3.
The trend of average case reserves over time, as shown in Figure 1, is the product of conscious
changes in ICBC’s case reserving practices, as described above.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.168.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Figure 1 – BI Average Case Reserves - Basic
-
10,000
20,000
30,000
40,000
50,000
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013At May 31
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.168.1.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.168.1.1 Reference: ACTUARIAL RATE LEVEL INDICATION ANALYSIS Exhibit B-1, Chapter 3, Exhibit C.0.5, p. 3 Exhibit B-3, 2013.1 RR BCUC.42.1 Summary of Analysis/Plate Owner Basic Bodily Injury/Impact of Claims Initiatives on the Actuarial Data In 2013.1 RR BCUC.42.1, ICBC states: “ICBC cannot identify which specific (claims) initiative may have impacted individual case reserves.” In what way does the development that has thus far occurred for accident years 2008 and subsequent support ICBC’s position that the case reserves and paid loss development for these years will be greater than for years prior to 2008? Response:
The development that has thus far occurred for accident year 2008 and subsequent has been
lower than expected, particularly in the latest two calendar years (see response to information
request 2013.1 RR BCUC.50.2). It is due to a combination of operational factors that have
reduced reserve levels on newly reported claims and impacted the adjusting and settlement of
claims, especially represented claims. All of this has combined to significantly reduce recent
case reserve levels, as well as paid loss amounts, relative to previous levels but has not had a
similar impact on ultimate cost levels; meaning that future development is anticipated to be
greater.
One impact of the operational changes is a slowdown in the settlement of bodily injury (BI)
claims, which combined with the acceleration in the rate at which claims are becoming
represented, has resulted in a much higher number of open BI claims that are represented. A
represented BI claim is more complex and generally more costly to resolve than a like injury
claim that is not represented.
Consequently, it is reasonable to assume that there will be greater case reserve development
and paid development in the future as compared to the period before these changes.
Qualitative discussions of the operational impacts are found in the following information
requests:
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.168.1.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.172.4 – discusses impacts on claims adjusting as a result of the
implementation of the claims functional model and a new Claims hierarchy.
2013.1 RR IBC.16.1 – discusses the expansion of the Claims Contact Injury Centre.
Actuarial analysis that supports the expectation of higher development in the future is as
follows:
2013.1 RR BCUC.43.6.5 (confidential) – demonstrates that case reserves have
become less adequate in more recent years as compared to 2007 and prior.
2013.1 RR BCUC.43.4 (confidential) – explains why on average there is now more
upward development on case reserve amounts, not less.
2013.1 BCUC.43.7 – describes how recent claims operational changes have resulted
in a slowdown in the settlement of BI claims and shows that there is now a much
higher number of open BI claims that are represented.
2013.1 BCUC.105.2 – demonstrates that a represented claim is more complex and
generally more costly to resolve than a like injury claim that is not represented.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.168.1.1.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.168.1.1.1 Reference: ACTUARIAL RATE LEVEL INDICATION ANALYSIS Exhibit B-1, Chapter 3, Exhibit C.0.5, p. 3 Exhibit B-3, 2013.1 RR BCUC.42.1 Summary of Analysis/Plate Owner Basic Bodily Injury/Impact of Claims Initiatives on the Actuarial Data In 2013.1 RR BCUC.42.1, ICBC states: “ICBC cannot identify which specific (claims) initiative may have impacted individual case reserves.” Has the development from age 17 months for both the case incurred losses and paid losses for accident years 2008-2011 been noticeably greater than that for accident years 2002-2006? If not, why does ICBC believe this to be the case? Response:
The development for both the case incurred and paid losses from age 17 to 29 months for
accident years 2008 to 2011, as compared to that for accident years 2002 to 2006, has been
lower on average. Similar comparisons beyond 29 months for those accident years yield the
same conclusion. This is evident from an examination of the data displayed in the Application,
Chapter 3, Exhibits C.1.3.3 and C.1.3.7. This is due to clear, significant Claims operational
changes and lower than expected claim closure rates, which are discussed in the response to
information request 2013.2 RR BCUC.168.1.1.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.169.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.169.1 Reference: ACTUARIAL RATE LEVEL INDICATION ANALYSIS Exhibit B-1, Chapter 3, Exhibit C.0.5, p. 3 Exhibit B-3, 2013.1 RR BCUC.42.2 Summary of Analysis/Plate Owner Basic Bodily Injury/Impact of Claims Initiatives on the Actuarial Data In 2013.1 RR BCUC.42.2.3, ICBC states: “One of the byproducts of a more homogeneous caseload is a better recognition of the ultimate probable cost of a claim as adjusters and managers start to have a better understanding of the nature and complexity of the individual risk profile of certain claims and therefore the reserves will be more consistent over time. Another by-product of a more homogeneous caseload is the consistent approach to target strategies on specific claims issues that can be reflected in how reserves are set.” (Emphasis added) If, as a result of the more homogenous caseload, there is a better recognition of the ultimate probable cost of a claim, why has the adequacy of the case reserves lessened? Response:
Reserve accuracy is defined as setting a more accurate reserve at the point in time when the
injury claim is assessed. Reserve adequacy is defined as case reserve amounts as compared
to final settlement values. Starting in 2007, the Claims Division began emphasizing the
importance of accurate case reserving rather than reserving with a provision for some margin.
This approach to case reserving has since been reinforced by changes in claims operations
which led to more homogeneous caseloads. As discussed in the response to information
request 2013.1 RR.BCUC 43.1-2.1, the approach of setting reserves at a more accurate level at
the point in time when an injury claim is assessed means the reserves tend to be set lower and
there is, on average, more upward development on case reserve amounts. The way in which
the changes in claims operations have affected the setting of case reserves is discussed further
in the response to information request 2013.2 RR BCUC.172.4.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.169.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.169.2 Reference: ACTUARIAL RATE LEVEL INDICATION ANALYSIS Exhibit B-1, Chapter 3, Exhibit C.0.5, p. 3 Exhibit B-3, 2013.1 RR BCUC.42.2 Summary of Analysis/Plate Owner Basic Bodily Injury/Impact of Claims Initiatives on the Actuarial Data In 2013.1 RR BCUC.42.2.3, ICBC states: “One of the byproducts of a more homogeneous caseload is a better recognition of the ultimate probable cost of a claim as adjusters and managers start to have a better understanding of the nature and complexity of the individual risk profile of certain claims and therefore the reserves will be more consistent over time. Another by-product of a more homogeneous caseload is the consistent approach to target strategies on specific claims issues that can be reflected in how reserves are set.” (Emphasis added) Do the case reserves being set reflect that there is a better recognition of the ultimate probable cost of a claim? Please explain. Response:
Case reserves currently being set do reflect better recognition of the ultimate probable cost of
the claim. As stated in the response to information request 2013.2 RR BCUC.174.1, reserves
are accurately set to reflect the total anticipated dollar cost of the loss and are based on the final
probable and reasonable cost to ICBC.
Segmenting files by file risk as well as placing files with the appropriate staff has improved
identification of risk and increased consistency in file handling and reserving practices. As a
result of the organizational changes, injury files are now being assigned to the appropriate level
of adjusters and managers with the right capabilities to assess each claim thereby increasing
the accuracy of reserves. However, as ICBC points out in the response to information request
2013.2 RR BCUC.172.4, there may be some delays in the timing of setting more accurate
reserves as adjusters assimilate their reassigned caseloads.
ICBC anticipates with greater segmentation as a by-product of both the move to a more function
based claims model and the introduction of a broader claims hierarchical structure reserves
should become even more consistent and accurate at the point in time they are assessed.
Please see the response to information request 2013.1 RR BCUC.43.3 for more information on
accurate reserving.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.170.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.170.1 Reference: ACTUARIAL RATE LEVEL INDICATION ANALYSIS Exhibit B-1, Chapter 3, Exhibit C.0.5, p. 3 Exhibit B-3, 2013.1 RR BCUC.42.2 Summary of Analysis/Plate Owner Basic Bodily Injury/Impact of Claims Initiatives on the Actuarial Data In 2013.1 RR BCUC.42.2, ICBC explains that due to the volume of claims, it is not able to provide the requested listing of all reported claims for accident year 2012 and for each, the amount of the case reserve and what the case reserve would have been had it not been for the claim initiatives. If possible, can ICBC instead provide the information for ten randomly selected claims from accident year 2012? Response:
As noted in the response to information request 2013.1 RR BCUC.42.2, bodily injury claims
have been subject, in varying degrees, to multiple initiatives implemented within coincidental or
overlapping time periods, and to external influences which occurred over the same time period.
The combination of multiple influences within a defined timeframe produces one combined
impact which cannot practically be separated out to quantify individual impacts. Any effort to do
so, even with the manual review of 10 randomly selected claims from accident year 2012, would
be highly subjective and therefore unlikely to produce meaningful, reliable results. As such,
ICBC respectfully declines to provide the information requested.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.171.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.171.1 Reference: ACTUARIAL RATE LEVEL INDICATION ANALYSIS Exhibit B-1, Chapter 3, Exhibit C.0.5, p. 3 Exhibit B-3, 2013.1 RR BCUC.42.3 Summary of Analysis/Plate Owner Basic Bodily Injury/Impact of Claims Initiatives on the Actuarial Data In 2013.1 RR BCUC.42.3.3, ICBC states: “Managers can also provide direction and feedback to adjusters to build their skills and improve their performance in respect of reserving.” In light of the preamble, per ICBC, case reserves are set more “accurately” as opposed to more adequately (as measured against the final settlement value), how is an adjuster’s performance in respect of reserving measured? That is, against what is the accuracy of an adjuster’s case reserves measured (particularly when ICBC has not published a new claims reserve philosophy or practice manual)? Response:
ICBC measures an adjuster’s performance in respect to reserving in a number of ways. The
majority of reviews are conducted by the adjuster’s direct manager during routine diary reviews,
a review of the file for authority granting purposes, or through an event-driven review such as a
pre-trial review, committee review, etc. In addition, ICBC also conducts group file reviews as
part of its claims governance.
The accuracy of an adjuster’s case reserves are measured against the case reserving policy as
set out in the Claims Procedures Manual. ICBC’s bodily injury adjusters are expected to set
injury reserves that accurately reflect the total anticipated dollar cost of the loss and are based
on the final probable and reasonable cost to ICBC, based on the information that is available at
that point in time. Managers must also verify that adjusters are following proper reserving
practices which include a re-evaluation of the reserve as the file matures and new information
becomes available. Management is responsible for providing coaching to adjusters, where
required, to improve the consistency and quality of accurately setting reserves.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.172.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.172.1 Reference: ACTUARIAL RATE LEVEL INDICATION ANALYSIS Exhibit B-1, Chapter 3, Exhibit C.0.5, p. 4 Exhibit B-3, 2013.1 RR BCUC.43.1-2.1 Summary of Analysis/Plate Owner Basic Bodily Injury/Incurred Development Method In 2013.1 RR BCUC.43.2.1, ICBC describes the change in claims operations that began in 2007 and was intensified in 2012 that included a change in case reserving. ICBC also states that before the change in 2007, “there were steady and predictable patterns in the data.” Does ICBC acknowledge that the change in case reserving has made it more difficult for the actuaries to identify claim development patterns and, hence, increased the uncertainty surrounding the actuaries’ estimates of the ultimate claim costs? If not, why not? Response:
ICBC agrees that the changes in claims operations that ICBC has described in the Application
have required that the actuaries undertake additional work to strike the assumptions needed for
certain of the methods used to estimate the amount of the incurred losses (described as
ultimate claim costs in the information request). ICBC’s qualitative assessment of the level of
uncertainty surrounding the actuaries’ estimate of unpaid claims is that it likely has increased.
This is mainly because the volume of pending claims is growing and while claims are open they
are subject to influence from economic and social forces that can affect the claim amount. If
there is greater uncertainty in the actuaries’ estimates of unpaid claims, then there is increased
uncertainty surrounding the actuaries’ estimates of the incurred claims cost.
It is important to point out that in estimating the incurred losses, the uncertainty is only
associated with the portion of the incurred losses that remain unpaid. This means that there is
more uncertainty around the estimated incurred losses for the most recent accident year than
there is for the previous accident year. Normally, the portion of the incurred losses that remains
unpaid steadily decreases over time, until all claims are paid for an accident year and so the
uncertainty level for an accident year declines as it ages.
ICBC believes that it is important to manage the fundamentals of the business to help to
manage claims costs. Actuaries have tools to manage uncertainty in estimating, and have
employed those tools in arriving at the appropriate rate indication.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.172.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.172.2 Reference: ACTUARIAL RATE LEVEL INDICATION ANALYSIS Exhibit B-1, Chapter 3, Exhibit C.0.5, p. 4 Exhibit B-3, 2013.1 RR BCUC.43.1-2.1 Summary of Analysis/Plate Owner Basic Bodily Injury/Incurred Development Method In 2013.1 RR BCUC.43.2.1, ICBC describes the change in claims operations that began in 2007 and was intensified in 2012 that included a change in case reserving. ICBC also states that before the change in 2007, “there were steady and predictable patterns in the data.” Why was the change in case reserving implemented? How has ICBC benefitted from the change in case reserving, and why does ICBC believe this benefit outweighs any possible loss in the accuracy of the claim cost estimation performed by the actuaries? Response:
In 2007 there was a significant change within ICBC’s senior Claims leadership and concomitant
with this change was a revised approach to claims handling. One of the by-products of the
structural changes in claims handling was influencing, to some degree, how case reserves were
assessed. As stated in the response to information request 2013.1 RR BCUC.43.1-2.1, starting
in 2007 the new Claims leadership stressed the importance of setting reserves at a level that
more accurately reflects the information available at the time, rather than setting reserves that
also had a provision for some margin.
ICBC believes these changes bring benefits in a number of ways. By setting reserves that more
accurately reflect the information available at a point in time, ICBC has the ability to better
segment files and ensure files are managed by the right level of adjuster and manager.
Consequently, there is improvement in the consistency and quality in both the setting of case
reserves and in the identification of file risk, which are intended to help moderate the trend in
bodily injury claims costs.
Furthermore, ICBC believes that the emphasis on setting reserves as accurately as possible
based on the information, rather than providing a higher level assessment that incorporates a
margin, assists adjusters to better assess, at a point in time, the ultimate probable cost of a
claim. This increased consistency in reserving practices should eventually provide more
stability in the historical patterns relied on by actuaries and could improve the accuracy of the
claim cost estimation.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.172.3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.172.3 Reference: ACTUARIAL RATE LEVEL INDICATION ANALYSIS Exhibit B-1, Chapter 3, Exhibit C.0.5, p. 4 Exhibit B-3, 2013.1 RR BCUC.43.1-2.1 Summary of Analysis/Plate Owner Basic Bodily Injury/Incurred Development Method In 2013.1 RR BCUC.43.2.1, ICBC describes the change in claims operations that began in 2007 and was intensified in 2012 that included a change in case reserving. ICBC also states that before the change in 2007, “there were steady and predictable patterns in the data.” In 2013.1 RR BCUC.43.2.1, ICBC states: “It should be pointed out that the claims initiatives, including the change to case reserving approach, are believed to have had the desired effect of moderating the trend in bodily injury costs.” How, exactly, have changes in the manner in which case reserves are established affected the trend in bodily injury costs? Response:
The response to information request 2013.1 RR BCUC.43.2.1, filed in the response to 2013.1
RR BCUC.43.1-2.1, states that claims initiatives are believed to have had the effect of
moderating the trend in bodily injury (BI) claims costs, and includes the change in case
reserving when discussing claims initiatives. The relationship between the claims changes and
the resultant effect on case reserves is discussed further in the response to information request
2013.2 RR BCUC.174.1. BI claims have been subject in varying degrees to multiple initiatives
implemented within coincidental or overlapping time periods, as well as to external influences
which occurred over the same time period. The combination of multiple influences within a
defined timeframe produces one combined impact, which cannot practically be separated out to
quantify individual impacts. Without quantifying the individual impacts, however, ICBC believes
that the combined effect of the claims initiatives have contributed to the reduction in the BI
severity trend rate from 8% prior to the initiatives to 6% subsequently. The intensification of the
changes in Claims operations that occurred in 2012, including additional claims initiatives, are
believed to be offsetting the cost pressures associated with the recent acceleration in the
representation rate as discussed in the response to information request 2013.1 RR BCUC.7.1.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.172.4 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.172.4 Reference: ACTUARIAL RATE LEVEL INDICATION ANALYSIS Exhibit B-1, Chapter 3, Exhibit C.0.5, p. 4 Exhibit B-3, 2013.1 RR BCUC.43.1-2.1 Summary of Analysis/Plate Owner Basic Bodily Injury/Incurred Development Method In 2013.1 RR BCUC.43.2.1, ICBC describes the change in claims operations that began in 2007 and was intensified in 2012 that included a change in case reserving. ICBC also states that before the change in 2007, “there were steady and predictable patterns in the data.” In what way have the changes in claims operations that were intensified in 2012 affected the manner in which case reserves are established and the amount of case reserves that are established? Response:
The Application, Chapter 6, Section C.1.1 references two significant changes in claims
operations; a new functional organizational model in 2011, and implementation of a new Claims
hierarchy in 2013. The intent of both of these changes was to provide better management of
bodily injury claims. However, in order to facilitate these changes there was significant
movement of bodily injury claim files and, in some cases, personnel movement as well.
The setting of case reserves is not an exact science and is subject, to some degree, on the
experience level and knowledge of the adjuster and manager handling the claim file. When an
adjuster handles a specific injury or a specific plaintiff firm once or twice a year, their ability to
set an accurate case reserve based on the unique characteristics of the claim is not as adept as
it would be if the adjuster handles a specific injury or specific plaintiff firm on a weekly basis. A
key benefit of segmentation is increased consistency in the types of files handled by adjusters
and managers; therefore, as ICBC segments more of its inventory of injury claims, the accuracy
of the case reserving can also improve.
However, the structural changes implemented since 2011 have some transitional impacts.
While the manner or ‘process’ in which ICBC sets case reserves has not changed, it is
reasonable to expect that with the movement of approximately 3,000 injury files in 2011 and
approximately 7,000 injury files at the beginning of 2013, the time taken to review and set
appropriate reserves on these files has been impacted.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.172.4 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Whenever a bodily injury adjuster receives a transferred caseload a period of time is required
until the adjuster fully assimilates the new claims assigned to them. This period of time can vary
and is dependent on the number, type, and complexity of the new caseload. In addition,
managers who are unfamiliar with the new caseload will also take longer to review, approve
reserve changes, or provide authority for settlement.
Consequently, when ICBC changed its organizational structure by segmenting more of its injury
claims through both the functional organizational model and subsequently the Claims hierarchy,
there were changes in the way case reserves were established.
ICBC’s change in approach to setting reserves has been reinforced by changes in claims
operations. That approach, which involves setting the reserve as accurately as possible rather
than performing a higher level estimate that incorporates a margin, does tend to produce lower
reserves. ICBC discussed this change in the response to 2013.1 RR BCUC.43.3.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.173.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.173.1 Reference: ACTUARIAL RATE LEVEL INDICATION ANALYSIS Exhibit B-1, Chapter 3, Exhibit C.0.5, p. 4 Exhibit B-3, 2013.1 RR BCUC.43.3 Summary of Analysis/Plate Owner Basic Bodily Injury/Incurred Development Method In 2013.1 RR BCUC.43.3, ICBC states: “As a result, the initial claims reserves for new opened BI claims are, on average, trending lower than in previous years.” Explain how this is the case given that represented claims are accelerating and ICBC finds that claims representation is correlated with higher claim costs. Response:
Initial claims reserves for new opened bodily injury (BI) claims are set early in a claim’s life
which in some cases, is before the claims adjuster or manager is aware of legal representation.
For more information on when legal representation is known to the claims adjuster or manager,
please see the response to information request 2013.2 RR BCUC.173.2, filed in the response to
2013.2 RR BCUC.173.2-3. This timing issue coupled with the recent Claims operational
changes discussed in the response to information request 2013.1 RR BCUC.43.3, has resulted
in initial BI claims reserves trending lower than previous years in spite of the recent acceleration
in the legal representation rate.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.173.2-3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.173.2-3 Reference: ACTUARIAL RATE LEVEL INDICATION ANALYSIS Exhibit B-1, Chapter 3, Exhibit C.0.5, p. 4 Exhibit B-3, 2013.1 RR BCUC.43.3 Summary of Analysis/Plate Owner Basic Bodily Injury/Incurred Development Method In 2013.1 RR BCUC.43.3, ICBC states: “As a result, the initial claims reserves for new opened BI claims are, on average, trending lower than in previous years.” 173.2 On average, at what point in the “life” of a claim, does the fact that a claim is represented become known to the claim adjuster? 173.3 How soon after does a claim adjuster becomes aware that a claim is represented, would the case reserve typically be increased or adjusted to reflect this new information? Response:
173.2
Typically, adjusters only become aware of legal representation when either the lawyer
representing the injured party or the customer directly communicates that fact. Generally
speaking, claimants have two years from the date of the accident (statutory limitation period) to
commence an action (for those who have not reached the age of majority, the limitation period
expires two years past their 19th birthday). At any time during this two year period a customer
can retain a lawyer but they are not compelled to advise ICBC of that fact. However, when
representation occurs it is usually communicated to the adjuster shortly thereafter.
173.3
It is corporate policy that each time a file is reviewed or new information is received, the reserve
is reviewed and updated as required. The expectation is that when representation has been
identified, adjusters as soon as reasonably practicable will adjust the reserve to reflect the
additional costs associated with representation and or litigation.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.174.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.174.1 Reference: ACTUARIAL RATE LEVEL INDICATION ANALYSIS Exhibit B-1, Chapter 3, Exhibit C.0.5, p. 4 Exhibit B-3, 2013.1 RR BCUC.43.6.4 Summary of Analysis/Plate Owner Basic Bodily Injury/Incurred Development Method In 2013.1 RR BCUC.43.6.4, ICBC states: “ICBC’s reserving philosophy and procedures have not changed….” Please reconcile this statement with ICBC’s response to 2013.1 RR BCUC.43.2.1, where ICBC states, “In 2007, the Claims Division implemented a new approach to managing claims that included a change in case reserving.” Response:
ICBC’s response to information request 2013.1 RR BCUC.43.6.4 states that ICBC’s,
“philosophy and procedures have not changed”, while its response to information request
2013.1 RR BCUC.43.2.1, filed in the response to information request 2013.1 RR BCUC.43.1-
2.1, states that there was a change in, “approach to managing claims that included a change in
case reserving”. While on the surface the two statements appear to be contradictory, that is not
the case.
ICBC has not altered its reserving procedure as articulated in the claims procedures manual.
As stated in the claims procedures manual, ICBC is committed to establishing sufficient financial
reserves to cover the cost of bodily injury (BI) claims in which there are liability exposures and
the capacity to sue. ICBC’s BI adjusters are expected to set injury reserves that accurately
reflect the total anticipated dollar cost of the loss and are based on the final probable and
reasonable cost to ICBC.
When ICBC indicates in its response to information request 2013.1 RR BCUC.43.2.1, filed in the
response to information request 2013.1 RR BCUC.43.1-2.1, that there was a change in
approach, the resultant effect on case reserves was more of a by-product of structural and
organizational changes within the Claims Division that did impact how adjusters were setting
case reserves.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.174.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
The setting of case reserves is not an exact science and is subject to some degree on the
experience level and knowledge of the adjuster and manager handling the claim file. Therefore,
when an adjuster only handles a specific injury or a specific plaintiff firm once or twice a year
their ability to set an accurate case reserve is not as adept as it would be if the adjuster handles
a specific injury or specific plaintiff firm on a weekly basis. Consequently, when ICBC changed
its organizational structure by segmenting more of its injury claims by risk and complexity, the
accuracy of the case reserves (or the approach, as referred to in ICBC’s response to
information request 2013.1 RR BCUC.43.2.1, filed in the response to information request
2013.1 RR BCUC.43.1-2.1) became more accurate. Furthermore, as stated in ICBC’s response
to information request 2013.1 RR BCUC.43.2.1, filed in the response to information request
2013.1 RR BCUC.43.1-2.1, with greater segmentation by risk and complexity ICBC adjusters
have become more consistent in their approach to setting reserves.
ICBC anticipates with greater segmentation as a result of both the move to a more function
based claims model and the introduction of a new claims hierarchical structure, reserves should
become even more consistent and accurate at the point in time they are assessed.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.175.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.175.1 Reference: ACTUARIAL RATE LEVEL INDICATION ANALYSIS Exhibit B-1, Chapter 3, Exhibit C.0.5, p. 4 Exhibit B-3, 2013.1 RR BCUC.43.7.2 Summary of Analysis/Plate Owner Basic Bodily Injury/Incurred Development Method In 2013.1 RR BCUC.43.7.2, ICBC presents Figure 1: Stratification by Severity of Injury. What do the years represent? If these are accident years, are all years valued as of 12 months? Response:
The years are claim exposures reported years.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.176.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.176.1 Reference: ACTUARIAL RATE LEVEL INDICATION ANALYSIS Exhibit B-1, Chapter 3, Exhibit C.1.0, p. 1 Exhibit B-3, 2013.1 RR BCUC.50.2 Summary of Bodily Injury Selections - Personal/Incurred Development Method and Paid Development Method In 2013.1 RR BCUC.50.2, ICBC states: “Since the Revenue Requirements Application of the 2012 Policy Year, average case reserves have emerged much lower than expected…” To what does ICBC attribute this lower than expected case reserve development, given that it had anticipated higher than historical development as a result of the noted change in claim reserving? Response:
ICBC assumes that “lower than expected case reserve development” is in reference to Table 1
of the response to information request 2013.1 RR BCUC.50.2. The numbers in Table 1 include
amounts that are comprised of both case reserves and paid losses. ICBC attributes the lower
than expected case reserve development to clear, significant Claims operational changes that
have occurred over the last two years (please see the response to information request 2013.2
RR BCUC.168.1.1 for more information on the clear, significant Claims operational changes).
ICBC attributes the lower than expected paid loss development to a slowdown in the settlement
of bodily injury claims.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.177.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.177.1 Reference: ACTUARIAL RATE LEVEL INDICATION ANALYSIS Exhibit B-4, 2013.1 RR IBC.39.1 Legal Representation Rates In 2013.1 RR IBC.39.1, ICBC presents a table showing the proportion of claims with legal representation by loss year at various valuation points. For what exposure/coverage are the claims that are included in the table? Response:
The table in the response to information request 2013.1 RR IBC.39.1 shows the proportion of
reported bodily injury claims with legal representation by loss year at various valuation points.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.177.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.177.2 Reference: ACTUARIAL RATE LEVEL INDICATION ANALYSIS Exhibit B-4, 2013.1 RR IBC.39.1 Legal Representation Rates In 2013.1 RR IBC.39.1, ICBC presents a table showing the proportion of claims with legal representation by loss year at various valuation points. Please provide the same information, but for open, Personal Plate Owner, Bodily Injury claims only. That is, please provide the proportion of such open claims with legal representation for the same loss years and valuation points. Response:
A table and graph of the ratio of the number of open, Personal Plate Owner, represented bodily
injury claims to the total number of open, Personal Plate Owner, bodily injury claims for the
same loss years and valuation points as the table provided in the response to information
request 2013.1 RR IBC.39.1 are shown below.
Loss Year @ 17 months @ 29 months @ 41 months
2006 60.3% 84.4% 94.5%
2007 63.7% 84.9% 96.0%
2008 62.8% 85.7% 95.8%
2009 66.2% 87.1% 96.0%
2010 67.7% 86.5% 96.9%
2011 67.1% 88.7%
2012 69.1%
Proportion of Personal Open BI Claims with Legal Representation
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.177.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.178.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.178.1 Reference: New Basic Capital Management Plan Exhibit B-3, 2013.1 RR BCUC.57.3 Solvency Target and Rate Smoothing Margin In 2013.1 RR BCUC.57.3, ICBC states: “The changes in investment income and bodily injury (BI) claims costs are significant factors influencing ICBC’s Basic MCT ratio and have contributed to its volatility over the last several years… … as the changing trend in BI frequency continues to challenge ICBC’s ability to accurately forecast the loss cost, the likelihood that there will be loss cost forecast variance in the future revenue requirements application also increases.” ICBC proposes a new Basic Capital Management Plan that starts on May 31, 2014. Is it possible that approval of the new Basic Capital Management Plan be in effect for a three to four year period? Response:
The rate smoothing framework, supported by a proposed new Basic insurance Capital
Management Plan (Basic Capital Management Plan), is intended to promote greater stability
and predictability in Basic insurance rates in future years. A new Basic Capital Management
Plan is needed because the rate smoothing framework relies on Basic capital to absorb any rate
deficiencies resulting from rate smoothing.
ICBC developed the proposed new Basic Capital Management Plan in accordance with Special
Direction IC2 and the Government directive of March 19, 2013 with respect to Rate Smoothing
approved by Order in Council 153/13, March 18, 2013 (the 2013 Government Directive
regarding Rate Smoothing). Neither Special Direction IC2 nor the 2013 Government Directive
regarding Rate Smoothing contemplates limiting the time for which the new Basic Capital
Management Plan would be in effect. In other words, there is no sunset clause in the
legislation.
ICBC’s response to information request 2013.1 RR BCUC.64.4 states, “ICBC has constructed
the proposed Basic insurance Capital Management Plan to rebuild the Basic capital level over
time …” [emphasis added]. This longer term approach benefits Basic insurance policyholders
and is discussed in ICBC’s response to information request 2013.1 RR BCUC.81.5. That
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.178.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
response notes that the new Basic Capital Management Plan is intended to keep rate changes
stable and predictable while building towards the proposed capital management target; once
that target is achieved and if rates are stable, the target is to be maintained by the capital
maintenance provision. As such, the Basic Capital Management Plan must be in effect long
enough to see both unfavourable and favourable loss cost forecast variance.
It is noted that Special Direction IC2 requires ICBC to “… apply annually for a general rate
change order by May 31 of the year of the application ….” One of the advantages of this is that
it provides the Commission with ample opportunities to consider the effects of the new Basic
Capital Management Plan on ICBC’s proposed rate changes and the associated Basic capital
levels, and to determine what refinements, if any, may be appropriate. Another advantage is
that, under the rate smoothing framework and in extraordinary circumstances, the Commission
is able at any time to make a direction on any refinements it deems to be necessary, provided
that they meet the requirements of Special Direction IC2.
A key disadvantage associated with creating an arbitrary time limit for the new Basic Capital
Management Plan, such as those suggested in the information request (three to four years), is
that this amount of time would be insufficient to build capital to the proposed new capital
management target of 150% MCT as shown in response to the information request 2013.1 RR
BCUC.81.2-3. Another disadvantage of creating an arbitrary time limit as suggested in the
information request is that it creates unnecessary regulatory costs and time commitments for
the Commission, ICBC and intervenors to review the new Basic Capital Management Plan
before there is any evidence to suggest whether it is achieving its intended results.
In light of the above, ICBC believes the Commission should allow the new Basic Capital
Management Plan to remain in place for so long as it is continuing to serve the intended
purpose under rate smoothing.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.178.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.178.2 Reference: New Basic Capital Management Plan Exhibit B-3, 2013.1 RR BCUC.57.3 Solvency Target and Rate Smoothing Margin In 2013.1 RR BCUC.57.3, ICBC states: “The changes in investment income and bodily injury (BI) claims costs are significant factors influencing ICBC’s Basic MCT ratio and have contributed to its volatility over the last several years… … as the changing trend in BI frequency continues to challenge ICBC’s ability to accurately forecast the loss cost, the likelihood that there will be loss cost forecast variance in the future revenue requirements application also increases.” Recognizing that the volatility of BI claims costs and the challenges to accurately forecast loss cost, would ICBC be opposed to having the new Basic Capital Management Plan approved until 2017, at which point ICBC would then have an opportunity to renew or modify the Basic Capital Management Plan including the Solvency Target and Rate Smoothing Margin in a Revenue Requirements application on or after May 31, 2017? Please discuss the pros and cons, and any other proposed timeline that should be considered. Response:
Please see the response to information request 2013.2 RR BCUC.178.1.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.179.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.179.1 Reference: NEW BASIC CAPITAL MANAGEMENT PLAN Exhibit B-1, Chapter 4, p. 4-7 Exhibit B-3, 2013.1 RR BCUC.57.3, 66.3, 68.1 and 82.1 Rationale for New Capital Management Plan In 2013.1 RR BCUC.57.3 ICBC states: “The changes in investment income and bodily injury (BI) claims costs are significant factors influencing ICBC’s Basic MCT ratio and have contributed to its volatility over the last several years. BI loss costs account for over 75% of the Basic loss costs and as a result any change to these costs will have a major impact on the rate indication as well as an impact on the MCT ratio…” In 2013.1 RR BCUC.66.3 ICBC states: “ICBC’s loss cost forecast variance has an estimated standard deviation of 3.4%.” In 2013.1 RR BCUC.82.1 ICBC states: “ICBC uses one standard deviation of its quarterly investment returns over the last four years to estimate future expected return volatility. This is considered to be representative of the current investment market environment. Using two standard deviations instead of one would be representative of an unusually large change in the investment markets.” Does ICBC agree that the recent single year loss cost variance can be considered the “most adverse volatility” since 2003? Why or why not? Response:
Yes, the recent single year loss cost forecast variance of 6.6 percentage points is considered
the most adverse since 2003. Please see the Application, Chapter 4, Figure 4.1 for a summary
of the historical loss cost forecast variances that shows that the largest loss cost forecast
variance since 2005 occurred in this Application. The loss cost forecast variances for years
2003 and 2004 are not available based on current information but given the overall rate
indications for those years it is assumed that the loss cost forecast variances for those years are
less than 6.6 percentage points of rate change. The overall rate change approved for 2004 was
0.4% based on an increase of 0.4% in premium taxes.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.179.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.179.2 Reference: NEW BASIC CAPITAL MANAGEMENT PLAN Exhibit B-1, Chapter 4, p. 4-7 Exhibit B-3, 2013.1 RR BCUC.57.3, 66.3, 68.1 and 82.1 Rationale for New Capital Management Plan In 2013.1 RR BCUC.57.3 ICBC states: “The changes in investment income and bodily injury (BI) claims costs are significant factors influencing ICBC’s Basic MCT ratio and have contributed to its volatility over the last several years. BI loss costs account for over 75% of the Basic loss costs and as a result any change to these costs will have a major impact on the rate indication as well as an impact on the MCT ratio…” In 2013.1 RR BCUC.66.3 ICBC states: “ICBC’s loss cost forecast variance has an estimated standard deviation of 3.4%.” In 2013.1 RR BCUC.82.1 ICBC states: “ICBC uses one standard deviation of its quarterly investment returns over the last four years to estimate future expected return volatility. This is considered to be representative of the current investment market environment. Using two standard deviations instead of one would be representative of an unusually large change in the investment markets.” What would one standard deviation of ICBC’s quarterly investment returns be for the last two years if ICBC takes out the impact of both the 2008 market downturn and the subsequent run-up in market share prices (i.e. exclude recession in 2008-2009 period)? Response:
Standard Deviation of 4-Year Quarterly Returns
Sep-13 Jun-13 Mar-13 Dec-12 Sep-12 Jun-12 Mar-12 Dec-11
Observed Std Dev (%) 1.9 2.00 2.04 2.42 2.52 3.06 3.05 3.05
Observations
48 48 48 48 48 48 48 48
No 2008/09 Std Dev (%)
1.87 1.89 1.90 1.93 2.01 2.06 2.02 2.06
Observations
45 42 39 36 33 30 27 24
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.179.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
The standard deviation of ICBC’s quarterly investment returns for the last two years would be
approximately 2% if the impact of the 2008 market downturn and the subsequent run-up in
market prices is removed from the calculation. The table above contrasts the standard
deviation of 4-year quarterly returns over the last two years with and without observations from
2008 and 2009.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.179.3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.179.3 Reference: NEW BASIC CAPITAL MANAGEMENT PLAN Exhibit B-1, Chapter 4, p. 4-7 Exhibit B-3, 2013.1 RR BCUC.57.3, 66.3, 68.1 and 82.1 Rationale for New Capital Management Plan In 2013.1 RR BCUC.57.3 ICBC states: “The changes in investment income and bodily injury (BI) claims costs are significant factors influencing ICBC’s Basic MCT ratio and have contributed to its volatility over the last several years. BI loss costs account for over 75% of the Basic loss costs and as a result any change to these costs will have a major impact on the rate indication as well as an impact on the MCT ratio…” In 2013.1 RR BCUC.66.3 ICBC states: “ICBC’s loss cost forecast variance has an estimated standard deviation of 3.4%.” In 2013.1 RR BCUC.82.1 ICBC states: “ICBC uses one standard deviation of its quarterly investment returns over the last four years to estimate future expected return volatility. This is considered to be representative of the current investment market environment. Using two standard deviations instead of one would be representative of an unusually large change in the investment markets.” If ICBC’s loss cost forecast variance has a standard deviation of 3.4% or 7% of MCT, why is a 20% margin for rate smoothing more reasonable than a 10% margin? Response:
The proposed 20 percentage point margin for rate smoothing strikes a balance in achieving the
following desirable characteristics:
1) Cover the worst single year of loss cost forecast variances over the past ten years of
history.
2) Recognize an unfavourable loss cost forecast variance gradually into the rate level over
one or more years without putting solvency capital at risk.
3) Limit the likelihood of the Basic capital level falling below the regulatory minimum MCT
ratio of 100% (if the ratio falls below 100%, this would require regulatory intervention and
possibly an additional rate change).
4) Limit the rate impact on customers.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.179.3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Using one standard deviation of loss cost forecast variances (7 percentage points of MCT)
to select the rate smoothing margin would not address items 2 and 3. Please see the
response to information request 2013.2 RR BCUC.180.1 that provides a summary of ICBC’s
recent modeling efforts that supports the proposed 130% MCT solvency target and the
proposed 150% MCT capital management target.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.180.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.180.1 Reference: NEW BASIC CAPITAL MANAGEMENT PLAN Exhibit B-1, Chapter 4, pp. 4-11 to 4-13 Exhibit B-3, 2013.1 RR BCUC.66.6 130% MCT Solvency Target In 2013.1 RR BCUC.66.6, ICBC states: “…the 130% MCT Solvency Target was calculated based on an industry standard risk analysis to estimate the amount of Basic capital that is needed to cover plausible adverse events and still remain above he regulatory minimum of 100% MCT. The Commission accepted that analysis and ICBC does not see any basis to deviate froth the Solvency Target as determined from the risk analysis at this time.” As the risk analysis testing (DCAT testing) used by ICBC to select and recommend a 130% MCT level (which the Commission approved) took into consideration plausible adverse events and their impact on the MCT known at the time, should the DCAT test be updated to take into consideration and integrate the +/-1.5% rate caps change limitation and the restriction on decreases to rates too? If not, why not? (If ICBC has updated the DCAT testing, provide a summary of the findings.) Response:
ICBC recently conducted an internal analysis to review the current Basic insurance solvency
MCT target of 130% and the impact on the proposed capital management target as a result of
the proposed rate smoothing provisions. That review confirmed that the solvency target of
130% continues to be reasonable, and a 20-point MCT margin for rate smoothing is indicated.
ICBC’s risk profile has changed somewhat since filing its Basic capital management target
analysis with the Commission in June 2008 as a result of internal and external factors. ICBC’s
actuaries quantify the potential financial consequences to ICBC under adverse scenarios,
meeting with senior management to better understand and evaluate the risks facing ICBC as a
precursor to developing those plausible adverse scenarios. The scenarios of the 2013 analysis
are consistent with the scenarios that were used in the 2008 analysis and reflect the following
notable changes to the risk environment since the 2008 filing:
Greater volatility in the equity market returns is assumed going forward as a result of the
economic downturn in 2008.
Concerns of high inflation in the short-term are less than in 2008.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.180.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
The risks associated with the adverse development of unpaid claim are ongoing with
different risks emerging from time to time. The actuaries respond to new risks with
appropriate adjustments to their methods and assumptions.
Similar to the analysis filed with the Commission in June 2008, single adverse scenarios were
constructed at the 10% probability level. Table 1 below summarizes the indicated management
targets based on these scenarios. It is the most severe of the 10% scenarios that indicates the
management target.
Table 1 – Indicated Target by Scenario
Plausible Adverse Scenarios
Solvency Target
Management Target
Asset Decline 133% 153%
Adverse Loss Cost 121% 144%
Adverse Unpaid Claims 120% 142%
Unanticipated Inflation 114% 141%
The industry standards for setting capital management targets has evolved since 2008, making
use of stress testing and increasing attention on the use of integrated scenarios in the risk
analysis. Integrated scenarios assume more than one adverse scenarios will happen
simultaneously. ICBC will consider using integrated scenarios in future risk analyses to be
consistent with industry standards; however, this may support the need for an even higher Basic
capital management target going forward.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.180.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.180.2 Reference: NEW BASIC CAPITAL MANAGEMENT PLAN Exhibit B-1, Chapter 4, pp. 4-11 to 4-13 Exhibit B-3, 2013.1 RR BCUC.66.6 130% MCT Solvency Target In 2013.1 RR BCUC.66.6, ICBC states: “…the 130% MCT Solvency Target was calculated based on an industry standard risk analysis to estimate the amount of Basic capital that is needed to cover plausible adverse events and still remain above he regulatory minimum of 100% MCT. The Commission accepted that analysis and ICBC does not see any basis to deviate froth the Solvency Target as determined from the risk analysis at this time.” Explain how the lower bound capping (-1.5%) and restriction on rate decreases would affect the DCAT testing and evaluation of the 130% MCT solvency target? And conversely, explain how the upper bound capping, +1.5%, would affect the DCAT testing and evaluation of the 130% MCT solvency target? Response:
Dynamic capital adequacy testing (DCAT) is the exploration of adverse scenarios and their
impacts on the financial condition of the company. Adverse scenarios include events such as
an unfavourable forecast variance or other event with adverse financial consequences. As
such, adverse scenarios tend to result in higher rate increases than expected, as opposed to
lower, and therefore would tend to trigger the upper bound capping, not the lower bound
capping or the restriction on rate decreases. For this reason, the lower bound capping would
not impact the analysis of the solvency target.
In contrast, an upper bound cap of + 1.5 percentage points would impact the risk analysis of the
capital management target. The adverse financial nature of adverse scenarios will tend to result
in higher rate increases that are more likely to trigger the upper bound capping. In these cases,
rates will be set below costs and capital will be depleted until the rates are later raised enough
to cover costs. The impact on the DCAT analysis is to indicate a higher capital management
target than the solvency target, which does not contemplate rate smoothing.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.181.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.181.1 Reference: NEW BASIC CAPITAL MANAGEMENT PLAN Exhibit B-1, Chapter 4, pp. 4-11 to 4-13 Exhibit B-3, 2013.1 RR BCUC.67.1 20 Percentage Point Margin for Rate Smoothing In 2013.1 RR BCUC.67.1, ICBC presents sections (a), (b), and (c) of the Special Direction IC2 to the BC Utilities Commission, BC Regulation 307/2004, as amended (Special Direction IC2). ICBC states: “ICBC defined the sum of (a) and (b) to be the Solvency Target, and refers to (c) as the margin for rate smoothing.” And (c) is “any additional margin, expressed in percentage points of MCT, consistent with relatively stable and predictable universal compulsory vehicle insurance rates.” Special Direction IC2 section (3) (1) (e) states: “…ensure that increases or decreases in universal compulsory vehicle insurance rates are phased in in such a way that those rates remain relatively stable and predictable.” Given the matter of stable and predictable rates is not new in Special Direction IC2, prior to this rate application, did ICBC include a provision in its MCT target (130 percent) or maintenance provision for item (3) (1) (e)? If so, explain the provision. If not, explain why not. Response:
Prior to this Application, ICBC did not include a provision in its MCT target (130%) for section
(3)(1)(e) of Special Direction IC2 regarding relatively stable and predictable rates. The MCT
target of 130% was established based on an industry standard risk analysis which considered
the impact of plausible adverse scenarios on the Basic capital. None of these plausible adverse
scenarios incorporated a specific provision to maintain relatively stable and predictable rates.
Other components of the Capital Management Plan, such as the maintenance provision and the
capital/build/release provision, were designed to not detract from the requirement to maintain
relatively stable and predictable rates but could not be used to address rate volatility when it
occurred.
The Government directive of May 18, 2010 with respect to Basic Excess Capital approved by
Order in Council 287/10, May 27, 2010 and the Government directive of November 25, 2011
with respect to Basic Rate Stability and Capitalization approved by Order in Council 560/11,
November 30, 2011 enhanced Basic insurance rate stability by adapting the capital build and
release provisions under certain circumstances, but had limited ability to smooth rates. These
limitations were discussed in response to information request 2012.2 RR BCUC.125.2 from the
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.181.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Revenue Requirements Proceeding for the 2012 Policy Year. In that response ICBC explained
that:
…despite the application of best actuarial practices, the inherent uncertainty in estimating loss costs limits the extent to which volatility can be reduced. To achieve more stability and predictability of Basic insurance rates, ICBC would need to take a different approach to capital management. Specifically, ICBC would need to allow capital to accumulate when there are favourable forecast variances, so that when unfavourable forecast variances occur, there are the requisite funds to smoothly realize the Basic insurance rate impact over a period of time. ICBC’s current Capital Management Plan is not adequate for such a purpose, as it was developed with the sole purpose of maintaining the financial health of Basic insurance. The Government directive of May 18, 2010 with respect to Basic Excess Capital approved by Order in Council 287/10, May 27, 2010 and Government directive of November 25, 2011 with respect to Basic Rate Stability and Capitalization approved by Order in Council 560/1, November 30, 2011 were put in place as a way to use capital to enhance Basic insurance rate stability, but these directives have limited ability to smooth through large Basic insurance rate changes. Therefore, a redesign of the capital management framework would be required to improve on the stability and predictability of Basic insurance rates.
Special Direction IC2 was amended by Order in Council 152/13, March 18, 2013, to promote
greater stability and predictability in Basic insurance rates through the use of the +/- 1.5
percentage point rate change band. The overall intent of the amendments is to permit ICBC to
use Basic insurance capital to a greater extent than in the past to manage significant sources of
volatility in Basic insurance rates. ICBC’s proposal to include a further margin of 20 percentage
points in its new capital management target over and above the 130% MCT target used in the
existing Capital Management Plan reflects the fact that, with rate smoothing, additional capital
will be needed to smooth through rate volatility (as per the Government directive of March 19,
2013 with respect to Rate Smoothing approved by Order in Council 153/13, March 18, 2013 and
as specified in the definition of “capital management target” subsection (c) in Special Direction
IC2).
ICBC observes that, despite the introduction of rate smoothing, the original requirement of
phasing in Basic insurance rate changes in such a way as to promote relatively stable and
predictable rates still has application in the context of setting rates. A good example of this is in
the context of rate design changes.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.182.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.182.1 Reference: Capital Management Plan Exhibit B-3, 2013.1 RR BCUC.67.1 ICBC 2007 Revenue Requirements Decision, dated January 9, 2008 Solvency Target and Rate Smoothing Margin ICBC submits that the 130 percent MCT Solvency Target should not be reduced as a result of adding a rate smoothing margin. ICBC further explains that the Solvency Target is in place to protect ICBC from becoming insolvent from adverse volatility that can arise in the insurance business, while the rate smoothing margin is in place to enable the use of capital to absorb rate volatility. “capital management target” means the MCT target, determined in a capital management plan approved by the commission, that is the total of the following: (a) the MCT required under section 3(1)(b) [i.e. 100%]; (b) the margin, expressed in percentage points of MCT, that reflects the corporation’s risk profile in relation to the corporation’s universal compulsory vehicle insurance business and its ability to respond to adverse events that arise from those risks; (c) any additional margin, expressed in percentage points of MCT, consistent with relatively stable and predictable universal compulsory vehicle insurance rates;” (2013.1 RR BCUC.67.1) In the 2007 Revenue Requirements Decision dated January 9, 2008, it states: “The Commission Panel is of the view that it would be important for ICBC to replenish its capital as quickly as possible following such an adverse scenario occurrence. The Commission Panel also recognizes that the severity of such an occurrence and consequential impact on rates can affect the relative stability and predictability of the rates. On balance considering IC2, the Commission considers that the financial strength and stability of the Basic insurance business should be given relatively more weight than maintaining stable and predictable rates. The Commission Panel notes that in the RDA [rate design application], ICBC proposes, with respect to the implementation of actuarially indicated base rates, a rate cap change of 6 percent in any year in the interest of rate stability. Subject to the following, the Basic Insurance Capital Management Plan, as set out in Chapter 6.2 of the Application, is approved.” [Emphasis added] In light of the Special Direction IC2, please confirm that (b) and (c) does not specifically state how much the MCT target should be, and that the Commission has the ability determine the percentage points of MCT in (b) and (c). Response:
ICBC confirms that (b) and (c) of the definition of “capital management target” do not specifically
prescribe MCT values. However, the legislation and past Commission decisions provide
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.182.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
guidance that the target should be higher than 130% MCT. For instance, section 3(1)(b) of
Special Direction IC2 requires that the Commission sets rates for Basic insurance in a way that
will allow ICBC to maintain Basic capital of at least 100% of MCT. In the July 2006 Decision
(please see response to information request 2013.1 RR BCUC.73.1-2 for full quotation), the
Commission indicated that a capital management target for Basic should provide “a reasonable
buffer to decrease the likelihood of falling below the regulatory minimum 100% for the Basic
Insurance business.” In 2008 the Commission accepted a solvency target of 130% MCT ((a)
plus (b)) based on ICBC’s risk profile for Basic insurance and now must determine the additional
margin for rate smoothing as per (c). Given that the rate smoothing framework is adding new
risk to ICBC’s Basic insurance business, it stands to reason that the capital management target
will be materially above 130% MCT. For the proposed new Capital Management Target, 150%
MCT is the value that makes the most sense for the reasons described in the Application.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.182.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.182.2 Reference: Capital Management Plan Exhibit B-3, 2013.1 RR BCUC.67.1 ICBC 2007 Revenue Requirements Decision, dated January 9, 2008 Solvency Target and Rate Smoothing Margin ICBC submits that the 130 percent MCT Solvency Target should not be reduced as a result of adding a rate smoothing margin. ICBC further explains that the Solvency Target is in place to protect ICBC from becoming insolvent from adverse volatility that can arise in the insurance business, while the rate smoothing margin is in place to enable the use of capital to absorb rate volatility. “capital management target” means the MCT target, determined in a capital management plan approved by the commission, that is the total of the following: (a) the MCT required under section 3(1)(b) [i.e. 100%]; (b) the margin, expressed in percentage points of MCT, that reflects the corporation’s risk profile in relation to the corporation’s universal compulsory vehicle insurance business and its ability to respond to adverse events that arise from those risks; (c) any additional margin, expressed in percentage points of MCT, consistent with relatively stable and predictable universal compulsory vehicle insurance rates;” (2013.1 RR BCUC.67.1) In the 2007 Revenue Requirements Decision dated January 9, 2008, it states: “The Commission Panel is of the view that it would be important for ICBC to replenish its capital as quickly as possible following such an adverse scenario occurrence. The Commission Panel also recognizes that the severity of such an occurrence and consequential impact on rates can affect the relative stability and predictability of the rates. On balance considering IC2, the Commission considers that the financial strength and stability of the Basic insurance business should be given relatively more weight than maintaining stable and predictable rates. The Commission Panel notes that in the RDA [rate design application], ICBC proposes, with respect to the implementation of actuarially indicated base rates, a rate cap change of 6 percent in any year in the interest of rate stability. Subject to the following, the Basic Insurance Capital Management Plan, as set out in Chapter 6.2 of the Application, is approved.” [Emphasis added] In light of the Commission’s Decision in January 2008, which approved the existing Basic Insurance Capital Management Plan, and recognizing that ICBC appears to have included the interest of rate stability in the existing Capital Management Plan, would ICBC agree that the Commission had considered some element of rate stability and predictability when the 130 percent MCT target was approved?
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.182.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Response:
The elements of rate stability and predictability were certainly considerations in the Capital
Management Plan as a whole, but the target was selected based on solvency concerns alone.
As discussed in response to the information request 2013.2 RR BCUC.181.1, the industry
financial stress testing used in determining the 130% MCT target did not contemplate holding
rates below costs in order to smooth through adverse rate volatility.
The circumstance described in the excerpt from the January 2008 Decision on Revenue
Requirements (i.e., first underlined sentence quoted in the question) is akin to what ICBC has
phrased as an “extraordinary circumstance” in the context of the proposed new Basic insurance
Capital Management Plan. In the event of the Basic capital level falling below the 100% MCT
regulatory minimum, the Commission recognized that, without a capital infusion, there would be
a need for a rate increase at a particular period in time, which reflected not only the relevant
projected costs for a future policy year, but also a significant additional amount to restore Basic
capital above the regulatory minimum. Both ICBC and the Commission were desirous of
avoiding such a circumstance which would result in less stable and predictable rates.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.182.3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.182.3 Reference: Capital Management Plan Exhibit B-3, 2013.1 RR BCUC.67.1 ICBC 2007 Revenue Requirements Decision, dated January 9, 2008 Solvency Target and Rate Smoothing Margin ICBC submits that the 130 percent MCT Solvency Target should not be reduced as a result of adding a rate smoothing margin. ICBC further explains that the Solvency Target is in place to protect ICBC from becoming insolvent from adverse volatility that can arise in the insurance business, while the rate smoothing margin is in place to enable the use of capital to absorb rate volatility. “capital management target” means the MCT target, determined in a capital management plan approved by the commission, that is the total of the following: (a) the MCT required under section 3(1)(b) [i.e. 100%]; (b) the margin, expressed in percentage points of MCT, that reflects the corporation’s risk profile in relation to the corporation’s universal compulsory vehicle insurance business and its ability to respond to adverse events that arise from those risks; (c) any additional margin, expressed in percentage points of MCT, consistent with relatively stable and predictable universal compulsory vehicle insurance rates;” (2013.1 RR BCUC.67.1) In the 2007 Revenue Requirements Decision dated January 9, 2008, it states: “The Commission Panel is of the view that it would be important for ICBC to replenish its capital as quickly as possible following such an adverse scenario occurrence. The Commission Panel also recognizes that the severity of such an occurrence and consequential impact on rates can affect the relative stability and predictability of the rates. On balance considering IC2, the Commission considers that the financial strength and stability of the Basic insurance business should be given relatively more weight than maintaining stable and predictable rates. The Commission Panel notes that in the RDA [rate design application], ICBC proposes, with respect to the implementation of actuarially indicated base rates, a rate cap change of 6 percent in any year in the interest of rate stability. Subject to the following, the Basic Insurance Capital Management Plan, as set out in Chapter 6.2 of the Application, is approved.” [Emphasis added] Does the new Basic Capital Management Plan contemplate the possibility of the 6 percent cap as noted in the Commission’s findings in the January 9, 2008 Decision? If so, please explain how. If not, why not? Response:
The March 29, 2007 Rate Design Application (2007 Rate Design Application) included among
other items an application to implement actuarially indicated adjustments to the base rates of
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.182.3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
customer groups. As part of that application ICBC included an annual cap of 6 percentage
points per year as a means of phasing in the actuarially indicated base rate adjustments.
Drawing from the 2007 Rate Design Application, the Commission in its January 2008 Decision
on Revenue Requirements approved the capital build and capital release provisions of the
existing Capital Management Plan as follows:
The Commission Panel determines that ICBC should implement a policy which reflects any deficiency in capital available to meet management target MCT ratios being recovered at the rate of 1/5 per year. This policy would be subject to review in the event of a rate impact from this source alone of greater than 6 percent. The Commission Panel also determines, in the interests of symmetry and fairness that any surplus capital should be built into Basic insurance rates as a negative capital build provision at the rate of 1/5 per year, but subject to a 6 percent cap.
ICBC did not specifically take into consideration a 6 percentage point cap in its proposed new
Basic insurance Capital Management Plan because the level of the indicated rate change
depends in a large way on Requirement (B) of Special Direction IC2:
A cap on the capital build provision would only be possible if it raised the indicated rate
change from the rate change to cover costs to above the rate change floor. According to
Requirement (B) the indicated rate change must be at least equal to the rate change
floor. The Commission may choose to cap the extent to which the rate change should
differ from the rate change floor. However, the proposed formula for the capital build
provision currently allows for a maximum of 4 percentage points of rate change (based
on the rule of thumb and assuming a build from a MCT level of 100%). A cap of 6
percentage points would therefore not be a limitation for the capital build provision.
A cap on a potential rate exclusion would only be possible if it reduced the indicated rate
change from the rate change to cover costs to at or below the rate change ceiling in
accordance with Requirement (B) of Special Direction IC2. It is possible for such a rate
exclusion to be in excess of 6 percentage points of rate change (as evidenced by the
current exclusion of the loss cost forecast variance of 6.6 percentage points for the 2013
policy year). The Commission may choose to exclude some or all of a loss cost forecast
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.182.3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
variance as from 2014. The Commission may therefore choose to cap the rate
exclusion at 6 percentage points in a future policy year provided that Requirement (B) is
not violated.
ICBC considers that the rate smoothing framework can and should stand on its own without the
imposition of other criteria such as that referred to in the question.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.183.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.183.1 Reference: NEW BASIC CAPITAL MANAGEMENT PLAN Exhibit B-3, 2013.1 RR BCUC.59.1-2 Non-annual Rate Changes In 2013.1 RR BCUC.59.1-2, ICBC states: “ICBC retains the ability to seek, and the Commission retains the ability to grant, rate changes beyond the “annual rate changes” addressed in Special Direction IC2 to the BC Utilities Commission, BC Regulation 307/2004, as amended (Special Direction IC2). ICBC would consider seeking a Basic insurance rate increase in addition to “annual rate changes” if there were signs that ICBC’s rates and/or capital under rate smoothing was on an unsustainable path.” Does ICBC require Government approval to apply for Basic Insurance rate changes outside the annual timeline of May 31 of each year as set out in Special Direction IC2? Response:
As explained in the response to information request 2013.1 RR BCUC.59.1-2 ICBC retains the
ability to apply for additional rate changes beyond the “annual rate changes” addressed in
Special Direction IC2. ICBC would likely consult with government on this as it explores various
options to address the need for an additional rate change, but it would not be mandatory unless
the capital levels are falling below 100% MCT. ICBC could not avoid an annual rate change
filing by May 31 of each year without an amendment to Special Direction IC2.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.183.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.183.2 Reference: NEW BASIC CAPITAL MANAGEMENT PLAN Exhibit B-3, 2013.1 RR BCUC.59.1-2 Non-annual Rate Changes In 2013.1 RR BCUC.59.1-2, ICBC states: “ICBC retains the ability to seek, and the Commission retains the ability to grant, rate changes beyond the “annual rate changes” addressed in Special Direction IC2 to the BC Utilities Commission, BC Regulation 307/2004, as amended (Special Direction IC2). ICBC would consider seeking a Basic insurance rate increase in addition to “annual rate changes” if there were signs that ICBC’s rates and/or capital under rate smoothing was on an unsustainable path.” To the extent possible, please describe the proposed regulatory process if ICBC seeks a Basic Insurance rate increase in addition to the annual rate changes timeline. Response:
If ICBC were to seek a Basic insurance rate change beyond the “annual rate change”
addressed in Special Direction IC2, this may be done as an additional revenue requirements
application in a particular year, over and above that which is required to be filed by May 31. The
content of the additional revenue requirements application would focus on the circumstances
and related analysis, which have led to the requirement and how ICBC proposes to address the
circumstances. The regulatory process for reviewing such an application would be determined
by the Commission, as is currently the case. Depending on the circumstances, it may or may
not require an expedited process.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.184.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.184.1 Reference: NEW BASIC CAPITAL MANAGEMENT PLAN Exhibit B-3, 2013.1 RR BCUC.81.6; Exhibit B-4, 2013.1 RR PI.1.1 Future Rate Scenarios 2013.1 RR BCUC.81.6, ICBC provides the results for favourable and unfavourable scenarios. How likely does ICBC consider the “Unfavourable” scenario to be? Why? Response:
The favourable and unfavourable scenarios provided in the response to information request
2013.1 RR BCUC.81.6 were constructed with the intent to present scenarios relative to the
current environment, in order to provide readers with an understanding of how these scenarios
could impact future rates. The unfavourable scenario reflects a sustained period of non-
decreasing bodily injury claims frequency (which has not occurred since mid-1990), as well as
added cost pressure from the recent upward shift in the rate of legal representation. ICBC’s
track record of successful claims initiatives to reduce new claims cost pressures, as well as a
favourable prognosis for lower claims frequency going forward, put ICBC’s assessment of the
likelihood of the unfavourable scenario occurring at low.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.184.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.184.2 Reference: NEW BASIC CAPITAL MANAGEMENT PLAN Exhibit B-3, 2013.1 RR BCUC.81.6; Exhibit B-4, 2013.1 RR PI.1.1 Future Rate Scenarios 2013.1 RR BCUC.81.6, ICBC provides the results for favourable and unfavourable scenarios. If the “Unfavourable” scenario is to develop, it may imply close to 30 percent rate increases cumulatively through 2016. Does ICBC consider such an outcome to be unreasonable? Why or why not? What actions would ICBC consider to mitigate the impact on Basic Insurance policyholders? Response:
It should be emphasized that the unfavourable scenario cited is hypothetical and ICBC does not
expect it to occur. That said, ICBC does consider a cumulative rate increase through 2016 in
the range of 30 percent to be of concern, but not unreasonable if cost pressures cannot be
moderated, as rates ultimately must cover costs.
A key benefit of rate smoothing is that it allows ICBC time to address adverse cost pressures,
before deciding whether it must impact customers’ rates, through the deliberate use of capital in
order to set rates below costs temporarily. In the meantime, ICBC would investigate the cause
of the adverse cost pressures and determine whether they can be mitigated or reversed, or
whether there is a permanent shift in the cost structure. If ICBC is successful in mitigating or
reversing the adverse cost pressures, then some, or all, of the excluded portion of prior rate
changes need not be adopted, thereby potentially avoiding a scenario where the accumulation
of four years of rate increases is as large as 30 percent. If ICBC cannot mitigate or reverse the
adverse cost trends, and those adverse cost trends are deemed to be unsustainable, then
legislative or regulatory intervention might be necessary. Again this is a hypothetical scenario
that ICBC does not expect to occur.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.185.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.185.1 Reference: NEW BASIC CAPITAL MANAGEMENT PLAN Exhibit B-3, 2013.1 RR BCUC.81.6 Extraordinary Circumstances In 2013.1 RR BCUC.81.6, ICBC provides the results for favourable and unfavourable scenarios. In the favourable scenario, ICBC states: “This situation would be considered an extraordinary circumstance and ICBC would take action as described in the response to information request 2013.1 RR BCPSO.32.1-2. For this scenario it is assumed that ICBC puts forward a request (and the request is approved) that the rate change floor limitation in year 2015 be removed for this one year only in order to align the indicated rate change with the rate change to cover costs.” The 2013 Rate Smoothing Government Directive states: “If circumstances should arise where, despite the implementation of a capital management plan consistent with the above principles, Basic capital is projected to fall below the regulatory minimum requirement of 100% MCT as determined under Special Direction IC2 to the British Columbia Utilities Commission, then ICBC is directed to report to Treasury Board immediately and develop an appropriate plan to address Basic capital levels in conjunction with Treasury Board.” From 2013.1 RR BCUC.81.6, it appears that extraordinary circumstances may also apply to favourable scenarios where ICBC may put forward a request to Government to have a rate change floor removed temporarily. If so, please clarify how this would be consistent with the 2013 Rate Smoothing Government directive as it only seems to contemplate unfavourable situations where the MCT is projected to fall below 100 percent MCT. Response:
In the response to information request 2013.1 RR BCUC.59.1-2, ICBC described circumstances
where additional action would be required on the part of ICBC and the Commission if the
volatility in ICBC’s costs could not be addressed by rate smoothing alone. The focus in this
response was on such extraordinary circumstances which might require an additional Basic
insurance rate increase outside of the “annual rate changes” contemplated in the rate
smoothing framework established in Special Direction IC2.
However, volatility can also be favourable. One such example was identified in the favourable
scenario describe in response to information request 2013.1 RR BCUC.81.6. In that favourable
scenario, by year 2015 the rate change to cover costs is much lower than the rate change floor
allowed by Requirement (B).
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.185.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
As the framework allows for ICBC to request a Basic insurance rate change in addition to
“annual rate changes”, ICBC would be at liberty to apply outside of the “annual rate change”
application process for a reduction in Basic insurance rates to moderate a situation where the
rate smoothing mechanism sets Basic insurance rates much higher than required to cover
costs.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.186.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.186.1 Reference: NEW BASIC CAPITAL MANAGEMENT PLAN Exhibit B-3, 2013.1 RR BCUC.86.2 Customer Renewal Credit (CRC) In 2013.1 RR BCUC.86.2, ICBC states: “The ability to issue a customer renewal credit (CRC) is planned for implementation in 2016, among the first changes following the initial deployment of ICBC’s new policy administration system (PAS).” Recognizing there is a possibility that policyholders may qualify for the CRC before 2016, does ICBC have an alternative plan if a CRC occurs before 2016? Please describe. Response:
As noted in the Application, Chapter 3, Exhibit G.2, ICBC’s Basic insurance MCT ratio for
December 31, 2013 is projected at 123.2%, well short of the level proposed to trigger a
customer renewal credit (CRC), an MCT ratio of 165%. Further, the 6.6 point loss cost forecast
variance exclusion in the Application means ICBC’s capital position is expected to decline in the
short-term. As a result of these factors, ICBC anticipates that there is only a small likelihood
that sufficient Basic excess capital will build to trigger a CRC before 2016.
Given this small likelihood and the fact that capital could in such circumstances be returned to
customers a relatively short time later, ICBC considered that it is in the best interest of Basic
insurance policyholders to avoid building a CRC capability that is likely to never be used within
the current policy administration system. As discussed in the Application, Chapter 4, paragraph
86, ICBC’s plan in the unlikely event that Basic excess capital were to accrue to the trigger level
of a CRC before 2016, is to request the Commission’s permission to allow excess capital to
remain in ICBC until the CRC payment capability is built within its new policy administration
system. At that time, a CRC would be paid assuming the Basic excess capital remained above
the CRC trigger. The excess capital would be used only for the purposes of paying the eventual
CRC or to smooth rate changes within the rate smoothing framework of the annual revenue
requirements application process.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.187.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.187.1 Reference: INVESTMENTS Exhibit B-3, 2013.1 RR BCUC.91.1-4 Statement of Investment Policy and Procedures (SIPP) In 2013.1 RR BCUC.91.1-4, ICBC states: “The confidential information in the SIPP dated April 15, 2013 is confidential only during the transition period into early 2014. ICBC does not anticipate future reporting on investment performance to reveal confidential information as it is expected that the requirement for confidentiality will have passed by ICBC’s next revenue requirements application.” Since the SIPP dated April 15, 2013 is confidential only during the transition period into early 2014, does this mean the SIPP dated April 15, 2013 will be filed on a non-confidential basis in the 2014 Revenue Requirements application? Response:
Yes, ICBC anticipates filing the current Statement of Investment Policy and Procedures dated
April 15, 2013, and any subsequent updates, on a non-confidential basis in the 2014 Revenue
Requirements Application.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.188.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 8
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.188.1 Reference: INVESTMENTS Exhibit B-3, 2013.1 RR BCUC.92.2 Companies Comparison In 2013.1 RR BCUC.92.2 – Attachment A, ICBC provides information relating to the top ten Canadian P&C companies over $1.6 billion, including an Asset Mix Summary dated December 31, 2012. According to the Asset Mix Summary table, it appears that Bonds and Debentures make up the majority of asset mix (61.79 percent low to 98.57 percent high). If possible, please describe each company’s bond holdings profile, such as average term, bond credit rating, geographic distribution, and sector breakdown. Response:
Yes, bonds and debentures make up the majority of the asset mix for the top ten Canadian
property and casualty companies over $1.6 billion. Detailed below is information describing the
bond portfolio profiles of those companies where information was publically available through
annual reports and financial statements. Information was not readily available for Intact
Insurance Company, Security National Insurance Company, Aviva Insurance Company of
Canada, Chartis Insurance Company of Canada, and Royal & Sun Alliance Insurance Company
of Canada as they are either private companies or private subsidiary companies of a larger
parent company.
Wawanesa Mutual Insurance Company1
Maturity Schedule of fixed-term investments:
Dollars in Thousands $
1 year or less 1 to 5 years 5 to 10 years More than 10 years
December 31, 2012 Total Carrying Value
$114,114 $1,898,725 $1,802,491 $968,733 $4,784,063
2.4% 39.7% 37.7% 20.2% 100.0%
1 The Wawanesa Mutual Insurance Company, Consolidated Financial Statements, December 31, 2012.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.188.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Geographic distribution:
Dollars in Thousands $
Bonds December 31, 2012 Total Carrying (Fair) Value
Canadian $4,061,165 84.9%
Foreign $722,898 15.1%
Totals $4,784,063 100.0%
Sector breakdown:
Dollars in Thousands $
Bonds December 31, 2012 Carrying Value
Federal $1,481,548 31.0%
Provincial $914,125 19.1%
Municipal $122,158 2.6%
Corporate rated A or higher $1,836,530 38.4%
Corporate rated below A $429,702 8.9%
Totals $4,784,063 100.0%
Bond credit rating:
Dollars in Thousands $
Credit rating December 31, 2012 Carrying Value %
AAA $1,808,699 37.8%
AA $923,416 19.3%
A $1,622,245 33.9%
BBB $425,530 8.9%
Below BBB $4,173 0.1%
Totals $4,784,063 100.0%
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.188.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 3 of 8
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Genworth Financial Mortgage Insurance Company Canada2 Maturity Schedule of fixed-term investments:
Dollars in Thousands $
Within 1 year 1 to 3 years 3 to 5 years 5 to 10
years Over 10 years
December 31, 2012 Total
Carrying Value
$453,867 $1,094,967 $961,246 $829,674 $484,134 $3,823,888 11.9% 28.6% 25.1% 21.7% 12.7% 100.0%
Bond credit rating:
Dollars in Thousands $
Credit rating December 31, 2012 Carrying Value %
AAA $1,109,865 29.0%
AA $1,252,399 32.8%
A $1,288,958 33.7%
BBB $172,666 4.5%
Totals $3,823,888 100.0%
2 Genworth MI Canada Inc., 2012 Financial Report.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.188.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 4 of 8
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Sector breakdown:
Dollars in Thousands $
December 31, 2012 Carrying Value
Short-term investments: Canadian federal government treasury bills $90,014 2.3%
Government bonds and debentures
Canadian federal government $748,292 19.6%
Canadian provincial government $743,921 19.5%
Corporate bonds and debentures:
Financial $1,171,976 30.7%
Energy $314,880 8.2%
Infrastructure $259,844 6.8%
All other sectors $429,936 11.2%
Asset-backed bonds and debentures $65,025 1.7%
Totals $3,823,888 100.0%
Co-operators General Insurance Company3
Maturity Schedule of fixed-term investments:
Dollars in Thousands $
< 1 year 1 to 3 years 4 to 5 years 6 to 10 years
> 10 years
December 31, 2012 Total
Carrying Value $225,145 $734,631 $606,164 $850,289 $247,199 $2,663,428
8.4% 27.6% 22.8% 31.9% 9.3% 100.0%
3 Co-operators General Insurance Company, Annual Report 2012.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.188.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 5 of 8
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Bond credit rating distribution based on carrying value as at December 31, 2012:
Credit rating %
AAA 35.9%
AA 23.8%
A 32.8%
BBB 6.9%
Below BBB 0.6%
Geographic distribution:
“It is diversified by industry sector and issuer, with 83.1% of the portfolio in Canadian holdings.”4
Sector breakdown:
Dollars in Thousands $
December 31, 2012 Carrying Value
Federal $ 712,600 26.8%
Provincial 711,611 26.7%
Municipal 122,159 4.6%
Corporate 1,114,009 41.8%
Co-operative 3,049 0.1%
Totals $2,663,428 100.0%
4 Co-operators General Insurance Company, Annual Report 2012, Management’s Discussion and Analysis, page 18.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.188.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Economical Insurance Company5
Maturity Schedule of fixed-term investments:
Dollars in Thousands $
Less than 1 year
1 to 5 years
6 to Ten years
10 years +
December 31, 2012 Total Fair
Value
FVTPL6 Bonds $65,063 $1,923,162 $42,413 $2,030,638 AFS7 Bonds $39,465 $263,004 $643,506 $85,288 $1,031,263
Total Bonds $104,528 $2,186,166 $685,919 $85,288 $3,061,901 3.4% 71.4% 22.4% 2.8% 100.0%
Bond credit rating:
Dollars in Millions $
Credit rating December 31, 2013 Fair Value %
AAA 1,956.2 63.9%
AA 302.8 9.9%
A 605.8 19.8%
BBB 176.5 5.8%
BB or not rated 20.6 0.6%
Totals 3,061.9 100.0%
5 Economical Insurance Company, 2012 Annual Report. 6 Fair Value Through Profit or Loss. 7 Available for Sale.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.188.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 7 of 8
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Geographic distribution and Sector breakdown:
The annual report does not clearly state the Company’s geographic distribution.
Dollars in Millions $
December 31, 2012 Fair Value
Government $2,180.2 71.2%
Corporate $881.7 28.8%
Totals $3,061.9 100.0%
Dominion of Canada General Insurance Company8
Maturity Schedule of fixed-term investments:
Dollars in Thousands $
Less than one year
One to three years
Three to five years
Five to ten years
Over 10 years
December 31, 2012 Fair Value
$272,194 $660,612 $574,920 $464,382 $100,152 $2,072,260
13.1% 32.0% 27.7% 22.4% 4.8% 100.0%
Bond credit rating:
Dollars in Thousands $
Credit rating December 31, 2012 Fair Value %
AAA $391,935 19.0%
AA $566,538 27.3%
A $936,981 45.2%
BBB $176,806 8.5%
Totals $2,072,260 100.0%
8 The Dominion of Canada General Insurance Company, Annual Report 2012.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.188.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 8 of 8
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Geographic distribution and Sector breakdown:
The annual report does not clearly state the Company’s geographic distribution. It does appear
that the majority of the bonds are in Canada.
Dollars in Thousands $
December 31, 2012 Fair Value
Bonds and debentures issued or guaranteed by:
Canadian federal government $330,732 16.0%
Canadian provincial and municipal governments
$448,292 21.6%
Canadian corporate bonds and debentures by industry sectors:
Consumer discretionary $2,108 0.1%
Consumer staples $17,822 0.9%
Energy $15,927 0.7%
Financial services $920,857 44.4%
Industrials $30,855 1.5%
Infrastructure $184,024 8.9%
Utilities $121,643 5.9%
Totals $2,072,260 100.0%
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.189.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.189.1 Reference: INVESTMENTS Exhibit B-3, 2013.1 RR BCUC.95.1 Risk-Free Rate In 2013.1 RR BCUC.95.1, ICBC quotes page 36 of the September 2009 Amended Application for a Streamlined Regulatory Process: “The formula for forecasting the yield on the equity portion of the strategic asset mix (consisting of Canadian equity, US equity and Europe, Australia, and Far-East equity) is determined from the average 30-year Government of Canada bond yield calculated from the multi-dealer survey plus a market equity risk premium as determined by the Commission.” [Emphasis added] The Commission accepted this approach in its April 2010 Decision on the Streamlined Regulatory Process. In 2013.1 RR BCUC.95.1, ICBC further states: “ICBC acknowledges that the Commission-approved formula specifies that ICBC should change the market equity risk premium in concert with future Commission decisions related to the annual benchmark low-risk utility return on equity for Commission-regulated utilities, but was silent regarding changes to the risk-free rate.” [Emphasis added] When the Commission approved the formula, would ICBC agree that the Commission has approved the methodology of using “the average 30-year Government of Canada bond yield calculated from the multi-dealer survey”? If not, please explain. Response:
Yes, ICBC agrees that the Commission has approved a methodology that uses the average 30-
year Government of Canada bond yield calculated from the multi-dealer survey.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.190.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.190.1 Reference: INVESTMENTS Exhibit B-3, 2013.1 RR BCUC.95.6 Risk-Free Rate In 2013.1 RR BCUC.95.6 ICBC states: “ICBC plans to apply in the 2014 revenue requirements application for a revised New Money Rate formula and a Yield on Basic Equity formula that will align the risk-free rate assumption used in the Application with the risk free rate adopted in the May 10, 2013 Decision on the Commission’s Generic Cost of Capital Proceeding Stage 1. In addition, the New Money Rate formula will be reviewed to account for changes in the strategic asset mix that impact the yield expected on investment assets in PY 2014.” Please explain how ICBC has calculated the risk-free rate in the last two Revenue Requirements applications. Response:
In the last two revenue requirements applications ICBC has used the average 30-year
Government of Canada bond yield calculated from the multi-dealer survey to calculate its risk-
free rate.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.190.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.190.2 Reference: INVESTMENTS Exhibit B-3, 2013.1 RR BCUC.95.6 Risk-Free Rate In 2013.1 RR BCUC.95.6 ICBC states: “ICBC plans to apply in the 2014 revenue requirements application for a revised New Money Rate formula and a Yield on Basic Equity formula that will align the risk-free rate assumption used in the Application with the risk free rate adopted in the May 10, 2013 Decision on the Commission’s Generic Cost of Capital Proceeding Stage 1. In addition, the New Money Rate formula will be reviewed to account for changes in the strategic asset mix that impact the yield expected on investment assets in PY 2014.” Please confirm that the anticipated proposals of: (i) the risk-free rate assumption; and (ii) the New Money Rate formula to account for changes in the strategic asset mix, are two separate proposals. Response:
ICBC agrees that the anticipated proposals for (i) the risk-free rate assumption and (ii) the
formulae to account for changes in the strategic asset mix, can be viewed as two separate
proposals. In the Application, Chapter 5, ICBC proposed to use the 3.8% floor for the risk-free
rate in alignment with the May 10, 2013 Decision on the Commission’s Generic Cost of Capital
Proceeding Stage 1 for the purpose of this Application only, as the estimated average 30-year
Government of Canada bond yield for policy year 2013 is 3.1%. In the response to information
request 2013.1 RR BCUC.95.6 ICBC indicated that it plans to apply in the 2014 Revenue
Requirements Application for both (i) and (ii).
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.190.3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.190.3 Reference: INVESTMENTS Exhibit B-3, 2013.1 RR BCUC.95.6 Risk-Free Rate In 2013.1 RR BCUC.95.6 ICBC states: “ICBC plans to apply in the 2014 revenue requirements application for a revised New Money Rate formula and a Yield on Basic Equity formula that will align the risk-free rate assumption used in the Application with the risk free rate adopted in the May 10, 2013 Decision on the Commission’s Generic Cost of Capital Proceeding Stage 1. In addition, the New Money Rate formula will be reviewed to account for changes in the strategic asset mix that impact the yield expected on investment assets in PY 2014.” If ICBC in this Application is calculating the New Money Rate and Yield on Basic Equity on the basis of the risk-free rate found in the May 10, 2013 Decision on the Generic Cost of Capital Proceeding Stage 1, wouldn’t this be considered as ICBC’s partial proposal to revise the New Money Rate and Yield on Basic Equity or a departure from past practice? Response:
In this Application the New Money Rate and Yield on Basic Equity were both calculated on the
basis of the risk-free rate found in the May 10, 2013 Decision on the Commission’s Generic
Cost of Capital Proceeding Stage 1 (May 2013 Decision) and this is a departure from past
practice. The approved formulae for both the New Money Rate and the Yield on Basic Equity
calculate the forecasted yield on the equity portion of the strategic asset mix using the average
30-year Government of Canada bond yield calculated from the multi-dealer survey plus a
market equity risk premium as determined by the Commission. In the Application, Chapter 5,
ICBC explained that it made this change as it agrees with the Commission statement that
“current monetary policy is historically unusual and subsequently results in the possibility of a
higher effective risk free rate.”
In the interest of regulatory efficiency, the Commission can consider the use of the risk-free rate
found in the May 2013 Decision to be a partial proposal for this proceeding. In such a case
ICBC would propose to use the floor of 3.8% for the risk-free rate while the Commission’s May
2013 Decision is in effect. Should the Commission determine this is the most appropriate
approach ICBC’s proposal in the 2014 Revenue Requirement Application will focus on changes
to the New Money Rate and Yield on Basic Equity formulae due to changes in the strategic
asset mix. Otherwise, ICBC will make one proposal in the 2014 Revenue Requirements
Application to address both the risk-free rate and the impact of changes in the strategic asset
mix on these formulae.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.191.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.191.1 Reference: CLAIMS COST MANAGEMENT Exhibit B-1, Chapter 2, p. 2-3 Exhibit B-3, 2013.1 RR BCUC.6.1 and 6.3.1 Accident Benefits (AB) Initiatives With regard to the new Claims hierarchy and functional organizational model, in 2013.1 RR BCUC.6.1 ICBC states: “ICBC believes that increased utilization is resulting in higher accident benefits severity, and easier access to benefits is increasing accident benefits frequency.” In 2013.1 RR BCUC.6.3.1 ICBC states: “ICBC has given recognition to the anticipated favourable impact of the AB streamlined processes in estimating the ultimate BI claims costs for policy year 2013. It is assumed that this initiative along with other claims initiatives will offset the increasing cost pressures associated with represented claims.” In light of 2013.1 RR BCUC.6.1, is ICBC suggesting that if ICBC did not implement the new Claims hierarchy and functional organizational model, or maintained status quo, the accident benefits costs could have been lower? Please explain. Response:
As noted in the response to information request 2013.1 RR BCUC.6.1, the new Claims
hierarchy and functional organizational model are important changes that facilitate timely access
to accident benefits.
ICBC believes that the streamlined processes for accident benefits claims have created earlier
access to and increased utilization of these benefits by claimants, and will positively affect
customer experience and help reduce bodily injury claims costs. Without these efforts, the
accident benefits costs used in the Application might have been lower, but the bodily injury
claims costs would be higher, as noted in the response to information request 2013.1 RR
BCUC.6.3.1, filed in the response to information request 2013.1 RR BCUC.6.3.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.191.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.191.2 Reference: CLAIMS COST MANAGEMENT Exhibit B-1, Chapter 2, p. 2-3 Exhibit B-3, 2013.1 RR BCUC.6.1 and 6.3.1 Accident Benefits (AB) Initiatives With regard to the new Claims hierarchy and functional organizational model, in 2013.1 RR BCUC.6.1 ICBC states: “ICBC believes that increased utilization is resulting in higher accident benefits severity, and easier access to benefits is increasing accident benefits frequency.” In 2013.1 RR BCUC.6.3.1 ICBC states: “ICBC has given recognition to the anticipated favourable impact of the AB streamlined processes in estimating the ultimate BI claims costs for policy year 2013. It is assumed that this initiative along with other claims initiatives will offset the increasing cost pressures associated with represented claims.” Are the enhanced access and speed of access to professional treatment consistent with the policies of other auto insurers and does ICBC have a strategy on how to use these features to gain customer support and reduce the legal representation rate? Please explain. Response:
ICBC’s processes for access to benefits are consistent with other automobile insurers.
ICBC is responding to customer needs by providing these benefits in a timely manner so they
are able to initiate their rehabilitation and recovery from injury as soon as possible without
incurring additional expenses.
ICBC’s strategy is to build effective relationships with stakeholders to maximize the quality and
benefit of services that support an improved customer experience and perception of ICBC,
through improved standardization of services and fees. ICBC’s focus is to improve customer
communication and to build trust with customers by understanding what is important to them
and to consistently meet their expectations in areas that matter most.
By providing earlier and enhanced access to treatment, ICBC believes that this will lead to an
improved customer experience and will help manage increasing bodily injury costs associated
with legal representation.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.192.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.192.1 Reference: CLAIMS COST MANAGEMENT Exhibit B-1, Chapter 6, pp. 6-1 and 6-2 Exhibit B-3-1, 2013.1 RR BCUC.103.1, 103.1.1 Initiatives and Best Practices; Bodily Injury Cost Increases-BI Severity In 2013.1 RR BCUC.103.1.1 ICBC states: “Despite the differences inherent in tort system in which ICBC operates, there are similarities with other jurisdictions in terms of operational efficiencies, call centre functions, material damage handling, accident benefit calculation and administration, and customer service standards.” Has ICBC compared its BI frequency and severity or claims costs to insurers operating in other jurisdictions with similar full tort systems in North America, Western Europe, or other Commonwealth countries? If not, why not? If so, please discuss. What best practices has ICBC identified from these jurisdictions? Response: Regarding comparison of statistics, ICBC does not regularly compare bodily injury (BI) severity
statistics with other jurisdictions, due to meaningful differences in the insurance systems in
place. For example, differences in tort eligibility, basic policy limits, and the level of uninsured
drivers in different jurisdictions would introduce distortions to a simple comparison of BI
severities. ICBC is not aware of another jurisdiction where data is made available on a basis
that would enable an appropriate comparison of BI severity.
ICBC does compare BI claim frequency trends with other comparable jurisdictions for which
data are made available on a comparable basis. This includes Washington, Oregon, and
Alberta, as discussed in the response to information request 2013.1 RR BCUC.24.4. As has
been described, it is useful to compare trends with these jurisdictions, and each of them exhibit
frequency trends that are similar to BC.
ICBC monitors current and emerging best practices in other jurisdictions, and considers how
these best practices may apply in BC. ICBC’s processes for access to benefits are consistent
with other automobile insurers who have identified uncomplicated or low-complexity types of
injury claims which are streamlined with expedited or pre-approval of fees, up to a limited
number of treatments. These streamlined practices for straightforward claims processing allow
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.192.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
for improved efficiency, enable resources to be allocated to the more complex cases, and are
intended to improve customer experience. Please also see the response to information request
2013.2 RR BCUC.192.2.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.192.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.192.2 Reference: CLAIMS COST MANAGEMENT Exhibit B-1, Chapter 6, pp. 6-1 and 6-2 Exhibit B-3-1, 2013.1 RR BCUC.103.1, 103.1.1 Initiatives and Best Practices; Bodily Injury Cost Increases-BI Severity In 2013.1 RR BCUC.103.1.1 ICBC states: “Despite the differences inherent in tort system in which ICBC operates, there are similarities with other jurisdictions in terms of operational efficiencies, call centre functions, material damage handling, accident benefit calculation and administration, and customer service standards.” Please elaborate on what similarities ICBC shares with other jurisdictions in terms of “operational efficiencies”? Response:
The administration of an insurance claim is similar regardless of jurisdiction, loss covered, or
coverage type. ICBC shares similarities with other insurers in claims intake, human resources,
coverage validation, claim investigation, and payment processes. ICBC monitors current and
emerging best practices, including potential “operational efficiencies”, and considers how these
best practices may apply in BC. Examples of industry standards and best practices adopted by
ICBC include segmentation and, through the Transformation Program, implementation of an
electronic claims management system. In addition, ICBC uses Service Quality Measurement
(SQM) Group Inc., which provides call centre benchmarking, tracking, and other services.
ICBC’s Claims Contact Centre has been awarded SQM’s World Class Call Centre Certification
every year since 2009.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.193.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.193.1 Reference: CLAIMS COST MANAGEMENT Exhibit B-3-1, 2013.1 RR BCUC.103.1 Loss Cost - Ontario In 2013.1 RR BCUC.103.1, Attachment A, ICBC shows Loss Costs for other jurisdictions. Please explain the circumstances that have led to the decline in Ontario’s Loss Cost since 2010. Were there any significant changes? Response:
There were a number of automobile insurance reforms in Ontario that became effective on
September 30, 2010. One of the reforms was the new Statutory Accident Benefits Schedule
(SABS), under Ontario Regulation 34/10, which restricted and reduced accident benefits to
serious, non-catastrophic claims. These reforms included:
Cap on assessment expenses for insurers.
Reduction in the mandatory coverage portion of medical rehabilitation and attendant
care benefits.
Refer to Report on the Five Year Review of Automobile Insurance1 for the full report and
recommendation on the old SABS by the Financial Services Commission of Ontario (FSCO).
Refer to Changes to Ontario Automobile Regulation2 for a summary of the automobile reforms
that came into effect on September 30, 2010.
1 http://www.fsco.gov.on.ca/en/auto/5yr-review/Documents/FiveYearReviewReport.pdf.
2 http://www.fsco.gov.on.ca/en/auto/autobulletins/2010/Pages/a-01_10.aspx.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.194.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.194.1 Reference: CLAIMS COST MANAGEMENT Exhibit B-1, Exhibit B.0.2, p. 5 Exhibit B-4, 2013.1 RR BCPSO.23.1 Accident Benefits Frequency In 2013.1 RR BCPSO.23.1, ICBC provides Figure 3 to compare Accident Benefits (AB) frequency in BC, Ontario, and the Maritimes. What accounts for the large discrepancy in AB frequency between BC and the other provinces? Response:
As discussed in the response to information request 2013.1 RR BCUC.24.4, ICBC’s claim
frequencies include both claims with and without payments. The data provided by the Alberta
Automobile Insurance Rate Board and the General Insurance Statistical Agency only provides
claims with payments, which creates a difference in the magnitude of frequency between
provinces.
In addition to the difference in claims data used to calculate the frequency statistic, BC also has
a higher frequency of property damage liability claims than the other provinces shown in the
response to information request 2013.1 RR BCPSO.23.1, which suggests a higher crash rate. It
is therefore intuitive that BC also has a higher frequency of accident benefit claims.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.195.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.195.1 Reference: CLAIMS COST MANAGEMENT Exhibit B-1, Chapter 6, pp. 6-7 and 6-8 Exhibit B-3-1, 2013.1 RR BCUC.105.2, 107.2, 111.3 Customer Experience & Fraud In 2013.1 RR BCUC.105.2, ICBC states, in regards to bodily injury cost increases: “… the willingness by some treatment providers to continue treatments that may not be effective or warranted can also play an enabling role.” In 2013.1 RR BCUC.107.2, ICBC states that the new organizational model gives the customer “quicker access to an available resource regardless of where the customer lives and more convenient options to deal with their claim such as email or telephone.” In 2013.1 RR BCUC.111.3, ICBC states: “ICBC estimates 10 to 15% of insurance claims contain an element of fraud or exaggeration, which is consistent with industry estimates.” In 2013.1 RR BCUC.111.3, ICBC provided a table showing the total numbers of actual BI investigations undertaken by the Special Investigations Unit (SIU) in the last five years. The total numbers of actual BI investigations undertaken are further broken down between SIU (BI) and Cyber. In 2013.1 RR BCUC.111.3, ICBC states: “During these five years, ICBC piloted the Intelligence and Cyber Unit and then made it a permanent work unit in 2011.” Does ICBC consider ineffective or non-warranted treatment from treatment providers to be fraud? Please explain how ICBC prevents or mitigates the incentive for treatment providers to “over” treat customers, in light of ICBC’s recent efforts to make access to treatment faster and less burdensome with prompt activation of accident benefits? Response:
ICBC does not equate the provision of ineffective or non-warranted treatment with fraud.
However, if there are suspicions of intent to defraud, ICBC’s Special Investigations Unit will
investigate the vendor or stakeholder conduct.
ICBC seeks to work with medical stakeholders to create improved consistency in treatment
outcomes and customer experience. ICBC believes that in the majority of cases, quicker
access to treatment, relief from financial burden, and return to normal activity can promote
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.195.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
quicker recovery. In other cases where treatment duration is prolonged or appears to be
ineffective, ICBC will consult with the treating therapist and may involve the customer’s
physician in discussing treatment plans and desired outcomes. Where warranted, ICBC will
request a medical evaluation from a non-treating specialist to provide a medical opinion on the
course of treatment required.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.195.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.195.2 Reference: CLAIMS COST MANAGEMENT Exhibit B-1, Chapter 6, pp. 6-7 and 6-8 Exhibit B-3-1, 2013.1 RR BCUC.105.2, 107.2, 111.3 Customer Experience & Fraud In 2013.1 RR BCUC.105.2, ICBC states, in regards to bodily injury cost increases: “… the willingness by some treatment providers to continue treatments that may not be effective or warranted can also play an enabling role.” In 2013.1 RR BCUC.107.2, ICBC states that the new organizational model gives the customer “quicker access to an available resource regardless of where the customer lives and more convenient options to deal with their claim such as email or telephone.” In 2013.1 RR BCUC.111.3, ICBC states: “ICBC estimates 10 to 15% of insurance claims contain an element of fraud or exaggeration, which is consistent with industry estimates.” In 2013.1 RR BCUC.111.3, ICBC provided a table showing the total numbers of actual BI investigations undertaken by the Special Investigations Unit (SIU) in the last five years. The total numbers of actual BI investigations undertaken are further broken down between SIU (BI) and Cyber. In 2013.1 RR BCUC.111.3, ICBC states: “During these five years, ICBC piloted the Intelligence and Cyber Unit and then made it a permanent work unit in 2011.” Does ICBC consider that claimants are more likely to exaggerate or attempt a fraudulent claim when they deal with an adjuster via email or telephone, rather than face to face? Why or why not? If yes, what impact does ICBC expect the transformation program to have on the percentage of fraudulent or exaggerated claims? Please explain. Response:
The potential for exaggerated and fraudulent claims will always exist regardless if the claim is
adjudicated via e-mail, telephone, or face to face. Those who are intent on exaggerating a
claim or committing fraud will modify their methods regardless of how a claim is handled.
ICBC must balance the need to combat fraud and exaggerated claims while improving customer
experience and working to reduce representation rates to control overall claims costs. While it
is possible opportunistic fraud may be more easily attempted by e-mail or telephone, capabilities
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.195.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
delivered by Claims Transformation will enhance ICBC’s ability to mitigate the risk of fraudulent
claims by improving data collection quality and integrity, ensuring the consistent application of
best practices and file handling protocols, and increasing the focus on claims risk. Once the
system is implemented, ICBC will begin to collect data that will be used to enhance fraud
indicators with the intent of identifying suspicious files earlier in the claim process. This process
will take some time to fully realize as data needs to be built up in the system. Once the new
claims system is fully implemented, improved data collection capabilities will allow ICBC, over
time, to better track potentially suspicious behaviour regardless of whether an individual is
making a claim or involved in claims in other ways.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.195.3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.195.3 Reference: CLAIMS COST MANAGEMENT Exhibit B-1, Chapter 6, pp. 6-7 and 6-8 Exhibit B-3-1, 2013.1 RR BCUC.105.2, 107.2, 111.3 Customer Experience & Fraud In 2013.1 RR BCUC.105.2, ICBC states, in regards to bodily injury cost increases: “… the willingness by some treatment providers to continue treatments that may not be effective or warranted can also play an enabling role.” In 2013.1 RR BCUC.107.2, ICBC states that the new organizational model gives the customer “quicker access to an available resource regardless of where the customer lives and more convenient options to deal with their claim such as email or telephone.” In 2013.1 RR BCUC.111.3, ICBC states: “ICBC estimates 10 to 15% of insurance claims contain an element of fraud or exaggeration, which is consistent with industry estimates.” In 2013.1 RR BCUC.111.3, ICBC provided a table showing the total numbers of actual BI investigations undertaken by the Special Investigations Unit (SIU) in the last five years. The total numbers of actual BI investigations undertaken are further broken down between SIU (BI) and Cyber. In 2013.1 RR BCUC.111.3, ICBC states: “During these five years, ICBC piloted the Intelligence and Cyber Unit and then made it a permanent work unit in 2011.” With respect to the estimate of the percentage of claims containing an element of fraud or exaggeration, is ICBC also able to provide an estimated range of the associated total dollar amounts for these elements? If yes, please provide the information. If not, please explain why not. Response:
ICBC has not quantified the dollar amount associated with fraudulent or exaggerated claims.
The limitations of current systems do not provide meaningful information that would support
measurement without a labour intensive process of manual file reviews.
ICBC assigns resources to support the prevention and detection of fraud as a means of
managing claims costs. The focus for the Special Investigation Unit (SIU) is to support the
Claims Division in managing claims costs by providing information and training to adjusters to
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.195.3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
improve claims investigation and claims evaluation processes, as well as conducting more in-
depth investigations that lead to the recommendation of either denial of a claim or potential
criminal charges.
As means to assess the SIU’s effectiveness, ICBC uses indicators such as number of referrals,
investigations with actionable results, criminal charges laid, as well as feedback from adjusting
staff. Although ICBC is unable to accurately quantify the claims cost benefits, ICBC believes
that the SIU resources are successfully supporting the business priority of managing claims
costs and that they serve as a strong deterrence factor for fraudulent or exaggerated claims.
Please see the response to information request 2013.2 RR BCPSO.6.2.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.195.4 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.195.4 Reference: CLAIMS COST MANAGEMENT Exhibit B-1, Chapter 6, pp. 6-7 and 6-8 Exhibit B-3-1, 2013.1 RR BCUC.105.2, 107.2, 111.3 Customer Experience & Fraud In 2013.1 RR BCUC.105.2, ICBC states, in regards to bodily injury cost increases: “… the willingness by some treatment providers to continue treatments that may not be effective or warranted can also play an enabling role.” In 2013.1 RR BCUC.107.2, ICBC states that the new organizational model gives the customer “quicker access to an available resource regardless of where the customer lives and more convenient options to deal with their claim such as email or telephone.” In 2013.1 RR BCUC.111.3, ICBC states: “ICBC estimates 10 to 15% of insurance claims contain an element of fraud or exaggeration, which is consistent with industry estimates.” In 2013.1 RR BCUC.111.3, ICBC provided a table showing the total numbers of actual BI investigations undertaken by the Special Investigations Unit (SIU) in the last five years. The total numbers of actual BI investigations undertaken are further broken down between SIU (BI) and Cyber. In 2013.1 RR BCUC.111.3, ICBC states: “During these five years, ICBC piloted the Intelligence and Cyber Unit and then made it a permanent work unit in 2011.” Cyber investigations increased in the years from 2008 to 2012, i.e. 488 to 1,690. Please discuss the factors that drove these increases. Is the increase in this trend continuing in 2013? Please explain. Response:
The communication forum of social networking, internet, blogging, and websites has gained
mainstream acceptance and immense popularity as the number of people using these forums
continues to expand every year.
The probative value of information people place on these various forums can assist ICBC in
determining if an injury claim is being exaggerated, is consistent with what a person has stated
on their claim, or if they are participating in activities they told their medical practitioner they
could not do. As the number of people accessing the internet continues, ICBC will continue to
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.195.4 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
increase its investigative capabilities to verify the legitimacy of injury claims. Furthermore, with
increased training provided by dedicated Special Investigations Unit personnel to identify
potentially suspicious claims, ICBC has seen an increase in adjuster referrals to the Intelligence
and Cyber Unit.
ICBC anticipates cyber investigations will continue to increase. More resources will be
dedicated to this type of investigation, as required, in order to effectively manage rising claims
costs.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.195.5 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.195.5 Reference: CLAIMS COST MANAGEMENT Exhibit B-1, Chapter 6, pp. 6-7 and 6-8 Exhibit B-3-1, 2013.1 RR BCUC.105.2, 107.2, 111.3 Customer Experience & Fraud In 2013.1 RR BCUC.105.2, ICBC states, in regards to bodily injury cost increases: “… the willingness by some treatment providers to continue treatments that may not be effective or warranted can also play an enabling role.” In 2013.1 RR BCUC.107.2, ICBC states that the new organizational model gives the customer “quicker access to an available resource regardless of where the customer lives and more convenient options to deal with their claim such as email or telephone.” In 2013.1 RR BCUC.111.3, ICBC states: “ICBC estimates 10 to 15% of insurance claims contain an element of fraud or exaggeration, which is consistent with industry estimates.” In 2013.1 RR BCUC.111.3, ICBC provided a table showing the total numbers of actual BI investigations undertaken by the Special Investigations Unit (SIU) in the last five years. The total numbers of actual BI investigations undertaken are further broken down between SIU (BI) and Cyber. In 2013.1 RR BCUC.111.3, ICBC states: “During these five years, ICBC piloted the Intelligence and Cyber Unit and then made it a permanent work unit in 2011.” Did the increase in Cyber investigations lead to the decision to make the Intelligence and Cyber Unit a permanent work unit in 2011? What other factors, if any, led to this decision? Response:
The decision to make the Intelligence and Cyber Unit a permanent work unit was based on the
increasing number of adjuster referrals, the number and quality of actionable investigations
conducted by the unit during the pilot phase, as well as greater popularity, acceptance and
usage of social networking, internet, blogging, and websites.
Please see the response to information request 2013.2 RR BCUC.195.4 for additional
information.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.195.6 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.195.6 Reference: CLAIMS COST MANAGEMENT Exhibit B-1, Chapter 6, pp. 6-7 and 6-8 Exhibit B-3-1, 2013.1 RR BCUC.105.2, 107.2, 111.3 Customer Experience & Fraud In 2013.1 RR BCUC.105.2, ICBC states, in regards to bodily injury cost increases: “… the willingness by some treatment providers to continue treatments that may not be effective or warranted can also play an enabling role.” In 2013.1 RR BCUC.107.2, ICBC states that the new organizational model gives the customer “quicker access to an available resource regardless of where the customer lives and more convenient options to deal with their claim such as email or telephone.” In 2013.1 RR BCUC.111.3, ICBC states: “ICBC estimates 10 to 15% of insurance claims contain an element of fraud or exaggeration, which is consistent with industry estimates.” In 2013.1 RR BCUC.111.3, ICBC provided a table showing the total numbers of actual BI investigations undertaken by the Special Investigations Unit (SIU) in the last five years. The total numbers of actual BI investigations undertaken are further broken down between SIU (BI) and Cyber. In 2013.1 RR BCUC.111.3, ICBC states: “During these five years, ICBC piloted the Intelligence and Cyber Unit and then made it a permanent work unit in 2011.” With respect to the total number of actual BI investigations, please show the success rate where ICBC has actually identified fraudulent activities or claims. Response:
ICBC’s Special Investigation Unit (SIU) success is in its commitment to increasing identification,
investigation, and deterrence of fraud as evidenced by the total number of investigations.
Because those who perpetrate fraud are focused on remaining undetected, it is very challenging
to quantify identified fraudulent activities.
In order to better focus resources and accountabilities on specific business needs and to
leverage unique expertise, in 2010 SIU separated accountability and reporting into two distinct
areas; Claims and Driver Licensing. While Driver Licensing resources were able to focus on
combating identity theft (a significant corporate responsibility), Claims was able to allocate
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.195.6 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
resources to align with the claims functional organizational model with the intent of reducing
injury claims costs. SIU has been realigned to mirror the functional organizational model with
dedicated SIU teams working with specific functional streams, which allows for better
segmentation, expertise and assessment of fraudulent and exaggerated claims.
Because fraud charges require a higher standard of proof, a significant amount of time and
resources must be expended before the Crown will accept a recommendation of criminal fraud
charges. In 2013, resources for ICBC-related criminal investigations were reallocated to help
support adjusters with reducing overall bodily injury claims costs. SIU’s authority to recommend
criminal charges against individuals that commit fraud is an important tool in deterring future
fraudulent activity. The resources allocated to continuing to investigate and recommend
criminal charges focused on targeted areas, such as addressing premeditated and organized
fraud, and repeat offenders.
ICBC developed the Intelligence and Cyber Unit to utilize technology and specialized
knowledge, skills, and training to investigate exaggerated and fraudulent claims through the
internet. The communication forum of social networking, internet, blogging, and websites has
gained mainstream acceptance and continues to expand every year. The Intelligence and
Cyber Unit has increased the number of investigations over the years, as have other law
enforcement and investigation agencies, because of the probative value of the information.
Capabilities delivered by Claims Transformation and specifically the new claims system will
enhance ICBC’s ability to mitigate the risk of fraudulent claims by improving data collection
quality and integrity, ensuring the consistent application of best practices and file handling
protocols, and increasing the focus on claims risk.
Please see the response to information request 2013.2 RR BCPSO.6.7.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.195.6.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.195.6.1 Reference: CLAIMS COST MANAGEMENT Exhibit B-1, Chapter 6, pp. 6-7 and 6-8 Exhibit B-3-1, 2013.1 RR BCUC.105.2, 107.2, 111.3 Customer Experience & Fraud In 2013.1 RR BCUC.105.2, ICBC states, in regards to bodily injury cost increases: “… the willingness by some treatment providers to continue treatments that may not be effective or warranted can also play an enabling role.” In 2013.1 RR BCUC.107.2, ICBC states that the new organizational model gives the customer “quicker access to an available resource regardless of where the customer lives and more convenient options to deal with their claim such as email or telephone.” In 2013.1 RR BCUC.111.3, ICBC states: “ICBC estimates 10 to 15% of insurance claims contain an element of fraud or exaggeration, which is consistent with industry estimates.” In 2013.1 RR BCUC.111.3, ICBC provided a table showing the total numbers of actual BI investigations undertaken by the Special Investigations Unit (SIU) in the last five years. The total numbers of actual BI investigations undertaken are further broken down between SIU (BI) and Cyber. In 2013.1 RR BCUC.111.3, ICBC states: “During these five years, ICBC piloted the Intelligence and Cyber Unit and then made it a permanent work unit in 2011.” Does ICBC believe that its additional efforts to deal with fraudulent claims will produce a net benefit to claims costs savings? If so, please quantify to the extent possible. Response:
ICBC believes that its additional efforts to deal with fraudulent claims through the Intelligence
and Cyber Unit will reduce claims costs affected by exaggerated or fraudulent claims. However,
ICBC’s existing claims systems are not able to accurately quantify the benefit of increased
efforts to deal with fraudulent claims and the net benefit to claims cost savings.
Please also see the response to information request 2013.2 RR BCPSO.6.1.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.196.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.196.1 Reference: CLAIMS COST MANAGEMENT Exhibit B-4, 2013.1 RR BCPSO.64.1 BI Severity - Legal Representation Rate In 2013.1 RR BCPSO.64.1 ICBC states: “In the event of an injury claim, claimants over the age of 65 tend to obtain legal representation less often, relative to younger age groups. Injured claimants in Greater Vancouver and the Fraser Valley tend to obtain legal representation more often than claimants in other parts of BC. Claimants on Vancouver Island tend to obtain legal representation somewhat less often, and claimants in the northern and interior parts of BC tend to obtain legal representation least often.” How is ICBC using this information to address the rise in legal representation rate? Response:
As stated the Application, Chapter 6, ICBC is concerned about rising legal representation rates.
Before ICBC could begin to address some of the drivers of representation it needed to have a
better understanding of where the problem was originating, including whether the influences of
representation were geographically or demographically based.
Once the information was obtained and analyzed, ICBC began using this information to allocate
resources to develop strategies for specific claimant segments and communities with the intent
of trying to reduce initial representation rates. Initiatives already implemented include the
dedicated Punjabi claims line and the multi-cultural information campaign to explain the claims
process. This information was also used in ICBC’s planning for further enhancements to claims
translation services for customers who speak Mandarin and Cantonese.
ICBC is continuing to use this information to build potential initiatives to further help address the
legal representation rate. The further analysis ICBC is doing to understand the key factors that
influence the rising legal representation rate will build on this information. As indicated in
ICBC’s response to 2013.1 RR BCUC.154.2, a comprehensive claimant attitude survey is
currently underway and is being administered in several languages to a wide range of ICBC
customers. ICBC will then utilize his information to improve the claims experience and address
the drivers of legal representation that are within its control.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.197.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.197.1 Reference: CLAIMS COST MANAGEMENT Exhibit B-1, Chapter 6, p. 6-2 Exhibit B-3-1, 2013.1 RR BCUC.105.4 and 105.5 Legal Representation Rate - Advertising In 2013.1 BCUC.105.4, ICBC states: “In ICBC’s view, advertising by law firms, in general, contributes to the rising representation rate which in turn drives up bodily injury severity. It is also reasonable to assume that advertising messages that imply higher payouts influence customers’ decisions to seek representation. ICBC is currently gathering customer feedback data to test this assumption. ICBC has considered customer relations strategies to counter the representation trend. ICBC recently launched an information campaign to provide customers with the information they need about the claims process, especially when an injury is involved, and to encourage customers to talk to ICBC. The multi-language campaign includes print, radio, and TV, as well as information on www.icbc.com.” In 2013.1 BCUC.105.5, in response to whether ICBC has considered having its first offer being its best offer, ICBC states that: “Yes, in fact this suggestion is consistent with ICBC’s policy to pay claimants who have a compensable injury claim a fair and reasonable settlement as soon as practicable. ICBC’s policy is to clearly explain entitlements to claimants, to understand and meet their immediate needs, and to fully explain the steps taken in the evaluation of their claim.” What other “customer relations strategies” has ICBC considered to mitigate the increasing legal representation trend? Response:
To mitigate the increasing legal representation trend, one of the customer relations strategies is
to continue in 2014 ICBC’s recently launched information campaign, which provides customers
with information to assist them with the claims process. Refinements and additional information
will be included to focus on areas that customers say are important to them with faster and
easier access to the information they need. ICBC recently enhanced its claims translation
service by offering a dedicated Punjabi claims line and expects to make similar enhancements
to its claims translation services for customers who speak Mandarin and Cantonese. ICBC is
continuing to look at opportunities to build understanding and accessibility for customers
through community partnerships and presence, greater local media presence, refining online
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.197.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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presence, and other potential improvements. Upon completion of the comprehensive claimant
attitude survey (please see the response to information request 2013.1 RR BCUC.154.2 for
information on this survey), ICBC will determine further customer relations strategies based on
the survey results.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.197.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.197.2 Reference: CLAIMS COST MANAGEMENT Exhibit B-1, Chapter 6, p. 6-2 Exhibit B-3-1, 2013.1 RR BCUC.105.4 and 105.5 Legal Representation Rate - Advertising In 2013.1 BCUC.105.4, ICBC states: “In ICBC’s view, advertising by law firms, in general, contributes to the rising representation rate which in turn drives up bodily injury severity. It is also reasonable to assume that advertising messages that imply higher payouts influence customers’ decisions to seek representation. ICBC is currently gathering customer feedback data to test this assumption. ICBC has considered customer relations strategies to counter the representation trend. ICBC recently launched an information campaign to provide customers with the information they need about the claims process, especially when an injury is involved, and to encourage customers to talk to ICBC. The multi-language campaign includes print, radio, and TV, as well as information on www.icbc.com.” In 2013.1 BCUC.105.5, in response to whether ICBC has considered having its first offer being its best offer, ICBC states that: “Yes, in fact this suggestion is consistent with ICBC’s policy to pay claimants who have a compensable injury claim a fair and reasonable settlement as soon as practicable. ICBC’s policy is to clearly explain entitlements to claimants, to understand and meet their immediate needs, and to fully explain the steps taken in the evaluation of their claim.” Does ICBC have statistics to demonstrate that its first offer is its best offer? If yes, does ICBC agree that it would be useful to communicate those statistics to customers to reduce legal representation? If yes, please describe ICBC’s efforts, if any, to communicate such statistics to customers. If not, please explain why not. Response:
ICBC does not have statistics to directly answer this information request as there are many
factors that either affects the decision to seek legal representation or which can affect the value
of the claim, both of which may not be present at the time the first offer is made. Furthermore,
evaluations are based on the specific facts which are unique to each claim and cannot always
be extrapolated to the larger population of bodily injury claimants.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.198.1-2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.198.1-2 Reference: CLAIMS COST MANAGEMENT Exhibit B-1, Chapter 3, Exhibit E.5 Exhibit B-3-1, 2013.1 RR BCUC.109.1-3 Transitional Impacts In 2013.1 RR BCUC.109.1-3, ICBC states: “While transitioning to the new claims management system and processes, and the new Claims hierarchy, there will be a number of elements that are expected to temporarily negatively impact the efficiency and quality of file handling, with a consequential impact on claims costs… Please refer to Application, Chapter 4, Exhibit E.5, for the estimation of the transitional impacts.” In the Application, Chapter 3, Exhibit E.5 provides the prospective adjustment for the Claims Transformation Process. 198.1 Please confirm that ICBC meant “Chapter 3, Exhibit E.5” for the estimation of the transitional impacts. 198.2 Based on Chapter 3, Exhibit E.5, is it fair to say that many of the cost savings in the Claims Transformation Process are expected to start in 2015? Response:
198.1
ICBC confirms that it meant “Chapter 3, Exhibit E.5”.
198.2
Yes, it is a fair statement to say that many of the cost savings in the Claims Transformation
process will start to materialize in 2015.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.199.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.199.1 Reference: CLAIMS COST MANAGEMENT Exhibit B-1, Chapter 9, p. 9-8 Exhibit B-3-1, 2013.1 RR BCUC.154.2 and 154.4 Legal Representation Rate In 2013.1 RR BCUC.154.2, ICBC states: “A comprehensive claimant attitude survey is currently underway that will compare perceptions of individuals who have had and have not had a claim, and who chose to be, or not to be, legally represented.… ICBC expects to have the benefit of further analysis on this topic in mid-2014.” In 2013.1 RR BCUC.154.4 – Attachment A, ICBC states: “… ICBC is concerned over the increased representation rates and is currently investigating the accelerating rise in represented bodily injury claims. This is a high priority corporate project which employs both quantitative and qualitative data analysis to identify and understand the key drivers of legal representation.” Does ICBC plan to file the survey results with the Commission? If so, would the survey be available for the 2014 rate application? If not, why not and how would it impact the 2014 rate application? Response:
ICBC does plan to file relevant survey results with the Commission. While the survey data are
still being collected, ICBC expects that the results will be available for the 2014 Revenue
Requirements Application. Results that have led ICBC to take new action at that time will be
discussed in the 2014 Revenue Requirements Application. To the extent that there are results
which may be detrimental to the success of ICBC’s actions if released publicly, this information
may be made available to the Commission confidentially.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.200.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.200.1 Reference: CLAIMS COST MANAGEMENT Exhibit B-3-1, 2013.1 RR BCUC.154.4 Legal Representation Rate – Low Velocity Impact Program In 2013.1 RR BCUC.154.4 – Attachment A, ICBC provides further analysis on Legal Representation Rate. Section D discusses ICBC’s ability to influence the rate of legal representation and Section E discusses initiatives in more detail. Relating to the Low Velocity Impact (LVI) program, ICBC states: “Originally launched in 1992 as an approach to reduce escalating BI claims costs, it has been modified over the years. However, ICBC concluded more recently that this program was now causing more claimants to seek representation and was no longer saving claims costs. ICBC ended the LVI program in February 2013.” (Emphasis added] (p. 5) “The original Program was very successful in helping to reduce bodily injury claims costs. However, the effect of the committee-based process was often to delay the determination of whether a claimant’s injury claim would be accepted by ICBC. It also was creating friction between the claimant and their adjuster because it took the decision making and accountability away from the adjuster and shifted it to someone that was not in direct contact with the claimant. These shortcomings could intuitively have a negative effect on representation rates.” (p. 8) If the original LVI program was very successful, why did ICBC modify the program over the years which seemed to have led to an unfavourable outcome? Please explain. Response:
In 1992, as a result of dramatically increasing minor soft tissue injury claims, ICBC required a
19% rate increase. ICBC was challenged by its (then) president to initiate claims programs to
reduce these costs. One of the programs recommended at that time was the minimal damage
program.
The premise of the original program was to reduce bodily injury claims costs by applying the
principle that no compensation for tort and Part 7 claims should be provided when there was
minimal or no material damage to the vehicles involved in an accident. Criteria were applied
that took into account both material damage and injury circumstances whereupon the claim
would be referred to specially convened committees to determine if the claim was to be
accepted into the program.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.200.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
At the time of the original program, most vehicle bumper systems were constructed with
isolators that made it comparatively easy to calculate the relative speed change at the time of
impact; this was critical information used to determine whether to accept or deny a claim for
compensation.
ICBC took the position that once a claim was denied by the committee no compensation would
be awarded, save and except as determined by a judgment. In these types of claims, ICBC
chose jury trials as the mode of trial and many plaintiffs received either zero or nominal awards.
The net impact of the program was the reduction in the number of claims paid against ICBC
liability policies. As the program grew in the late 1990s and more claims were subject to the
minimal damage criteria, the program was renamed to the Low Velocity Impact (LVI) Program.
The first significant challenge to the program was in 1995, when a plaintiff attempted to initiate a
class action law suit against ICBC for failure to pay Part 7 benefits on minimal damage claims.
While the class action law suit was not successful, ICBC reviewed its practice of denying Part 7
benefits on minimal damage claims. In 2000, ICBC modified its position on the payment of Part
7 benefits by paying benefits until the claim had been reviewed by the LVI committee.
In 2001, the program was subject to a comprehensive review by the Office of the Ombudsman.
As a result of the Ombudsman’s review, in 2003 ICBC altered the program once again to accept
Part 7 benefit claims while continuing to deny compensation on the tort claim.
In 2000, vehicle manufacturers began to change vehicle bumper construction, and isolators that
absorbed the impact of a crash were replaced with foam core bumper inserts. While it was
relatively easy to measure how much a bumper isolator compressed at impact and thereby
determine the relative speed change, it was more difficult to measure the deformity of a foam
core bumper. As a result, it was becoming increasingly more difficult to determine speed
change without the need for more specialized engineering evidence.
Also at this time, changes to court rules and procedures made it difficult to secure jury trials for
LVI claims. Trial judges were more circumspect on ICBC’s LVI program and found that vehicle
damage as a determinant of injury had no application in a court of law. In 2009, with the
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.200.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
implementation of the new Supreme Court Civil Rules, the principle of proportionality effectively
ended the ability to bring these types of claims in front of a jury.
Faced with these increasing challenges, the LVI program was difficult to sustain and, in late
2011, ICBC began to review the efficacy of the LVI program. ICBC found that while the
program was still having some moderate success through the court system, more and more files
were becoming represented and at trial plaintiff counsel were becoming more successful in
undermining the arguments raised to support the program. As ICBC was beginning to
investigate the causes of the increased representation rates and ways to moderate injury claims
trends, it became evident that the program was no longer viable in its present form. In February
2013 the program was discontinued.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.200.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.200.2 Reference: CLAIMS COST MANAGEMENT Exhibit B-3-1, 2013.1 RR BCUC.154.4 Legal Representation Rate – Low Velocity Impact Program In 2013.1 RR BCUC.154.4 – Attachment A, ICBC provides further analysis on Legal Representation Rate. Section D discusses ICBC’s ability to influence the rate of legal representation and Section E discusses initiatives in more detail. Relating to the Low Velocity Impact (LVI) program, ICBC states: “Originally launched in 1992 as an approach to reduce escalating BI claims costs, it has been modified over the years. However, ICBC concluded more recently that this program was now causing more claimants to seek representation and was no longer saving claims costs. ICBC ended the LVI program in February 2013.” (Emphasis added] (p. 5) “The original Program was very successful in helping to reduce bodily injury claims costs. However, the effect of the committee-based process was often to delay the determination of whether a claimant’s injury claim would be accepted by ICBC. It also was creating friction between the claimant and their adjuster because it took the decision making and accountability away from the adjuster and shifted it to someone that was not in direct contact with the claimant. These shortcomings could intuitively have a negative effect on representation rates.” (p. 8) Please expand on ICBC’s study or conclusion of the LVI program. How did ICBC conclude that LVI program was causing more representation and was no longer saving claims costs? Response:
In 2011, ICBC began to review the efficacy of the Low Velocity Impact (LVI) program. As stated
in the response to information request 2013.2 RR BCUC.200.1, there were changes to both the
physical material damage criteria and the legal landscape that challenged the results of the
program. Furthermore, as ICBC was facing accelerated representation rates in 2012, the
drivers of those increases were being examined.
When comparing representation rates for the past five years, ICBC determined that LVI claims
had a greater rate of legal representation than on any other category of bodily injury claims,
including those with significant vehicle impact or injury.
In addition, claims identified as LVI were ineligible for Express Repair and required a three
member committee to review each submission, thus creating operational inefficiency and delays
which could negatively impact ICBC’s relationship with its customers.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.200.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
The discontinuance of the LVI program will enable employees to better meet the needs of
claimants injured in a minor damage crash while continuing to assess each claim on its merits.
The new approach will better utilize resources, reduce additional process and associated costs,
and is intended to address escalating claims costs associated with legal representation on that
segment of low impact claims.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.200.3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.200.3 Reference: CLAIMS COST MANAGEMENT Exhibit B-3-1, 2013.1 RR BCUC.154.4 Legal Representation Rate – Low Velocity Impact Program In 2013.1 RR BCUC.154.4 – Attachment A, ICBC provides further analysis on Legal Representation Rate. Section D discusses ICBC’s ability to influence the rate of legal representation and Section E discusses initiatives in more detail. Relating to the Low Velocity Impact (LVI) program, ICBC states: “Originally launched in 1992 as an approach to reduce escalating BI claims costs, it has been modified over the years. However, ICBC concluded more recently that this program was now causing more claimants to seek representation and was no longer saving claims costs. ICBC ended the LVI program in February 2013.” (Emphasis added] (p. 5) “The original Program was very successful in helping to reduce bodily injury claims costs. However, the effect of the committee-based process was often to delay the determination of whether a claimant’s injury claim would be accepted by ICBC. It also was creating friction between the claimant and their adjuster because it took the decision making and accountability away from the adjuster and shifted it to someone that was not in direct contact with the claimant. These shortcomings could intuitively have a negative effect on representation rates.” (p. 8) Does ICBC use similar studies or business cases to create or discontinue any other programs? For example, does ICBC examine the effectiveness of the Centralized Claims Injury Centre (CCIC) or other claims functions to determine whether or not they reduce claims costs? Please explain. Response:
Wherever practicable, ICBC will use pilot studies and/or business cases to initiate new
programs or to assess business decisions intended to address emerging or specific issues or
opportunities.
ICBC will monitor major programs over the life of the program to assess continued
effectiveness. Programs are improved or modified to address evolving issues or opportunities
and, if warranted, discontinued if they no longer fulfill business requirements.
The Centralized Claims Injury Centre (CCIC) for example, was first piloted and monitored during
the pilot phase, with adjustments made as needed. Once the pilot proved successful, CCIC
was implemented. CCIC was monitored and measured for its effectiveness and when the
results for processed files resulted in better representation and severity trends, CCIC was
expanded.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.201.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.201.1 Reference: CLAIMS COST MANAGEMENT Exhibit B-3-1, 2013.1 RR BCUC.107.2.1, 2013.1 RR BCUC.154.4; Exhibit B-4, 2013.1 RR BCPSO.20.1; 2013.1 RR IBC.16.1 Legal Representation Rate – Centralized Claims Injury Centre (CCIC) In 2013.1 RR BCUC.154.4 – Attachment A, ICBC provides further analysis on Legal Representation Rate. Section E discusses ICBC’s response to rising representation rates in detail. ICBC states: “Under the CCIC model, claims adjusters would deal immediately with a BI claimant when they reported their claim at the first notice of loss. Over the years it has proven to be a successful model with low representation rates and high settlement rates.” [Emphasis added] In 2013.1 RR BCPSO.20.1, however, ICBC states: “While it is not possible to prove a link between the legal representation rate and specific claims operational changes, it is reasonable to assume that the cumulative effect of these changes has influenced the rate of legal representation.” [Emphasis added] In 2013.1 RR IBC.16.1, ICBC provides the number of files handled by CCIC and the number of these claims that become represented from 2006 through 2012. Based on 2013.1 RR IBC.16.1, Commission staff created the following table:
2006 2007 2008 2009 2010 2011 2012
BI Exposures Opened by CCIC 2,685 3,872 5,286 5,996 7,921 8,112 11,204
BI Exposures Becoming Represented 366 640 1,076 1,430 1,941 1,945 3,243
Ratio BI Exposures Becoming Represented vs. BI Exposures Opened by CCIC
13.6% 16.5% 20.4% 23.8% 24.5% 24.0% 28.9%
In 2013.1 RR IBC.16.1, ICBC also states: “With the further expansion of CCIC in 2012, restrictions were lifted as to the type and complexity of files retained so that 100% of all files initially processed by CCIC remained with CCIC. The increased proportion of represented BI exposures in 2012 is a natural result of CCIC increasing intake and retaining 100% of all unrepresented files regardless of complexity.” Please substantiate the underlined statement in 2013.1 RR BCUC.154.4. Specifically, in light of 2013.1 RR BCPSO.20.1, how does ICBC know that the CCIC model has proven to be a successful model with “low representation rates” and “high settlement rates”? Include any applicable timeframe and measurements to substantiate the CCIC model progress.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.201.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Response:
With respect to the question of how ICBC knows that the Centralized Claims Injury Centre
(CCIC) model is successful, please refer to the chart below:
Using legal representation rate and severity measures, the chart depicts the difference between
files handled at CCIC versus CCIC qualified files that were not processed at CCIC. While the
rate of legal representation of new bodily injury claims increased, the increase is lower at CCIC.
In addition to a lower representation rate, CCIC also has a lower severity on closed files. It is
important to note that the table created by Commission staff refers to all files opened by CCIC,
while the chart provided in response to this information request refers to the legal representation
rate for those files opened and retained by CCIC. Prior to 2012, CCIC transferred some of their
unrepresented files to a field office based on certain criteria.
ICBC acknowledges that the 2012 numbers for CCIC in the above chart would be higher;
however, for the reasons discussed below they do not reflect an accurate comparison to prior
years and therefore are not included in the above chart.
As part of the Claims Transformation process, the claims business model was redesigned to
enhance the customer experience, improve business results, and prepare for a new Claims
system. Changes necessary to support the business model include a more functional approach
to the claims organization, revised job profiles as part of a new Claims hierarchy, and expansion
of CCIC. While these changes are necessary to successfully transform the business for the
long term, it is acknowledged that there is a transitional period during which the changes can
adversely impact business results. As noted in the response to information request 2013.1 RR
BCPSO.20.1, it is reasonable to assume the large volume of file and staff movement associated
2009 2010 2011Legal Representation Rate Handled in CCIC 24% 24% 23%
Handled in Field (CCIC qualified) 27% 32% 30%
Severity on BI Exposures Closed With Payment Handled in CCIC 3,094$ 2,650$ 2,544$
Handled in Field (CCIC qualified) 4,575$ 4,396$ 4,731$
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.201.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
with these changes may have unfavourably influenced the legal representation rate for a
transitional period.
In addition, as noted in the response to information request 2013.1 RR IBC.16.1, CCIC was
expanded in 2012. With the expansion, restrictions were lifted as to the type and complexity of
files retained so that any type of unrepresented bodily injury files could now be assigned to
CCIC or another claims office.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.201.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.201.2 Reference: CLAIMS COST MANAGEMENT Exhibit B-3-1, 2013.1 RR BCUC.107.2.1, 2013.1 RR BCUC.154.4; Exhibit B-4, 2013.1 RR BCPSO.20.1; 2013.1 RR IBC.16.1 Legal Representation Rate – Centralized Claims Injury Centre (CCIC) In 2013.1 RR BCUC.154.4 – Attachment A, ICBC provides further analysis on Legal Representation Rate. Section E discusses ICBC’s response to rising representation rates in detail. ICBC states: “Under the CCIC model, claims adjusters would deal immediately with a BI claimant when they reported their claim at the first notice of loss. Over the years it has proven to be a successful model with low representation rates and high settlement rates.” [Emphasis added] In 2013.1 RR BCPSO.20.1, however, ICBC states: “While it is not possible to prove a link between the legal representation rate and specific claims operational changes, it is reasonable to assume that the cumulative effect of these changes has influenced the rate of legal representation.” [Emphasis added] In 2013.1 RR IBC.16.1, ICBC provides the number of files handled by CCIC and the number of these claims that become represented from 2006 through 2012. Based on 2013.1 RR IBC.16.1, Commission staff created the following table: 2006 2007 2008 2009 2010 2011 2012 BI Exposures Opened by CCIC 2,685 3,872 5,286 5,996 7,921 8,112 11,20
4 BI Exposures Becoming Represented
366 640 1,076 1,430 1,941 1,945 3,243
Ratio BI Exposures Becoming Represented vs. BI Exposures Opened by CCIC
13.6% 16.5% 20.4% 23.8% 24.5% 24.0% 28.9%
In 2013.1 RR IBC.16.1, ICBC also states: “With the further expansion of CCIC in 2012, restrictions were lifted as to the type and complexity of files retained so that 100% of all files initially processed by CCIC remained with CCIC. The increased proportion of represented BI exposures in 2012 is a natural result of CCIC increasing intake and retaining 100% of all unrepresented files regardless of complexity.” Please confirm the calculation of the above Commission staff table is correct. Otherwise, please adjust.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.201.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Response:
ICBC confirms that the Commission staff table based on the response to information request
2013.1 RR IBC.16.1 is correct. However, year-over-year comparisons must take into account
changes in the Centralized Claims Injury Centre business model over time.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.201.3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.201.3 Reference: CLAIMS COST MANAGEMENT Exhibit B-3-1, 2013.1 RR BCUC.107.2.1, 2013.1 RR BCUC.154.4; Exhibit B-4, 2013.1 RR BCPSO.20.1; 2013.1 RR IBC.16.1 Legal Representation Rate – Centralized Claims Injury Centre (CCIC) In 2013.1 RR BCUC.154.4 – Attachment A, ICBC provides further analysis on Legal Representation Rate. Section E discusses ICBC’s response to rising representation rates in detail. ICBC states: “Under the CCIC model, claims adjusters would deal immediately with a BI claimant when they reported their claim at the first notice of loss. Over the years it has proven to be a successful model with low representation rates and high settlement rates.” [Emphasis added] In 2013.1 RR BCPSO.20.1, however, ICBC states: “While it is not possible to prove a link between the legal representation rate and specific claims operational changes, it is reasonable to assume that the cumulative effect of these changes has influenced the rate of legal representation.” [Emphasis added] In 2013.1 RR IBC.16.1, ICBC provides the number of files handled by CCIC and the number of these claims that become represented from 2006 through 2012. Based on 2013.1 RR IBC.16.1, Commission staff created the following table: 2006 2007 2008 2009 2010 2011 2012 BI Exposures Opened by CCIC 2,685 3,872 5,286 5,996 7,921 8,112 11,20
4 BI Exposures Becoming Represented
366 640 1,076 1,430 1,941 1,945 3,243
Ratio BI Exposures Becoming Represented vs. BI Exposures Opened by CCIC
13.6% 16.5% 20.4% 23.8% 24.5% 24.0% 28.9%
In 2013.1 RR IBC.16.1, ICBC also states: “With the further expansion of CCIC in 2012, restrictions were lifted as to the type and complexity of files retained so that 100% of all files initially processed by CCIC remained with CCIC. The increased proportion of represented BI exposures in 2012 is a natural result of CCIC increasing intake and retaining 100% of all unrepresented files regardless of complexity.” Based on 2013.1 RR IBC.16.1 and the table above, it appears that the proportion of people becoming represented is increasing faster than the number of claims handled by CCIC. In light of this observation, how does ICBC know that the CCIC model has proven to be a successful model?
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.201.3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Response:
As stated in 2013.2 RR BCUC 201.1, while the rate of legal representation of new bodily injury
claims has accelerated, the rate of this acceleration is lower at Centralized Claims Injury Centre
(CCIC). A contributing factor to the increased rate of legal representation at CCIC has been the
increase in the number of customers who retain counsel before they report their claim to ICBC,
without allowing the benefit of the CCIC model to apply to those customers.
ICBC believes that CCIC is an effective model for the customers who do choose to give ICBC
an opportunity to handle their bodily injury claim directly with them. The CCIC model provides
effective and efficient claims handling to enhance the customer experience.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.201.4 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.201.4 Reference: CLAIMS COST MANAGEMENT Exhibit B-3-1, 2013.1 RR BCUC.107.2.1, 2013.1 RR BCUC.154.4; Exhibit B-4, 2013.1 RR BCPSO.20.1; 2013.1 RR IBC.16.1 Legal Representation Rate – Centralized Claims Injury Centre (CCIC) In 2013.1 RR BCUC.154.4 – Attachment A, ICBC provides further analysis on Legal Representation Rate. Section E discusses ICBC’s response to rising representation rates in detail. ICBC states: “Under the CCIC model, claims adjusters would deal immediately with a BI claimant when they reported their claim at the first notice of loss. Over the years it has proven to be a successful model with low representation rates and high settlement rates.” [Emphasis added] In 2013.1 RR BCPSO.20.1, however, ICBC states: “While it is not possible to prove a link between the legal representation rate and specific claims operational changes, it is reasonable to assume that the cumulative effect of these changes has influenced the rate of legal representation.” [Emphasis added] In 2013.1 RR IBC.16.1, ICBC provides the number of files handled by CCIC and the number of these claims that become represented from 2006 through 2012. Based on 2013.1 RR IBC.16.1, Commission staff created the following table: 2006 2007 2008 2009 2010 2011 2012 BI Exposures Opened by CCIC 2,685 3,872 5,286 5,996 7,921 8,112 11,20
4 BI Exposures Becoming Represented
366 640 1,076 1,430 1,941 1,945 3,243
Ratio BI Exposures Becoming Represented vs. BI Exposures Opened by CCIC
13.6% 16.5% 20.4% 23.8% 24.5% 24.0% 28.9%
In 2013.1 RR IBC.16.1, ICBC also states: “With the further expansion of CCIC in 2012, restrictions were lifted as to the type and complexity of files retained so that 100% of all files initially processed by CCIC remained with CCIC. The increased proportion of represented BI exposures in 2012 is a natural result of CCIC increasing intake and retaining 100% of all unrepresented files regardless of complexity.” How confident is ICBC that the CCIC service levels did not contribute to the increasing legal representation rate, and the increase is instead due to the restriction being lifted as 100 percent of all unrepresented files regardless of complexity are retained by CCIC?
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.201.4 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Response:
To clarify the question, as noted in the response to information request 2013.1 RR IBC.16.1,
Centralized Claims Injury Centre (CCIC) does not handle 100% of all unrepresented files
reported to ICBC, rather they now retain all unrepresented files initially assigned to them
regardless of type and complexity, just as any other ICBC field office would. This is a significant
change from the past where CCIC transferred some of the unrepresented files to a field office
based on certain criteria.
ICBC believes that CCIC service levels did not contribute to the increasing legal representation
rate. While the rate of legal representation of new bodily injury claims has accelerated, the rate
of this acceleration is lower at CCIC. One of the contributing factors to the increase in legal
representation rate has been the increase in the number of customers who retain counsel
before they report to ICBC, giving CCIC no opportunity to handle these claims and demonstrate
the ability to positively affect the customer experience.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.201.5 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.201.5 Reference: CLAIMS COST MANAGEMENT Exhibit B-3-1, 2013.1 RR BCUC.107.2.1, 2013.1 RR BCUC.154.4; Exhibit B-4, 2013.1 RR BCPSO.20.1; 2013.1 RR IBC.16.1 Legal Representation Rate – Centralized Claims Injury Centre (CCIC) In 2013.1 RR BCUC.154.4 – Attachment A, ICBC provides further analysis on Legal Representation Rate. Section E discusses ICBC’s response to rising representation rates in detail. ICBC states: “Under the CCIC model, claims adjusters would deal immediately with a BI claimant when they reported their claim at the first notice of loss. Over the years it has proven to be a successful model with low representation rates and high settlement rates.” [Emphasis added] In 2013.1 RR BCPSO.20.1, however, ICBC states: “While it is not possible to prove a link between the legal representation rate and specific claims operational changes, it is reasonable to assume that the cumulative effect of these changes has influenced the rate of legal representation.” [Emphasis added] In 2013.1 RR IBC.16.1, ICBC provides the number of files handled by CCIC and the number of these claims that become represented from 2006 through 2012. Based on 2013.1 RR IBC.16.1, Commission staff created the following table:
In 2013.1 RR IBC.16.1, ICBC also states: “With the further expansion of CCIC in 2012, restrictions were lifted as to the type and complexity of files retained so that 100% of all files initially processed by CCIC remained with CCIC. The increased proportion of represented BI exposures in 2012 is a natural result of CCIC increasing intake and retaining 100% of all unrepresented files regardless of complexity.” In 2013.1 RR BCUC.107.2.1, ICBC states: “Having employees with the right skills, training, and focus on a specific type of risk allows for improved effectiveness and efficiency of claims initiatives and processes.” Since employees are trained to have the right skills to focus on specific type of risk, why would the CCIC model now handle claims (e.g. 100 percent of all unrepresented files regardless of complexity) that seem to depart from its usual function?
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.201.5 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Response:
As stated in the response to information request 2013.2 RR BCUC.201.4, Centralized Claims
Injury Centre (CCIC) does not handle 100% of all unrepresented files reported to ICBC, rather
they now retain all unrepresented files initially assigned to them regardless of type and
complexity, just as any other ICBC field office would.
Unrepresented bodily injury claims, while subject to some varying degrees of complexity, are
largely a homogenous category that can be managed within a single functional stream of claims
adjusters with management oversight and support. By handling more unrepresented claims
through CCIC, including those with a higher degree of risk, ICBC believes there will be greater
claims handling efficiencies, and improved consistency, and ease of transaction for ICBC
customers.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.202.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.202.1 Reference: CLAIMS COST MANAGEMENT Exhibit B-4, 2013.1 RR TREAD.13.1, Attachment A Legal Representation Rate and Judicial Awards In 2013.1 RR TREAD.13.1, Attachment A, ICBC states that: “Judicial cost discretion is often exercised in favour of the plaintiff while ICBC can be perceived as the “institutional defendant” with “unlimited funds”. Furthermore, the contingency fee system can be a motivating factor in building cases, and the willingness by some treatment providers to continue treatments that may not be effective or warranted can also play an enabling role. The evidence used to support plaintiff injury claims is becoming more complex and more difficult to validate since injury symptoms are often subjective or subtle. More (and more expensive) experts may be utilized, as may be more elaborate (and more expensive) diagnostic tools and procedures. This is one reason why it is not uncommon in the casualty insurance industry to observe health-care related liability costs increasing at a rate above general inflation.” Is ICBC doing anything to address the perception of ICBC as an “institutional defendant” with “unlimited funds”? Why or why not? Response:
To the extent ICBC can, it tries to effect the perception of ICBC as an “institutional defendant”
with “unlimited funds”.
ICBC believes it is important to address this perception because the amounts paid to settle
claims affect the insurance premiums paid by all policyholders. Where possible and
appropriate, ICBC tries to reinforce this; for example, ICBC’s August 30, 2013 news release
regarding changes in insurance rates quotes ICBC’s then interim President and CEO as saying,
“we’ve seen our injury claims costs increase substantially which has put a great deal of pressure
on basic insurance rates.” Similarly, the open letter to customers from then interim President
and CEO posted on www.icbc.com notes that, “…bodily injury claims costs, which cover
payouts for pain and suffering, future care and loss of wages, continued on a worryingly sharp
upward trend …”, and “…the reality is our claims costs are increasing year-over-year and
already make up 86 cents of every premium dollar collected.”
One of the ways ICBC is trying to address this perception is, when practicable, inviting the
defendant to attend at trial to support the notion that there is a customer behind the policy at risk
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.202.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
in a tort action. Another way is by utilizing the provisions of the new Supreme Court Civil Rules,
BC Regulation 168/2009 to ensure the spirit of proportionality governs the legal process, which
further supports the approach that the funds expended to defend ICBC customers are not
unlimited.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.203.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.203.1 Reference: CLAIMS COST MANAGEMENT Exhibit B-3-1, 2013.1 RR BCUC.116.2 Road Safety In 2013.1 RR BCUC.116.2 ICBC provides the 2012 Road Safety Annual Report. Page 15 discusses the result of the fixed speed readerboards. On page 20 ICBC acknowledges that it fell short to meet its target for reduced use of hand held PEDs. Since the fixed speed readerboards appear to be a successful program at low cost, has ICBC expanded its use? If yes, please describe. If not, why not. Response:
Yes, the fixed speed readerboard tactic is slowly expanding to support ICBC’s program to
combat unsafe speed in the province. In 2013, 13 net new speed readerboards were
implemented province-wide. Partnerships were also expanded beyond municipalities to include
the Ministry of Transportation and Infrastructure as the tactic transitioned from the Speed
Program to an infrastructure countermeasure within the Road Improvement Program. The tactic
is now more effectively utilized as it is packaged along with other speed mitigation
countermeasures to more effectively manage unsafe speed in the province.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.203.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.203.2 Reference: CLAIMS COST MANAGEMENT Exhibit B-3-1, 2013.1 RR BCUC.116.2 Road Safety In 2013.1 RR BCUC.116.2 ICBC provides the 2012 Road Safety Annual Report. Page 15 discusses the result of the fixed speed readerboards. On page 20 ICBC acknowledges that it fell short to meet its target for reduced use of hand held PEDs. Please describe what is ICBC doing to improve the rate of reduced use of hand held PEDs? Response:
There is evidence that distracted driving as a causal factor for crashes is growing due to
smartphones although the data and effectiveness of countermeasures are hampered by
reporting challenges not unique to BC. Currently ICBC promotes education and awareness
tactics and supports enforcement activities associated with distracted driving during the month
of September as per the BC Chiefs of Police Association Provincial Enforcement Campaign
Schedule, as indicated in response to information request 2013.1 RR IBC.25.1.
ICBC is in the early stages of reviewing possible initiatives to reduce the use of personal
electronic devices (PEDs) by BC’s population while driving. This work will include reviewing
available research, examining the experience in other jurisdictions, collaborating with interested
stakeholders, and enhancing education and awareness activities focused on the use of PEDs.
ICBC will also continue to support police who have now added a second enforcement period in
2014.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.204.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.204.1 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit B-1, Chapter 7, pp. 7-1, 7-6 Exhibit B-3-1, 2013.1 RR BCUC.119.2 2012 Government Review of ICBC In 2013.1 RR BCUC.119.2, ICBC states: “… the $50 million in cost reduction is derived from the 2011 original plan amount of $630 million minus the 2013 forecast amount of $579 million.” Please provide the amount of new cost reductions in each of 2011 (i.e. 2011 Actual versus 2011 Original Plan), 2012 (2012 Actual versus 2011 Actual) and 2013 (2013 Forecast versus 2012 Actual). Response:
As explained in the response to information request 2013.1 RR BCUC.119.2, the $50 million in
cost reduction is not the cumulative amount over two years but is in fact derived from the 2011
original plan amount of $630 million minus the 2013 forecast amount of $579 million (see the
Application, Chapter 7, Figure 7.1, page 7-6).
The change between the 2011 Plan and the ensuing years are summarized as follows:
At the time of the Revenue Requirements Application for the 2012 Policy Year, ICBC had
targeted cost savings of $26 million from the original 2011 plan operating expenses ($630
million) as compared to the 2011 outlook ($604 million). At the time of the 2012 Government
Review of ICBC, in addition to the $26 million savings, there was a further commitment to save
$15 million in 2012 and $9 million in 2013. Actual operating expenses in 2011 were a further
$20 million lower ($584 million). There is no detailed breakdown of the additional $15 million
and $9 million in savings because those savings and timeframes were the anticipated
reductions for ICBC to achieve its commitment to reduce budgeted costs by $50 million. Actual
results were different than the anticipated results.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.204.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Actual operating costs in 2012 ($591 million) were $7 million higher than the 2011 actual ($584
million) but $14 million lower than the 2012 forecast ($605 million). Included in the 2012 actual
results is a provision of $25 million in non-recurring restructuring costs related to staff reductions
which is the main reason why operating expenses in 2012 were higher than 2011. ICBC
achieved other cost savings, which offset a portion of the restructuring costs. If the $25 million
in restructuring costs were excluded, 2012 actual operating expenses would have been only
$566 million, $18 million lower than the 2011 actual of $584 million.
The $51 million reduction in budgeted costs was achieved in the following expense categories
which correspond to the operating expense categories used in Chapter 7, Figure 7.3.
Other changes in expense categories can be seen by comparing the year to year costs in
Chapter 7, Figure 7.2, page 7-8 and Figure 7.3, page 7-13.
Expense Category ($ millions)Net Compensation 29$
Computer Costs (5)
Depreciation (5)
Projects 10
Professional Services 2
Road Improvements and Other Traffic Safety Programs 1
Printing Stationery and Supplies 2
Staff Related Expenses Including Training 5
Other Operating Expenses 8
Government Initiatives and Unique Items 4
Total Cost Savings 51$
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.204.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.204.2 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit B-1, Chapter 7, pp. 7-1, 7-6 Exhibit B-3-1, 2013.1 RR BCUC.119.2 2012 Government Review of ICBC In 2013.1 RR BCUC.119.2, ICBC states: “… the $50 million in cost reduction is derived from the 2011 original plan amount of $630 million minus the 2013 forecast amount of $579 million.” 204.2 Please confirm, or explain otherwise, that the $50 million in cost reductions between 2013 forecast and 2011 original plan exclude the following forecast 2013 costs: $3 million in compensation costs that are expected to be offset by increased
revenues and reduced claims costs; $19 million in pension and post-retirement benefits costs related to changes in
IAS19R, assumptions changes for accounting purposes and discount rate changes. 204.2.1 If the preceding information request (IR) is confirmed, please explain why the $3 million and $19 million in corporate operating costs are excluded from the description of cost reductions between 2013 forecast and 2011 original plan. Response:
204.2
ICBC confirms that the $50 million in cost reductions between the 2013 forecast and 2011
original plan exclude the following 2013 costs:
$3 million increase in compensation costs that are expected to be offset by increased
revenues and reduced claims costs.
$19 million increase in pension and post-retirement benefits costs related to changes in
IAS 19R, assumption changes for accounting purposes, and discount rate changes.
Please refer to the Application, Chapter 7, Section B.3, pages 7-6 to 7-10.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.204.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
204.2.1
ICBC complied with the Public Sector Employers’ Council (PSEC) Bargaining Mandate in that
the increase in Bargaining Unit compensation will have a zero impact on ICBC’s net income. Of
the total Bargaining Unit compensation increase of $6 million in the 2013 forecast:
$3 million will be achieved through operating cost savings (see the response to
information request 2013.2 RR BCUC.216.1).
The remaining $3 milllion is to be offset by increased revenues and reduced claims
costs.
The first $3 million is already reflected in ICBC’s 2013 operating expense forecast. The second
$3 million is reflected as an exclusion to the 2013 forecast amount of $579 million shown in
Chapter 7, Figure 7.2, page 7-8, as the “Operating Expenses (reflecting PSEC Bargaining
Mandate)” line item to facilitate comparability to the 2011 original plan.
The $19 million increase in pension and post-retirement benefits costs are described in Chapter
7, Section B.3, page 7-10 and comprised of changes in the International Financial Reporting
Standards International Accounting Standard on Employee Benefits (IAS 19R), changes in
actuarial assumptions for accounting purposes, and changes in the discount rate used to
calculate long-term pension and post-retirement liabilities. This amount is excluded from the
2013 forecast amount of $579 million shown in Chapter 7, Figure 7.2, page 7-8, as the
“Operating Expenses (reflecting PSEC Bargaining Mandate)” line item to facilitate comparability
to the 2011 original plan.
Further details in regards to the $19 million increase in pension and post-retirement benefits
costs may be found in the responses to information requests 2013.1 RR BCUC.126.2 through to
2013.1 RR BCUC.126.5.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.205.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.205.1 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit B-1, Chapter 7, pp. 7-16 to 7-17; Exhibit A2-9 2012 Government Review of ICBC The 2012 Government Review makes the following two recommendations: “(5) ICBC should reduce total management and confidential staffing to a level more consistent with 2008. (6) ICBC should develop action plans, with timelines, for maximizing span of control and reducing management layers across the organization.” [Exhibit A2-9] ICBC submits the following on p. 7-17 of Exhibit B-1: “2008 actual total ICBC FTEs were 4,934, comprised of 4,044 Bargaining Unit and 890 Management and Confidential FTEs…” Forecast 2013 Total ICBC FTEs are 4,734, comprised of 3,808 Bargaining Unit and 926 Management and Confidential. [Exhibit B-1, p. 7-16] Commission staff notes that 2013 forecast Management and Confidential FTEs exceed 2008 Actual Management and Confidential FTEs. Please discuss any action plans, with timelines, for reducing Management and Confidential employees to 2008 levels, as recommended in the 2012 Government Review. Response:
ICBC acknowledges that 2013 forecast Management and Confidential full-time equivalents
(FTEs) (926 FTEs) exceed the 2008 actual Management and Confidential FTEs (890 FTEs) by
36. However, ICBC has complied with the 2012 Government Review of ICBC (the 2012
Government Review) recommendation to “reduce total management and confidential staffing to
a level more consistent with 2008.”
As indicated in the Application, Chapter 7, Section C.1.1.2, page 7-18, ICBC has had to adjust
its employee mix during the last few years to address its changing business needs, including for
example the following:
Enhance management oversight.
Strengthen risk management and governance.
Support technology infrastructure.
Execute corporate strategic objectives.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.205.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
In response to the 2012 Government Review recommendations, ICBC reduced staffing at the
senior management levels, reduced management and confidential positions, and consolidated
key functions. As indicated in the response to information request 2013.1 RR COPE.1.1, ICBC
has met the commitment to the 2012 Government Review by reducing its workforce by over 260
positions, of which more than 80% were Management and Confidential positions. Also as
indicated in the response to information request 2013.1 RR BCPSO.56.1, ICBC’s 2013 forecast
span of control, with approximately nine employees being supported by one manager, is
consistent with the 2008 actual level.
As described in Chapter 7, Section C.1.1.4, ICBC has improved its FTEs per 1,000 policies (an
indicator of efficiency) by approximately 10% over the period from 2009 to 2013. Since the
2008 FTEs per 1,000 policies was 1.568, the calculation of “approximately 10%” is consistent
for the period from 2008 to 2013 as well. In spite of business growth as indicated by a higher
number of policies, ICBC has maintained staffing levels in line with its service demands while at
the same time improving on efficiency of operations.
ICBC believes that in order to continue to meet the service expectations of customers, it must
manage its employee mix as business needs dictate and its service model evolves. Even
though ICBC’s 2013 forecast Management and Confidential FTEs are higher than its 2008 level,
ICBC has met the commitment to the 2012 Government Review recommendation to reduce
total management and confidential staffing to a level more consistent with 2008.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.206.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.206.1 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit B-4, 2013.1 RR TREAD.12.3; Exhibit A2-9 2012 Government Review of ICBC In 2013.1 RR TREAD.12.3, ICBC states: “In conjunction with ICBC’s President and CEO, the Board of Directors provided a formal response to the 2012 Government Review of ICBC, which was completed on August 15, 2012… To date, ICBC has fully achieved 22 of the 24 recommendations, and partially achieved 2 of the recommendations.” Please identify the reporting requirements to the government, if any, on ICBC’s progress and achievement of the recommendations made in the 2012 Government Review. If any reporting requirements are identified, please provide the relevant reporting deadlines. Response:
In accordance with the Commission’s decision in Order G-193-13, the actual implementation of
the 2012 Government Review of ICBC (the 2012 Government Review) recommendations is the
purview of ICBC and the government and therefore outside the scope of this proceeding. Any
reporting requirements on ICBC’s progress and achievement of the recommendations would
necessarily be out of scope as well. However, ICBC can advise that subsequent to ICBC’s
Response to the 2012 Government Review, ICBC’s Board of Directors created a sub-committee
called the Government Review Committee whose purpose is to ensure implementation of the
commitments made in ICBC’s Response to the 2012 Government Review as well as to monitor
outcomes.
ICBC’s management has provided, to both ICBC’s Government Review Committee and the
government, ongoing status updates on the progress and achievement of the recommendations
made in the 2012 Government Review in April, August, and November of 2013.
ICBC intends to continue to provide status updates periodically to the government until all
commitments made in the 2012 Government Review have been fully implemented.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.206.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.206.2 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit B-4, 2013.1 RR TREAD.12.3; Exhibit A2-9 2012 Government Review of ICBC In 2013.1 RR TREAD.12.3, ICBC states: “In conjunction with ICBC’s President and CEO, the Board of Directors provided a formal response to the 2012 Government Review of ICBC, which was completed on August 15, 2012… To date, ICBC has fully achieved 22 of the 24 recommendations, and partially achieved 2 of the recommendations.” Does ICBC consider that the British Columbia Utilities Commission has a responsibility to ensure that some or all recommendations made to ICBC in the 2012 Government Review are fully implemented? If so, please identify the Government Directive that assigns this responsibility to the Commission. Response:
The Commission’s jurisdiction is to set Basic insurance rates that are just and reasonable.
While this can involve an assessment of the costs of providing Basic insurance, ICBC
management remains solely responsible for running the business. There is no specific
legislation or direction to the contrary that would give the Commission responsibility for ensuring
implementation of the 2012 Government Review recommendations. In Order G-193-13, the
Commission confirmed that the actual implementation of 2012 Government Review
recommendations is the purview of ICBC and the Government.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.207.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.207.1 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit B-1, Chapter 7, p. 7-20 Exhibit B-3-1, 2013.1 RR BCUC.123.1; Exhibit B-4, 2013.1 RR TREAD.19.2 Performance Based Incentive Pay – STIP for Management and Confidential Employees In 2013.1 RR BCUC.123.1, ICBC states: “The 2013 target payment for each eligible employee varies according to position level, and ranges from 10% to 35% of base salary, depending on corporate, divisional, and individual performance. All corporate and divisional metrics have threshold, target, and maximum performance targets. Recognition of achievement and the subsequent reward payment for each component varies on a calibrated scale between 0% and 150% based upon actual results, with the threshold set at 50% of target, target at 100%, and performance maximum at 150%.” In 2013.1 RR BCUC.123.1, ICBC provided “Attachment B – 2013 STIP Net Income Trigger” which includes the following summary:
In 2013.1 RR TREAD.19.2, ICBC submits that actual 2012 corporate net income is $249 million and the forecast 2013 corporate net income is $257 million. Please provide ICBC’s actual historical corporate net income for 2008, 2009, 2010 and 2011.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.207.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Response:
ICBC’s actual historical corporate net income for the years ended 2008, 2009, 2010, and 2011
is summarized in the following table as referenced in ICBC’s 2012 Annual Report in the
Application, Appendix 10 C, page 4.
($ millions) 2008 2009 2010 2011
Corporate Net Income 1 $ 497 $ 563 $ 372 $ 140
1 Financial information since 2010 is prepared based on International Financial Reporting Standards (IFRS). Financial information for 2009 and before is prepared in accordance with pre-IFRS changeover Canadian Generally Accepted Accounting Principles.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.207.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.207.2 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit B-1, Chapter 7, p. 7-20 Exhibit B-3-1, 2013.1 RR BCUC.123.1; Exhibit B-4, 2013.1 RR TREAD.19.2 Performance Based Incentive Pay – STIP for Management and Confidential Employees In 2013.1 RR BCUC.123.1, ICBC states: “The 2013 target payment for each eligible employee varies according to position level, and ranges from 10% to 35% of base salary, depending on corporate, divisional, and individual performance. All corporate and divisional metrics have threshold, target, and maximum performance targets. Recognition of achievement and the subsequent reward payment for each component varies on a calibrated scale between 0% and 150% based upon actual results, with the threshold set at 50% of target, target at 100%, and performance maximum at 150%.” In 2013.1 RR BCUC.123.1, ICBC provided “Attachment B – 2013 STIP Net Income Trigger” which includes the following summary:
In 2013.1 RR TREAD.19.2, ICBC submits that actual 2012 corporate net income is $249 million and the forecast 2013 corporate net income is $257 million. Please complete the following table of the number of employees that received incentive pay based on their level of achievement for the different targets.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.207.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Response:
As stated in the response to the information request 2013.1 RR BCUC.123.1, all corporate and
divisional Short Term Incentive Pay (STIP) Plan metrics have threshold, target, and maximum
performance targets with levels of achievement ranging from 0% up to 150% based on actual
results. Hence, the following table is edited to show the number of employees that received
incentive pay based on a 50% calibrated scale for the corporate and divisional components.
ICBC employees’ individual performance plans (personal component) are based on a 4-point
scale system, i.e., Requires Improvement, Developing/Contributing, Fully Successful, and
Outstanding.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.207.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
STIP for Management and Confidential Employees
Number of employees that received incentive pay 2010 2011 2012
Corporate >= 50% and < 100% of Target - 26 1,137 >= 100% and < 150% of Target 1,109 1,117 - 150% of Target - - - Total 1,109 1,143 1,137
Divisional >= 50% and < 100% of Target - 469 1,123 >= 100% and < 150% of Target 1,103 670 11 150% of Target -
-
No divisional component 1 6 4 3 Total 1,109 1,143 1,137
Personal Requires Improvement 2 na na na Developing/Contributing 3 78 118 41 Fully Successful 822 883 1,003 Outstanding 209 142 93 Total 1,109 1,143 1,137 Notes: 1. Employees in the Executive Office do not have a divisional component. The Vice President Investments also did
not have a divisional component except for 2012. 2. Under Personal component, employees with an individual performance rating of “Requires Improvement” are not
eligible to receive any portion of STIP payment. 3. The category of “Developing” and “Contributing” is combined as one category as prior to the 2012 plan year,
there was no distinction for the purposes of STIP payment. Beginning the 2012 plan year, an individual rating of “Contributing” could result in a STIP reduction of 50 to 100% whereas an individual rating of “Developing” could result in a STIP reduction of 25 to 50%.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.208.1-1.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.208.1-1.2 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit A2-9; Exhibit B-3-1, 2013.1 RR BCUC.124.4 Exhibit B-4, 2013.1 RR COPE.1.6.3, 2013.1 RR TREAD.18.2, TREAD.21.11 2012 Government Review of ICBC The 2012 Government Review of ICBC states: “Compensation consultants are commissioned on a regular basis to monitor salaries in general industry, insurance companies, and the public sector, to ensure ICBC’s compensation is competitive…The province, despite being the shareholder of ICBC, was not included as a comparator.” [Exhibit A2-9] The 2012 Government Review of ICBC also states: “Based on data provided by Public Sector Employers’ Council and ICBC, management salaries are consistently in the top two among BC public sector organizations.” [Exhibit A2-9] In 2013.1 RR BCUC.124.4, ICBC states: “ICBC does however compare itself for compensation purposes to a defined labour market comparator group approved by its Board of Directors and the Public Sector Employers’ Council.” In 2013.1 RR COPE.1.6.3, ICBC states: “ICBC targets total compensation to deliver at the market median (i.e. 50th percentile) for similar positions within a pre-determined labour market comparator group approved by its Board of Directors and the Public Sector Employers’ Council. ICBC utilizes an external consulting firm to conduct the total compensation review as required either for business needs or as instructed by the Board of Directors.” In 2013.1 RR TREAD.18.2, ICBC states: “ICBC participates in two published surveys conducted by Towers Watson and Mercer every year.” In 2013.1 RR TREAD.21.11, ICBC states: “ICBC is committed to reducing its overall compensation costs to a level more consistent with 2008 through the adoption of the Public Sector Employers’ Council (PSEC) Compensation Guidelines and by undertaking a number of initiatives.” 208.1 Please provide the most recent published compensation surveys conducted by Towers Watson and Mercer.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.208.1-1.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
208.1.1 For each survey provided, please provide a complete list of companies included in the comparator group. 208.1.2 For each survey provided, please indicate which percentile ICBC ranks in relation to the market. Response:
208.1 and 208.1.1
ICBC participates annually in Tower Watson’s Compensation Data Bank and the Mercer
Benchmark Database compensation surveys. The most recent published compensation
surveys were released in 2013. As one of the survey participants, ICBC is bound by Mercer’s
System License Agreement and Data License Agreement and Towers Watson’s Data Services
Terms and Conditions and Participants Terms & Conditions not to share any of the survey
content. ICBC is therefore not authorized to share the survey results or provide a list of the
participating companies.
208.1.2
As stated in the response to information request 2013.1 RR TREAD.18.2, published surveys are
commonly conducted annually by well-known compensation consulting firms with no limitation
on participants in any sector. The annual published surveys’ results allow ICBC to withdraw
compensation data and compare its compensation with hundreds of participants within each
sector. It is completely up to the invited companies’ own willingness to participate in any of the
published surveys.
It is important to note that these published surveys are different from the total compensation
review surveys conducted by an external consulting firm. The total compensation review
surveys are customized to ICBC’s jobs only and can be used for comparison to determine
where ICBC ranks in relation to the market comparators whereas the published surveys may
contain some jobs that are not comparable with ICBC’s business.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.208.1-1.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
The last total compensation review survey was conducted by Mercer in 2012 with the following
findings:
Based on the overall results, ICBC’s actual base salaries, on average, are at the 50th
percentile (i.e., market median).
Actual total cash compensation (i.e., base salary and incentive pay) is 98% of the 50th
percentile.
Total compensation (i.e., base salary, incentive pay, and relative value of health and
pension benefits) is 104% of the 50th percentile, which is considered to be “at market”.
The commonly adopted market practice for “at market” is considered to be plus or minus
10% of the target percentile, which, in ICBC’s case, is the 50th percentile of ICBC’s
market comparator group.
ICBC’s compensation for the Management and Confidential group employees has been frozen
in 2012 and 2013, and as a result, it is fair to say that were Mercer to conduct the same survey
in 2013 based on the same labour market comparator group, ICBC’s total compensation would
now rank lower than 104% and be even closer to the 50th percentile.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.208.1.3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.208.1.3 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit A2-9; Exhibit B-3-1, 2013.1 RR BCUC.124.4 Exhibit B-4, 2013.1 RR COPE.1.6.3, 2013.1 RR TREAD.18.2, TREAD.21.11 2012 Government Review of ICBC The 2012 Government Review of ICBC states: “Compensation consultants are commissioned on a regular basis to monitor salaries in general industry, insurance companies, and the public sector, to ensure ICBC’s compensation is competitive…The province, despite being the shareholder of ICBC, was not included as a comparator.” [Exhibit A2-9] The 2012 Government Review of ICBC also states: “Based on data provided by Public Sector Employers’ Council and ICBC, management salaries are consistently in the top two among BC public sector organizations.” [Exhibit A2-9] In 2013.1 RR BCUC.124.4, ICBC states: “ICBC does however compare itself for compensation purposes to a defined labour market comparator group approved by its Board of Directors and the Public Sector Employers’ Council.” In 2013.1 RR COPE.1.6.3, ICBC states: “ICBC targets total compensation to deliver at the market median (i.e. 50th percentile) for similar positions within a pre-determined labour market comparator group approved by its Board of Directors and the Public Sector Employers’ Council. ICBC utilizes an external consulting firm to conduct the total compensation review as required either for business needs or as instructed by the Board of Directors.” In 2013.1 RR TREAD.18.2, ICBC states: “ICBC participates in two published surveys conducted by Towers Watson and Mercer every year.” In 2013.1 RR TREAD.21.11, ICBC states: “ICBC is committed to reducing its overall compensation costs to a level more consistent with 2008 through the adoption of the Public Sector Employers’ Council (PSEC) Compensation Guidelines and by undertaking a number of initiatives.” Please indicate when the next compensations surveys are expected to be completed by Towers Watson and Mercer.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.208.1.3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Response:
In order to keep abreast of compensation trends and changes in the labour market, ICBC
participates annually in Tower Watson’s Compensation Data Bank and the Mercer Benchmark
Database. ICBC has not received the 2014 survey dates from Towers Watson and Mercer. In
general, these published surveys are open for participation in April and will be available for the
participating companies to withdraw data through their subscribed online Data Bank in
September or October each year, subject to the actual survey schedules to be determined by
the two survey hosts.
ICBC’s Board of Directors’ and the Public Sector Employers’ Council’s approved management
compensation plan changes which will all be implemented by January 1, 2014. ICBC conducts
triennial reviews of total compensation which is within normal compensation industry practice.
Therefore ICBC will not be conducting another total compensation review until Q4 2016, barring
extraordinary circumstances.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.208.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.208.2 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit A2-9; Exhibit B-3-1, 2013.1 RR BCUC.124.4 Exhibit B-4, 2013.1 RR COPE.1.6.3, 2013.1 RR TREAD.18.2, TREAD.21.11 2012 Government Review of ICBC The 2012 Government Review of ICBC states: “Compensation consultants are commissioned on a regular basis to monitor salaries in general industry, insurance companies, and the public sector, to ensure ICBC’s compensation is competitive…The province, despite being the shareholder of ICBC, was not included as a comparator.” [Exhibit A2-9] The 2012 Government Review of ICBC also states: “Based on data provided by Public Sector Employers’ Council and ICBC, management salaries are consistently in the top two among BC public sector organizations.” [Exhibit A2-9] In 2013.1 RR BCUC.124.4, ICBC states: “ICBC does however compare itself for compensation purposes to a defined labour market comparator group approved by its Board of Directors and the Public Sector Employers’ Council.” In 2013.1 RR COPE.1.6.3, ICBC states: “ICBC targets total compensation to deliver at the market median (i.e. 50th percentile) for similar positions within a pre-determined labour market comparator group approved by its Board of Directors and the Public Sector Employers’ Council. ICBC utilizes an external consulting firm to conduct the total compensation review as required either for business needs or as instructed by the Board of Directors.” In 2013.1 RR TREAD.18.2, ICBC states: “ICBC participates in two published surveys conducted by Towers Watson and Mercer every year.” In 2013.1 RR TREAD.21.11, ICBC states: “ICBC is committed to reducing its overall compensation costs to a level more consistent with 2008 through the adoption of the Public Sector Employers’ Council (PSEC) Compensation Guidelines and by undertaking a number of initiatives.” Please provide a complete list of companies included in the comparator group approved by ICBC’s Board of Directors and the Public Sector Employers’ Council.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.208.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Response:
ICBC’s Board of Directors and the Public Sector Employers’ Council approved the market
comparator group which comprise of 1/3 Canadian public sector, 1/3 Canadian insurance
sector, and 1/3 Canadian general sector entities. As of January 1, 2014, ICBC’s Board of
Directors has amended the general sector from companies with $1 billion to $10 billion in
revenue to those with $1 billion to $4 billion in revenue to more closely approximate
comparisons to companies of ICBC’s revenue size.
Companies that participate in the annual published surveys within ICBC’s defined sectors are
included in the market comparison. As stated in the response to information request 2013.2 RR
BCUC.208.1.1, filed in the response to 2013.2 RR BCUC.208.1-1.2, ICBC is not authorized to
list the names of the participating companies.
In 2013, ICBC’s Board of Directors specifically directed that the compensation data from the BC
Public Service Agency, Saskatchewan Government Insurance (SGI), and Manitoba Public
Insurance (MPI) must be included in the labour market comparator group. In 2012, ICBC’s
market comparison included SGI and MPI, but not the BC Public Service Agency as they did not
participate in any of the published surveys. Going forward, the BC Public Service Agency will
also be added to ICBC’s survey sample through a custom supplementary survey.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.208.2.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.208.2.1 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit A2-9; Exhibit B-3-1, 2013.1 RR BCUC.124.4 Exhibit B-4, 2013.1 RR COPE.1.6.3, 2013.1 RR TREAD.18.2, TREAD.21.11 2012 Government Review of ICBC The 2012 Government Review of ICBC states: “Compensation consultants are commissioned on a regular basis to monitor salaries in general industry, insurance companies, and the public sector, to ensure ICBC’s compensation is competitive…The province, despite being the shareholder of ICBC, was not included as a comparator.” [Exhibit A2-9] The 2012 Government Review of ICBC also states: “Based on data provided by Public Sector Employers’ Council and ICBC, management salaries are consistently in the top two among BC public sector organizations.” [Exhibit A2-9] In 2013.1 RR BCUC.124.4, ICBC states: “ICBC does however compare itself for compensation purposes to a defined labour market comparator group approved by its Board of Directors and the Public Sector Employers’ Council.” In 2013.1 RR COPE.1.6.3, ICBC states: “ICBC targets total compensation to deliver at the market median (i.e. 50th percentile) for similar positions within a pre-determined labour market comparator group approved by its Board of Directors and the Public Sector Employers’ Council. ICBC utilizes an external consulting firm to conduct the total compensation review as required either for business needs or as instructed by the Board of Directors.” In 2013.1 RR TREAD.18.2, ICBC states: “ICBC participates in two published surveys conducted by Towers Watson and Mercer every year.” In 2013.1 RR TREAD.21.11, ICBC states: “ICBC is committed to reducing its overall compensation costs to a level more consistent with 2008 through the adoption of the Public Sector Employers’ Council (PSEC) Compensation Guidelines and by undertaking a number of initiatives.” Please indicate which percentile ICBC ranks in relation to the comparator group.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.208.2.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Response:
Please see the response to information request 2013.2 RR BCUC.208.1.2, filed in the response
to information request 2013.1 RR BCUC.208.1-1.2, for the percentile that ICBC ranks in relation
to the market comparators.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.208.2.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.208.2.2 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit A2-9; Exhibit B-3-1, 2013.1 RR BCUC.124.4 Exhibit B-4, 2013.1 RR COPE.1.6.3, 2013.1 RR TREAD.18.2, TREAD.21.11 2012 Government Review of ICBC The 2012 Government Review of ICBC states: “Compensation consultants are commissioned on a regular basis to monitor salaries in general industry, insurance companies, and the public sector, to ensure ICBC’s compensation is competitive…The province, despite being the shareholder of ICBC, was not included as a comparator.” [Exhibit A2-9] The 2012 Government Review of ICBC also states: “Based on data provided by Public Sector Employers’ Council and ICBC, management salaries are consistently in the top two among BC public sector organizations.” [Exhibit A2-9] In 2013.1 RR BCUC.124.4, ICBC states: “ICBC does however compare itself for compensation purposes to a defined labour market comparator group approved by its Board of Directors and the Public Sector Employers’ Council.” In 2013.1 RR COPE.1.6.3, ICBC states: “ICBC targets total compensation to deliver at the market median (i.e. 50th percentile) for similar positions within a pre-determined labour market comparator group approved by its Board of Directors and the Public Sector Employers’ Council. ICBC utilizes an external consulting firm to conduct the total compensation review as required either for business needs or as instructed by the Board of Directors.” In 2013.1 RR TREAD.18.2, ICBC states: “ICBC participates in two published surveys conducted by Towers Watson and Mercer every year.” In 2013.1 RR TREAD.21.11, ICBC states: “ICBC is committed to reducing its overall compensation costs to a level more consistent with 2008 through the adoption of the Public Sector Employers’ Council (PSEC) Compensation Guidelines and by undertaking a number of initiatives.” Is the comparator group approved by the Board of Directors and the Public Sector Employers’ Council different from the comparator group used in the Towers Watson and Mercer surveys? If so, please explain why they are different.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.208.2.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Response:
Yes, compensation data from ICBC’s Board of Directors and Public Sector Employers’ Council
approved comparator group is withdrawn from the Towers Watson and Mercer online Data
Bank, and is a subset of that data. Please see the response to information request 2013.2 RR
BCUC.208.2 for more details.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.208.3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.208.3 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit A2-9; Exhibit B-3-1, 2013.1 RR BCUC.124.4 Exhibit B-4, 2013.1 RR COPE.1.6.3, 2013.1 RR TREAD.18.2, TREAD.21.11 2012 Government Review of ICBC The 2012 Government Review of ICBC states: “Compensation consultants are commissioned on a regular basis to monitor salaries in general industry, insurance companies, and the public sector, to ensure ICBC’s compensation is competitive…The province, despite being the shareholder of ICBC, was not included as a comparator.” [Exhibit A2-9] The 2012 Government Review of ICBC also states: “Based on data provided by Public Sector Employers’ Council and ICBC, management salaries are consistently in the top two among BC public sector organizations.” [Exhibit A2-9] In 2013.1 RR BCUC.124.4, ICBC states: “ICBC does however compare itself for compensation purposes to a defined labour market comparator group approved by its Board of Directors and the Public Sector Employers’ Council.” In 2013.1 RR COPE.1.6.3, ICBC states: “ICBC targets total compensation to deliver at the market median (i.e. 50th percentile) for similar positions within a pre-determined labour market comparator group approved by its Board of Directors and the Public Sector Employers’ Council. ICBC utilizes an external consulting firm to conduct the total compensation review as required either for business needs or as instructed by the Board of Directors.” In 2013.1 RR TREAD.18.2, ICBC states: “ICBC participates in two published surveys conducted by Towers Watson and Mercer every year.” In 2013.1 RR TREAD.21.11, ICBC states: “ICBC is committed to reducing its overall compensation costs to a level more consistent with 2008 through the adoption of the Public Sector Employers’ Council (PSEC) Compensation Guidelines and by undertaking a number of initiatives.” Please provide a copy of the 2012 Crown Corporation Executive Compensation Policy.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.208.3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Response:
Please see Attachment A – Crown Corporation Executive Compensation Policy July 2012,
which is also available on the provincial government website:
www.fin.gov.bc.ca/psec/disclosuredocs/crown_corporation_executive_compensation_july_2012.pdf.
ICBC’s Information Request Response
Insurance Corporation of British Columbia
December 23, 2013
2013.2 RR BCUC.208.3 – Attachment A – Crown Corporation Executive Compensation Policy July 2012
Crown Corporation Executive Compensation
Policy
July 2012
PURPOSE
This policy will result in a more rigorous approach to executive compensation in Crown corporations.
BACKGROUND
The legislative authority for this policy is the Public Sector Employers Act. The Act requires that employee compensation plans and contracts be approved by the Minister responsible for the Act prior to implementation. Contracts describe all elements of total compensation for an employee, including salary, salary holdbacks, bonuses, statutory and non-statutory benefits, employer pension contributions, transportation allowances / vehicles, and perquisites.
Early in 2012, a working group of Crown Corporation Board Chairs was formed at the request of government to propose revisions to the framework guiding executive compensation in Crown corporations. In particular, the government, in its role as shareholder, was concerned about levels of bonuses available in some Crown corporations, variations in their administration, and the number of executives in some Crown corporations. This policy follows from the recommendations of that working group.
PRINCIPLES AND OBJECTIVES
Attract and retain the required skills, talent, and experience at an affordable cost to taxpayers and ratepayers.
Use total compensation maximums for CEOs, and ensure all other executive salaries are less than that of the CEO in each Crown corporation.
Eliminate bonuses. Implement salary holdbacks within a maximum base salary. Limit generic perquisites to transportation allowances, and only provide such an allowance
where appropriate. Reimburse out-of-pocket expenses in adherence with BC Government policy. Organizational design, including the number of executives and number of organizational
layers, that is satisfactory to Government. Transition to full implementation of this policy shall be consistent with employment law and
therefore avoid incurring financial liabilities.
2 Crown Corporation Compensation Guidelines
SCOPE
This policy will primarily affect Crown corporations where bonuses are available, bonuses or holdbacks are treated as pensionable income, perquisites are provided, expense reimbursement is not consistent with government expense reimbursement policy, other executives earn more than 85% of the CEO’s total compensation, there are more than six organizational layers or there are more than seven executives reporting directly to the CEO.
While government aims to increase standardization across Crown corporations in the areas described in this policy, it recognizes that exceptions may be required due to special circumstances including unique industry practices. Exceptions may be sought from the Minister responsible for the Act through PSEC Secretariat and must be in the form of written proposals with rationale.
FRAMEWORK
Salary/Holdbacks/Bonuses for Senior Executives
Executive salaries are now frozen in all Crown corporations subject to the Public Sector Employers Act.
This freeze applies to all Crown corporation executives subject to the Public Sector Employers Act, whether or not they are currently at the top of their salary band.1 As with unionized staff, salaries are often set within a limited range – or band – to allow modest increases according to performance and experience without re-setting salary. Where there is a legal requirement for movement within approved salary bands, Crown corporations should discuss the particular circumstances with PSEC Secretariat.
Where bonuses are now present, an implementation plan to move to holdbacks is to be provided to PSEC Secretariat by January 1, 2013.
When new staff or newly-promoted staff move to an executive position which currently has bonus pay available to it, a hold back up to a maximum of 20% of maximum base salary will be employed in place of bonuses. In this situation, the employer should discuss a revised compensation plan in detail with PSEC Secretariat before making an employment offer. The discussion will focus on how to adhere to the shareholder’s principles and objectives described above. It will include discussion of a reduction in total base salary for senior executives of 10%. The reduction reflects either or both a reduced amount of pay at risk and compression with CEO compensation.
Awarding of holdback in the future and the administration of current arrangements in the interim will be subject to board assessment of performance against stretch targets tied to
1 ‘Executive’ in this context refers to those executives who report directly to the CEO or who are vice-presidents, whether or not they report to the CEO. If there is doubt on whether or not this applies to a particular employee, contact the Public Sector Employers’ Council Secretariat for clarification.
3 Crown Corporation Compensation Guidelines
shareholder and board priorities. Performance criteria will be established by agreement between the Board and the Minister responsible for the Crown Corporation and will reflect government priorities as outlined in the shareholder’s letter of expectations.
Holdbacks will not be treated as pensionable income for new employees or employees taking new positions.
Bonuses/holdbacks for other non-union employees
In general, holdbacks should be used for executives only. They will be phased out below the executive level. New or newly-promoted employees below the vice-president / executive level will not be eligible for holdbacks, bonuses or incentive pay. Elimination of bonuses and holdbacks where they apply to unionized staff is a bargaining issue and not within the scope of this policy.
Perquisites and Allowances
Where present, perquisite allowances and other perquisites will be discontinued for new employees or newly promoted employees. For existing employees, they will be eliminated as quickly as possible within the bounds of employment law. A plan for their removal is to be provided to PSEC Secretariat by January 1, 2013.
Transportation allowances are permitted where justified and will follow government rates and terms which may be found at http://www.bcpublicserviceagency.gov.bc.ca/policy/Schedule/schedule_6.htm
Expense Reimbursement
Out of pocket expenses will be reimbursed at government rates for equivalent staff and by applying government policies. Where government rates and policy are not now employed, an implementation plan is required to PSEC Secretariat by January 1, 2013.
http://www.bcpublicserviceagency.gov.bc.ca/policy/terms_conditions/Part_06.htm
Salary Compression
If executives reporting to a CEO earn more than 85% of the CEO’s total compensation, a plan to eliminate the compression will be developed in consultation with PSEC Secretariat for approval by the Minister responsible for the Act. This may entail red-circling existing compensation levels and addressing the compression through attrition. Plans should be provided to PSEC Secretariat by January 1, 2013.
4 Crown Corporation Compensation Guidelines
Organizational Design
Crown corporations will restrict the number of organizational layers to six unless an exception is approved by the Minister responsible for the Public Sector Employers Act. Organization charts will be requested by PSEC Secretariat as part of the annual executive compensation disclosure process. Where more than six layers are currently present, an implementation plan is to be sent to PSEC Secretariat by January 1, 2013.
Vice-presidents and vice-president equivalents are to be in a direct reporting relationship to the CEO and will not exceed seven without approval of the Minister responsible for the Act. Where this is not currently the case, implementation plans to reach this level or requests for exceptions will require approval from the Minister responsible for the Act. Implementation plans are required by January 1, 2013 and should be sent to PSEC Secretariat.
COMPLIANCE
This policy supports a more consistent and rigorous approach to executive compensation in Crown corporations, consistent with the values of government. Where issues arise in specific circumstances that are not addressed by this policy, the Crown corporation will work with PSEC Secretariat to resolve those issues within the policy’s intent.
The Public Sector Employers Act has a number of enforcement provisions including:
• Any compensation that is paid to an employee in excess of an approved compensation plan is a debt payable to government. This includes, for example, salary increases in excess of a compensation plan approved by the Minister responsible for the Act, or compensation paid under a compensation plan that has not been approved by the Minister. Severance payments that are in excess of the Act are also a debt payable to government.
• The Act provides public sector employers with one year to recoup payments made to employees that are in contravention of the Act.
• Any provision of a contract of employment that states that all or part of the contract is confidential is void under the Act.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.208.4 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.208.4 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit A2-9; Exhibit B-3-1, 2013.1 RR BCUC.124.4 Exhibit B-4, 2013.1 RR COPE.1.6.3, 2013.1 RR TREAD.18.2, TREAD.21.11 2012 Government Review of ICBC The 2012 Government Review of ICBC states: “Compensation consultants are commissioned on a regular basis to monitor salaries in general industry, insurance companies, and the public sector, to ensure ICBC’s compensation is competitive…The province, despite being the shareholder of ICBC, was not included as a comparator.” [Exhibit A2-9] The 2012 Government Review of ICBC also states: “Based on data provided by Public Sector Employers’ Council and ICBC, management salaries are consistently in the top two among BC public sector organizations.” [Exhibit A2-9] In 2013.1 RR BCUC.124.4, ICBC states: “ICBC does however compare itself for compensation purposes to a defined labour market comparator group approved by its Board of Directors and the Public Sector Employers’ Council.” In 2013.1 RR COPE.1.6.3, ICBC states: “ICBC targets total compensation to deliver at the market median (i.e. 50th percentile) for similar positions within a pre-determined labour market comparator group approved by its Board of Directors and the Public Sector Employers’ Council. ICBC utilizes an external consulting firm to conduct the total compensation review as required either for business needs or as instructed by the Board of Directors.” In 2013.1 RR TREAD.18.2, ICBC states: “ICBC participates in two published surveys conducted by Towers Watson and Mercer every year.” In 2013.1 RR TREAD.21.11, ICBC states: “ICBC is committed to reducing its overall compensation costs to a level more consistent with 2008 through the adoption of the Public Sector Employers’ Council (PSEC) Compensation Guidelines and by undertaking a number of initiatives.” Please provide a copy of the Public Sector Employers’ Council (PSEC) Compensation Guidelines.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.208.4 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Response:
The Compensation Guidelines stated in the response to the information request 2012.1 RR
TREAD.21.11 is a reference to the Crown Corporation Executive Compensation Policy that was
communicated to all Crown corporations by the Public Sector Employers’ Council in July 2012.
Please see the response to information request 2013.2 RR BCUC.208.3, Attachment A – Crown
Corporation Executive Compensation Policy July 2012 for a copy of the guidelines.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.208.5 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.208.5 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit A2-9; Exhibit B-3-1, 2013.1 RR BCUC.124.4 Exhibit B-4, 2013.1 RR COPE.1.6.3, 2013.1 RR TREAD.18.2, TREAD.21.11 2012 Government Review of ICBC The 2012 Government Review of ICBC states: “Compensation consultants are commissioned on a regular basis to monitor salaries in general industry, insurance companies, and the public sector, to ensure ICBC’s compensation is competitive…The province, despite being the shareholder of ICBC, was not included as a comparator.” [Exhibit A2-9] The 2012 Government Review of ICBC also states: “Based on data provided by Public Sector Employers’ Council and ICBC, management salaries are consistently in the top two among BC public sector organizations.” [Exhibit A2-9] In 2013.1 RR BCUC.124.4, ICBC states: “ICBC does however compare itself for compensation purposes to a defined labour market comparator group approved by its Board of Directors and the Public Sector Employers’ Council.” In 2013.1 RR COPE.1.6.3, ICBC states: “ICBC targets total compensation to deliver at the market median (i.e. 50th percentile) for similar positions within a pre-determined labour market comparator group approved by its Board of Directors and the Public Sector Employers’ Council. ICBC utilizes an external consulting firm to conduct the total compensation review as required either for business needs or as instructed by the Board of Directors.” In 2013.1 RR TREAD.18.2, ICBC states: “ICBC participates in two published surveys conducted by Towers Watson and Mercer every year.” In 2013.1 RR TREAD.21.11, ICBC states: “ICBC is committed to reducing its overall compensation costs to a level more consistent with 2008 through the adoption of the Public Sector Employers’ Council (PSEC) Compensation Guidelines and by undertaking a number of initiatives.” 208.5 Please indicate when the most recent total compensation review was performed by the external consulting firm.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.208.5 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
208.5.1 Please provide any reports completed by the external consulting firm during the most recent total compensation review. 208.5.2 Please indicate when the next total compensation review will be completed by an external consulting firm. Response:
208.5 and 208.5.1
The last total compensation review was conducted by Mercer in 2012, and implemented by
ICBC in 2013 along with the ICBC Board of Directors and Public Sector Employers’ Council
(PSEC) approved changes to ICBC’s management compensation plan. The total compensation
review survey report is proprietary to Mercer, so ICBC is not authorized to release it. Please
see the responses to information requests in 2013.2 RR BCUC.208.1-1.2 for a further
explanation.
208.5.2
ICBC conducts total compensation review on a triennial basis. The next total compensation
review is scheduled for 2016.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.209.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.209.1 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit A2-9; Exhibit B-3-1, 2013.1 RR BCUC.124.1 2012 Government Review of ICBC – Pension The 2012 Government Review of ICBC states: “Management employees are members of the ICBC Pension Plan, which is funded through contributions made by ICBC (2/3) and the employees (1/3); normal practice in the public sector is closer to 1:1. In addition to the pension plan, ICBC has established a Supplementary Employee Retirement Plan which is funded entirely by ICBC for management employees earning over $149K.” [Exhibit A2-9] ICBC provided the following table of employer vs. employee contribution rates in 2013.1 RR BCUC.124.1:
Please discuss any action plans with timelines, if any, for changing the level of ICBC contributions to the ICBC Pension Plan for Management and Confidential Employees and the Supplementary Employee Retirement Plan. Response:
ICBC’s contributions to the ICBC Pension Plan for Management and Confidential Employees
(the plan) are the amounts required to fund one year of plan member benefits, less contributions
made by plan members. As the funding requirements change for the plan, ICBC’s contributions
will also change.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.209.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
The contributions made by ICBC on behalf of plan members are one component of the total
compensation for Management and Confidential employees. There are no current plans to
change the level of contributions made by ICBC at this time, however through ongoing review of
the total compensation mix for Management and Confidential employees, ICBC may determine
that an increase in plan member contributions is warranted, thereby reducing ICBC’s required
funding levels.
The Supplemental Employee Retirement Plan is a non-funded plan, meaning that there are no
ongoing contributions made to the plan by either ICBC or plan members.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.210.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.210.1 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit B-1, Chapter 7, pp. 7-14, 7-55 and 7-62 Exhibit B-3-1, 2013.1 RR BCUC.122.2 and 122.4 Compensation Costs In 2013.1 RR BCUC.122.2, ICBC provides the following table:
In 2013.1 RR BCUC.122.4 ICBC states: “In Chapter 7, page 7-14, footnote 10, ICBC specified that as shown in Figure 7.4, contractor costs are netted against the amount “Charged to Projects”. Typically, contractors are independent service providers that ICBC retains on a short-term basis to fulfill specific project support requirements.” Please recreate the table provided in response to 2013.1 RR BCUC 122.2 to include a line item for contractor costs and to present the ‘Charged to Project’ line items gross of contractor costs. Response:
ICBC provides, in the table below, a revised Figure 7.4 from the response to information request
2013.1 RR BCUC.122.2 showing the breakdown of amounts charged to projects for the 2008 to
2012 actual and 2013 forecast to include a line item for “Contractor Costs” and to present the
“Charged to Projects” line items gross of contractor costs.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.210.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Figure 7.4 - Compensation by Employee Group (Revised To Include Contractor Costs)
($ millions) 2008 Actual
2009 Actual
2010Actual
2011 Actual
2012 Actual
2013 Forecast
Bargaining Unit 273$ 275$ 273$ 268$ 269$ 276$
Management and Confidential 112$ 124$ 135$ 141$ 145$ 131$
Employee Compensation 1 385$ 399$ 408$ 409$ 414$ 407$
Contractor Costs 13$ 14$ 9$ 11$ 5$ 5$
Charged to Projects: Capitalized Labour for TP -$ -$ -$ (5)$ (10)$ (13)$
Charged to Projects: Core Operations (20)$ (24)$ (15)$ (14)$ (10)$ (8)$
Charged to Projects 1 (7)$ (10)$ (6)$ (8)$ (15)$ (16)$
Net Compensation 2 378$ 389$ 402$ 401$ 399$ 391$
Notes:1
2
Employee Compensation and Charged to Projects - 2008 actual from the Revenue Requirements Application for the 2012 Policy Year, Chapter 7, Figure 7.6 - Compensation by Employee Group; 2009 to 2012 actual, and 2013 forecast from Exhibit B-1, Figure 7.4 - Compensation by Employee Group
Net Compensation - 2008 actual from the Revenue Requirements Application for the 2012 Policy Year, Chapter 7, Figure 7.6 - Compensation by Employee Group; 2009 to 2012 actual, and 2013 forecast from Exhibit B-1, Figure 7.3 - Base Operarting Expenses by Expense Category
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.211.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.211.1 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit B-1, Chapter 7, pp. 7-14, 7-55 and 7-62 Exhibit B-3-1, 2013.1 RR BCUC.122.4 Compensation Costs – Pension and Post-Retirement Benefits In 2013.1 RR BCUC.122.4, ICBC states: ““Employee Compensation”, which pertains to salaries, benefits and other compensation (e.g., performance-based incentive pay) is presented by employee group, split between Bargaining Unit and Management and Confidential employees, in detail in Chapter 7, Appendix 7 C, Figure 7C.3. “Employee Compensation” as well as FTEs by employee group is also detailed in Chapter 7, Appendix 7 C, Figure 7C.4 with respect to number of FTEs, base salary, performance-based incentive pay, pension, post-retirement benefits, and other benefits.” Figure 7.20 ‘Unique Items’ of Exhibit B-1 includes the following Pension and Post-Retirement Benefit Adjustment:
Please confirm, or explain otherwise, that the “Employee Compensation” line item of Figure 7C.3 and 7C.4 excludes pension and post-retirement benefit costs included in the ‘Pension and Post-Retirement Benefit Adjustment’ of Figure 7.20 (i.e. $19 million for “The difference between the standard benefit rate as a percentage of salary charged to each user division and the actual cost of benefit to ICBC” and $19 million for “Changes in the IFRS accounting standard on employee benefits (IAS 19R), assumptions for accounting purposes, and discount rate.”) Response:
ICBC confirms that the amounts shown in the “Employee Compensation” line item of the
Application, Chapter 7, Figure 7.4, Appendix 7 C, Figure 7C.2, and Apendix 7 C, Figure 7C.3
are same as those shown in the “Total Compensation” column of Appendix 7 C, Figure 7C.4
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.211.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
and that these amounts exclude the pension and post-retirement benefit costs included in the
“Pension and Post-Retirement Benefit Adjustment” line item of Chapter 7, Figure 7.20.
For the 2013 forecast, for example, “Employee Compensation” excludes the following items:
$19 million in pension and post-retirement benefits costs related to the difference
between the standard benefit rate as a percentage of salary charged to each user
division and the actual cost of benefits to ICBC.
$19 million in pension and post-retirement benefits costs related to changes in
International Accounting Standard on Employee Benefits (IAS 19R), assumptions
changes for accounting purposes and discount rate changes.
$7 million exclusion amount related to a change in the rate used to discount pension
liabilities.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.211.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.211.2 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit B-1, Chapter 7, pp. 7-14, 7-55 and 7-62 Exhibit B-3-1, 2013.1 RR BCUC.122.4 Compensation Costs – Pension and Post-Retirement Benefits In 2013.1 RR BCUC.122.4, ICBC states: ““Employee Compensation”, which pertains to salaries, benefits and other compensation (e.g., performance-based incentive pay) is presented by employee group, split between Bargaining Unit and Management and Confidential employees, in detail in Chapter 7, Appendix 7 C, Figure 7C.3. “Employee Compensation” as well as FTEs by employee group is also detailed in Chapter 7, Appendix 7 C, Figure 7C.4 with respect to number of FTEs, base salary, performance-based incentive pay, pension, post-retirement benefits, and other benefits.” Figure 7.20 ‘Unique Items’ of Exhibit B-1 includes the following Pension and Post-Retirement Benefit Adjustment:
Please confirm, or explain otherwise, that the total cost of Pension and Post-Retirement Benefits includes the following items included in ‘Pension and Post-Retirement Benefit Adjustment’ of Figure 7.20: The difference between the standard benefit rate as a percentage of salary charged to
each user division and the actual cost of benefit to ICBC. Changes in the IFRS accounting standard on employee benefits (IAS 19R),
assumptions for accounting purposes, and discount rate.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.211.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Response:
Yes, ICBC’s total cost of pension and post-retirement benefits includes the amounts shown in
the “Pension and Post-Retirement Benefit Adjustment” line item in the Application, Chapter 7,
Figure 7.20, page 7-55, which for the 2013 forecast includes:
$19 million in pension and post-retirement benefits costs related to the difference
between the standard benefit rate as a percentage of salary charged to each user
division and the actual cost of benefits to ICBC.
$19 million in pension and post-retirement benefits costs related to changes in
International Accounting Standard on Employee Benefits (IAS 19R), assumptions
changes for accounting purposes and discount rate changes.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.211.2.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 3
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.211.2.1 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit B-1, Chapter 7, pp. 7-14, 7-55 and 7-62 Exhibit B-3-1, 2013.1 RR BCUC.122.4 Compensation Costs – Pension and Post-Retirement Benefits In 2013.1 RR BCUC.122.4, ICBC states: ““Employee Compensation”, which pertains to salaries, benefits and other compensation (e.g., performance-based incentive pay) is presented by employee group, split between Bargaining Unit and Management and Confidential employees, in detail in Chapter 7, Appendix 7 C, Figure 7C.3. “Employee Compensation” as well as FTEs by employee group is also detailed in Chapter 7, Appendix 7 C, Figure 7C.4 with respect to number of FTEs, base salary, performance-based incentive pay, pension, post-retirement benefits, and other benefits.” Figure 7.20 ‘Unique Items’ of Exhibit B-1 includes the following Pension and Post-Retirement Benefit Adjustment:
Please recreate Figure 7C.4 of Exhibit B-1 to include the following items included in ‘Pension and Post-Retirement Benefit Adjustment’ of Figure 7.20: The difference between the standard benefit rate as a percentage of salary charged to
each user division and the actual cost of benefit to ICBC. Changes in the IFRS accounting standard on employee benefits (IAS 19R),
assumptions for accounting purposes, and discount rate. Response:
ICBC has recreated the summary shown in the Application, Chapter 7, Appendix 7 C, Figure
7C.4 to reflect the amounts included in the “Pension and Post-Retirement Benefit Adjustment”
line item in Chapter 7, Figure 7.20.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.211.2.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 3
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
For the 2013 forecast, for example, the amounts presented in Chapter 7, Figure 7.20 “Pension
and Post-Retirement Benefit Adjustment” include:
$19 million in pension and post-retirement benefits costs related to the difference
between the standard benefit rate as a percentage of salary charged to each user
division and the actual cost of benefit to ICBC.
$19 million in pension and post-retirement benefits costs related to changes in
International Accounting Standard on Employee Benefits (IAS 19R), assumptions
changes for accounting purposes and discount rate changes.
$7 million exclusion amount related to a change in the rate used to discount pension
liabilities.
The items are now included in the 2013 forecast “Total Benefits” column in the revised Chapter
7, Appendix 7 C, Figure 7C.4 (see footnote 1).
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.211.2.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 3 of 3
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2009 (CGAAP) - Actual
Line #Employee Group FTE # Salary
Performance-based
Incentive Pay
Pension Benefits
Post Retirement
Benefits
Other Benefits1
Total Compensation
1 BU 4,009 $224 $9 ($6) $8 $33 $2682 M&C 972 $91 $14 $9 $3 $3 $1203 Total 4,981 $315 $23 $3 $11 $36 $388
2010 (CGAAP) - Actual
Line #Employee Group FTE # Salary
Performance-based
Incentive Pay
Pension Benefits
Post Retirement
Benefits
Other Benefits1
Total Compensation
1 BU 3,961 $223 $9 ($11) $12 $40 $2732 M&C 968 $96 $19 $12 $5 $1 $1333 Total 4,929 $319 $28 $1 $17 $41 $406
2010 (IFRS) - Actual
Line #Employee Group FTE # Salary
Performance-based
Incentive Pay
Pension Benefits
Post Retirement
Benefits
Other Benefits1
Total Compensation
1 BU 3,961 $223 $9 ($11) $12 $49 $2822 M&C 968 $96 $19 $12 $5 $6 $1383 Total 4,929 $319 $28 $1 $17 $55 $420
2011 (IFRS) - Actual
Line #Employee Group FTE # Salary
Performance-based
Incentive Pay
Pension Benefits
Post Retirement
Benefits
Other Benefits1
Total Compensation
1 BU 3,936 $222 $4 $9 $13 $29 $2772 M&C 1,050 $105 $15 $9 $6 $10 $1453 Total 4,986 $327 $19 $18 $19 $39 $422
2012 (IFRS) - Actual
Line #Employee Group FTE # Salary
Performance-based
Incentive Pay
Pension Benefits
Post Retirement
Benefits
Other Benefits1
Total Compensation
1 BU 3,822 $219 $6 $11 $14 $30 $2802 M&C 1,054 $109 $13 $11 $7 $11 $1513 Total 4,876 $328 $19 $22 $21 $41 $431
2013 (IFRS) - Forecast
Line #Employee Group FTE # Total
Compensation
1 BU 3,808 $2982 M&C 926 $1403 Total 4,734 $438Note: Rounding may affect totals.
Figure 7C.4 – Compensation Details by Employee Group (Revised to include Pension and Post-Retirement Benefit Adjustment amount as presented in Figure 7.20 - Unique Items)
1 Other benefits revised to include pension and post-retirement benefit adjustment as shown in Figure 7.20 - Unique Items.
($ MILLIONS)
($ MILLIONS)
($ MILLIONS)
($ MILLIONS)
$341 $97
2 2013 forecast for salary and performance-based incentive pay: calculated based on compensation factors such as forecast FTEs, employee mix, and compensation level changes.3 2013 forecast for total benefits including pension, post-retirement and other. Other benefits revised to include (a) pension and post-retirement benefit adjustment as shown in Figure 7.20 - Unique Items, (b) IAS 19R amount of $19 million, and (c) exclusion of $7 million in pension and post-retirement benefits related to change in rate used to discount pension liabilities.
($ MILLIONS)
($ MILLIONS)
Salary and Performance-based Incentive Pay2 Total Benefits3
$230 $68$111 $29
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.212.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 3
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.212.1 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit B-1, Chapter 7, pp. 7-53 to 7-58; Appendix 10C, p. 77 Exhibit B-3-1, 2013.1 RR BCUC.125.3, 125.3.2 Unique Items – Pension and Post-Retirement Benefit Adjustments Appendix 10C of Exhibit B-1 (2012 ICBC Annual Report) includes the following net benefit expense for the pension and post-retirement benefits plans:
In 2013.1 RR BCUC.125.3.2, ICBC states: “…ICBC’s external actuary, Aon Hewitt, calculates and provides the expense and other information needed for ICBC’s consolidated financial statements to management.”
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.212.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 3
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
The following table was provided in 2013.1 RR BCUC.125.3:
Please expand the table provided in 2013.1 RR BCUC.125.3 to include 2011 Actual. Response:
2011 actual has been added to the table as shown below.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.212.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 3 of 3
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
$ millions 2011 Actual
2012 Actual
2013 Forecast
Pension Benefits $ 18 $ 22 $ 39
+ Post-Retirement Benefits 19 21 23
= Total Pension and Post-Retirement Benefits 37 43 62
+ Other Benefits (e.g., EI, CPP, MSP, Worksafe) 39 41 42
= Total Benefits $ 76 $ 84 $ 104
Estimated Salaries for Benefits Calculation(1) $ 304 $ 310 $ 303
x Standard Benefit Rate(2) 20.75% 21.58% 21.75%
= Amount of Benefits allocated to Divisions $ 63 $ 67 $ 66
Amount of Benefits allocated to Divisions (included as base operating expenses)
$ 63 $ 67 $ 66
+ Difference between standard benefit rate as a percentage charged to divisions and actual benefits (included in unique items as first $19 million)
13 17 19
+ Changes in IFRS accounting standard (included in unique items as second $19 million)
- - 19
= Total Benefits $ 76 $ 84 $ 104
Notes:
(1) Estimated salaries for benefits calculation include only full time regular and part time regular salaries. (2) The standard benefit rate for 2012 was 20.75% for the period January to April and 22.00% May to December.
The average for 2012 actual was therefore 21.58%.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.212.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.212.2 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit B-1, Chapter 7, pp. 7-53 to 7-58; Appendix 10C, p. 77 Exhibit B-3-1, 2013.1 RR BCUC.125.3, 125.3.2 Unique Items – Pension and Post-Retirement Benefit Adjustments Appendix 10C of Exhibit B-1 (2012 ICBC Annual Report) includes the following net benefit expense for the pension and post-retirement benefits plans:
In 2013.1 RR BCUC.125.3.2, ICBC states: “…ICBC’s external actuary, Aon Hewitt, calculates and provides the expense and other information needed for ICBC’s consolidated financial statements to management.” The following table was provided in 2013.1 RR BCUC.125.3:
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.212.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Do the ‘Total Benefits’ and ‘Total Pension and Post-Retirement Benefits’ line items of the table provided in 2013.1 RR BCUC.125.3 (i.e. $104 million and $62 million, respectively, in 2013 Forecast) represent total ICBC consolidated amounts? If not, please explain otherwise. Response:
ICBC confirms that in the response to information request 2013.1 RR BCUC.125.3, the 2013
Forecast for “Total Benefits” at $104 million and “Total Pension and Post-Retirement Benefits”
at $62 million represent total ICBC consolidated amounts, inclusive of Basic insurance, Non-
insurance, and Optional insurance lines of business.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.212.2.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 3
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.212.2.1 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit B-1, Chapter 7, pp. 7-53 to 7-58; Appendix 10C, p. 77 Exhibit B-3-1, 2013.1 RR BCUC.125.3, 125.3.2 Unique Items – Pension and Post-Retirement Benefit Adjustments Appendix 10C of Exhibit B-1 (2012 ICBC Annual Report) includes the following net benefit expense for the pension and post-retirement benefits plans:
In 2013.1 RR BCUC.125.3.2, ICBC states: “…ICBC’s external actuary, Aon Hewitt, calculates and provides the expense and other information needed for ICBC’s consolidated financial statements to management.”
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.212.2.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 3
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
The following table was provided in 2013.1 RR BCUC.125.3:
Please indicate if the ‘Total Benefits’ and ‘Total Pension and Post-Retirement Benefits’ line items of the table provided in 2013.1 RR BCUC.125.3 (i.e. $104 million and $62 million, respectively, for 2013 Forecast) exclude or include costs attributable to each of the following items: Employees seconded to support the Transformation Program (TP); Employees seconded to support Olympics sponsorship; Employees working on cost recoverable government initiatives; Capitalized labour (TP and non-TP projects); Compensation charged to the project expense category; Compensation charged to non-cost recoverable government initiatives.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.212.2.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 3 of 3
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Response:
As explained in the response to information request 2013.2 RR BCUC.212.2, the 2013 forecast
for “Total Benefits” at $104 million and “Total Pension and Post-Retirement Benefits” at $62
million represent total ICBC consolidated amounts, inclusive of costs attributable to each of the
following items:
• Employees seconded to support the Transformation Program (TP).
• Employees working on cost recoverable government initiatives.
• Employee labour capitalized for TP and non-TP projects.
• Employee labour charged to the project expense category.
• Employee labour charged to non-cost recoverable government initiatives.
ICBC incurred sponsorship costs for the Olympics during fiscal years 2009 and 2010. There
were no employees seconded to support Olympics sponsorship in either 2012 actual or 2013
forecast.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.212.2.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 5
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.212.2.2 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit B-1, Chapter 7, pp. 7-53 to 7-58; Appendix 10C, p. 77 Exhibit B-3-1, 2013.1 RR BCUC.125.3, 125.3.2 Unique Items – Pension and Post-Retirement Benefit Adjustments Appendix 10C of Exhibit B-1 (2012 ICBC Annual Report) includes the following net benefit expense for the pension and post-retirement benefits plans:
In 2013.1 RR BCUC.125.3.2, ICBC states: “…ICBC’s external actuary, Aon Hewitt, calculates and provides the expense and other information needed for ICBC’s consolidated financial statements to management.”
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.212.2.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 5
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
The following table was provided in 2013.1 RR BCUC.125.3:
212.2.2 If the ‘Total Benefits’ and ‘Total Pension and Post-Retirement Benefits’ line items of the table provided in 2013.1 RR BCUC.125.3 (i.e. $104 million and $62 million, respectively) represent total ICBC consolidated amounts, please provide the amount of ‘Total Benefits’ and ‘Total Pension and Post-Retirement Benefits’ attributable to each of the following items for each of 2012 and 2013: Employees seconded to support the Transformation Program (TP); Employees seconded to support Olympics sponsorship; Employees working on cost recoverable government initiatives; Capitalized labour (TP and non-TP projects). 212.2.2.1 With respect to each item listed above, please discuss if ICBC considers that these should be excluded from the ‘Total Benefits’ included in corporate operating expenses.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.212.2.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 3 of 5
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
212.2.2.2 If the ‘Total Benefits’ and ‘Total Pension and Post-Retirement Benefits’ line items of the table provided in 2013.1 RR BCUC.125.3 (i.e. $104 million and $62 million, respectively) represent total ICBC consolidated amounts, please provide the percentage impact on the PY 2013 indicated rate change if the items listed above are excluded. Response:
212.2.2
The “Total Benefits” amounts, at $104 million for 2013 forecast and $84 million for 2012 actual,
represent total ICBC consolidated amounts, inclusive of Basic insurance, Non-insurance, and
Optional insurance lines of business.
ICBC incurred sponsorship costs for the Olympics during fiscal years 2009 and 2010. There
were no employees seconded to support Olympics sponsorship in either 2012 actual or 2013
forecast.
ICBC’s employee salaries and benefits are firstly charged to core operations and then
subsequently recovered from non-core operations through the “Charged to Projects” process
using a standard labour hourly rate. ICBC’s standard labour hourly rate calculation is reviewed
and updated annually. The standard labour hourly rate is determined by salary level and
available work hours (based on employee group) and is inclusive of employee benefits,
common administration, and general costs.
ICBC’s recovery amount is calculated based on the number of hours each employee worked
multiplied by the standard labour hourly rate associated with that employee’s salary level. In the
Application, Chapter 7, Figure 7.4, ICBC’s recovery amount is reflected in the “Charged to
Projects” line item.
In response to the information request 2013.2 RR BCUC.210.1, ICBC presents the “Charged to
Projects” line items gross of contractor costs. As ICBC had previously indicated in response to
information request 2013.1 RR BCUC.122.4, contractors, though a resource, are not eligible for
the compensatory benefits awarded to ICBC employees in the course of employment. As such,
the “Charged to Projects” recovery amount does not pertain to contractor costs.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.212.2.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 4 of 5
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
ICBC provides, in the table below, the “Total Benefits” and “Total Pension and Post-Retirement
Benefits” recovered from the “Charged to Projects” process using standard labour hourly rates.
($ millions) 2012 Actual
2013 Forecast
Contractor Costs 5$ 5$
Charged to Projects: Capitalized Labour for TP (10)$ (13)$
Charged to Projects: Core Operations (10)$ (8)$
Charged to Projects (15)$ (16)$
($ millions) 2012 Actual
2013 Forecast
Recovery of Total Benefits: Contractor Costs n/a n/a
(1.7)$ (2.3)$
(1.7)$ (1.4)$
Recovery of Total Benefits in Charged to Projects (3.4)$ (3.7)$
n/a n/a
(0.7)$ (0.8)$
(0.7)$ (0.5)$
(1.4)$ (1.3)$ Recovery of Total Pension and Post-Retirement Benefits in Charged to Projects
Recovery of Total Pension and Post-Retirement Benefits: Contractor Costs
Figure 7.4 - Compensation by Employee Group (Revised To Include Contractor Costs)(as shown in response to information request 2013.2 RR BCUC.210.1)
Recovery of Total Benefits in Charged to Projects: TP
Recovery of Total Benefits in Charged to Projects: Core Operations
Recovery of Total Pension and Post-Retirement Benefits in Charged to Projects: TP
Recovery of Total Pension and Post-Retirement Benefits in Charged to Projects: Core Operations
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.212.2.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 5 of 5
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
212.2.2.1
ICBC incurred sponsorship costs for the Olympics during fiscal years 2009 and 2010. There
were no employees seconded to support Olympics sponsorship in either 2012 actual or 2013
forecast.
ICBC confirms that, except for Olympics sponsorship, the items listed below:
Employees seconded to support the Transformation Program (TP);
Employees working on cost recoverable government initiatives;
Employee labour capitalized for TP and non-TP projects
are included in corporate operating expenses but have been recovered from Optional
insurance-funded initiatives (i.e., TP), cost recoverable government initiatives, and capitalized
labour, and reflected in the “Charged to Projects” line item in Chapter 7, Figure 7.4. Therefore,
“Net Compensation” costs have appropriately excluded the employee benefits with respect to
each item listed in the response to information request 2013.2 RR BCUC.212.2.2 above.
212.2.2.2
As indicated in the response to information request 2013.2 RR BCUC.212.2.2.1 (above), “Net
Compensation” costs have appropriately excluded the employee benefits with respect to each
item listed in the response to information request 2013.2 RR BCUC.212.2.2 (above). Therefore,
there is no change necessary to the actuarial rate indication used in this Application.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.212.3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 3
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.212.3 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit B-1, Chapter 7, pp. 7-53 to 7-58; Appendix 10C, p. 77 Exhibit B-3-1, 2013.1 RR BCUC.125.3, 125.3.2 Unique Items – Pension and Post-Retirement Benefit Adjustments Appendix 10C of Exhibit B-1 (2012 ICBC Annual Report) includes the following net benefit expense for the pension and post-retirement benefits plans:
In 2013.1 RR BCUC.125.3.2, ICBC states: “…ICBC’s external actuary, Aon Hewitt, calculates and provides the expense and other information needed for ICBC’s consolidated financial statements to management.”
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.212.3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 3
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
The following table was provided in 2013.1 RR BCUC.125.3:
Please provide the actuarial estimates used to support the forecast 2013 ‘Total Pension and Post-Retirement Benefits’ cost of $62 million, including a reconciliation of any differences between the actuarial estimates and the 2013 forecast of $62 million. Response:
ICBC’s forecast 2013 “Total Pension and Post-Retirement Benefits” cost of $62 million reflects
the actuarial estimates as provided by its external actuary, Aon Hewitt.
The forecast amounts provided by Aon Hewitt are prepared in accordance with the accounting
standards and actuarial standards of practice using management’s best estimates except for the
discount rate. The discount rate is based on high quality corporate bond yields. Please see the
response to information request 2013.1 RR BCUC.126.3 for the impact to pension and post-
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.212.3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 3 of 3
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
retirement benefits expense due to the adoption of the International Accounting Standard on
Employee Benefits (IAS 19R).
The components of ICBC’s forecast 2013 “Total Pension and Post-Retirement Benefits” cost of
$62 million, as provided by Aon Hewitt, are shown below:
As indicated in the response to information request 2013.1 RR BCUC.125.3.2, ICBC’s pension
and post-retirement benefits expense is determined by Aon Hewitt at the beginning of each year
based upon the assumptions and financial position at the prior year’s end. The pension and
post-retirement benefits expense is not changed unless a significant event occurs. ICBC does
not anticipate any significant events to occur during 2013 that would require a change to its total
pension and post-retirement benefits expense. Therefore, ICBC expects that the actual total
pension and post-retirement benefits expense for 2013 will equal the forecast 2013 amount of
$62 million.
($ THOUSANDS) Pension Plans
Post-Retirement
Benefits
2013 2013
Current service cost 36,358$ 10,781$
Interest cost on obligation 46,982 12,330
Interest income on assets (45,460) -
Interest on surplus derecognition 913 -
Non-investment expenses 450 - Net expense 39,243$ 23,111$
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.213.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.213.1 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit B-1, Chapter 7, pp. 7-53 to 7-58 Exhibit B-3-1, 2013.1 RR BCUC.125.3.1, 126.2, 126.3 Unique Items – Pension and Post-Retirement Benefit Adjustments In 2013.1 RR BCUC.125.3.1, ICBC states: “The costs excluded from the distribution to divisions through the standard benefit rate percentage are variable amounts that fluctuate based on changes to the discount rate and the expected rate of return on pension assets, and any one-time impacts.” In 2013.1 RR BCUC.126.2, ICBC submits that the change in IFRS accounting standard on employee benefits (IAS 19R) results in an increase to pension and post-retirement benefits expense in forecast 2013 of $30 million. In 2013.1 RR BCUC.126.3, ICBC states: “The International Standard on Employee Benefits (IAS 19R) came into effect on January 1, 2013, which amended the existing IAS 19. The amendments will not impact the obligation on the Statement of Financial Position, but will increase the pension and post-retirement benefit expense in 2013 and beyond.” In ICBC’s opinion, should the standard benefit rate be adjusted to reflect that the amendments to IAS 19 effective January 1, 2013 will impact the pension and post-retirement benefit expense “in 2013 and beyond”? Please explain why or why not. Response:
ICBC’s standard benefit rate is reviewed and updated periodically. Please see the response to
information request 2013.1 BCUC.125.3.1.
ICBC did not adjust its 2013 standard benefit rate to reflect the amendments to the International
Accounting Standard on Employee Benefits (IAS 19R).
As discussed in the response to information request 2013.1 RR BCUC.126.3, the rate credited
on plan assets changed from the expected rate of return to the discount rate. Since the
expected rate of return is a higher rate than the discount rate, the pension and post-retirement
benefits expense in 2013 increased.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.213.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
ICBC observes that changes to the assumptions and the discount rate can materially impact the
pension and post-retirement benefits expense thereby causing large fluctuations to divisonal
operating costs on an annual basis. In order to facilitate comparability of expenses from one
year to the next, ICBC has limited the increase/decrease of the standard benefit rate from one
year to the next so as to dampen some of the variability as regards to the pension and post-
retirement benefits expense.
As well, at the time the detailed operating budgets are set in the fall of each year, the actual
pension and post-retirement benefits expense is not yet known. The uncertainty of the actual
pension and post-retirement benefits expense amount is an impediment to the determination of
the appropriate standard benefit rate.
ICBC will undertake a review of its standard benefit rate to determine if it should be adjusted
prospectively to reflect the amendments to IAS 19R as regards to pension and post-retirement
benefits expense.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.214.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.214.1 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit B-1, Chapter 7, pp. 7-53 to 7-58; Chapter 3, p. 3-4 Exhibit B-3-1, 2013.1 RR BCUC.127.3 Unique Items – Pension and Post-Retirement Benefit Adjustments In 2013.1 RR BCUC.127.3, ICBC states: “If the Basic insurance component of the $7 million corporate amount related to the pension and post-retirement benefits discount rate was not excluded, the total impact of International Accounting Standards – Employee Benefits (IAS 19R) and Assumption Changes would increase by +0.2 percentage points of the impact on the indicated rate change for PY 2013.” Figure 3.2 of Exhibit B-1 indicates that the “Impact of IAS 19R and Assumptions Changes” impacts the PY 2013 indicated rate change by +0.2. Figure 7.20 ‘Unique Items’ of Exhibit B-1 includes the following Pension and Post-Retirement Benefit Adjustment:
214.1 Please confirm, or explain otherwise, that the “Impact of IAS 19R and Assumptions Changes” in Figure 3.2 relates to an amount of $12 million ($19 million pension and post-retirement benefits adjustment of $19 million, excluding $7 million relating to the discount rate for pension liabilities). 214.1.1 Taking into account the response to the preceding IR, please explain how a $7 million increase in pension and post-retirement benefits expense results in a +0.2 percent increase in the PY 2013 indicated rate change (as provided in response to 2013.1 RR BCUC.127.3).
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.214.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Response:
214.1
ICBC confirms that the “Impact of [International Accounting Standard on Employee Benefits]
IAS 19R and Assumptions Changes” line item in the Application, Chapter 3, Figure 3.2 relates
to the Basic insurance portion of the $12 million corporate “Pension and Post-Retirement
Benefit Adjustment” line item shown in Chapter 7, Figure 7.20 (i.e., $19 million in pension and
post-retirement benefits costs related to changes in IAS 19R, assumptions changes for
accounting purposes and discount rate changes, offset by $7 million exclusion amount related
to a change in the rate used to discount pension liabilities).
The $12 million corporate “Pension and Post-Retirement Benefit Adjustment” amount consists
of three components:
1. Approximately $4 million for the Optional insurance component of the adjustment, which
is excluded.
2. Approximately $3 million for the Basic insurance portion of the adjustment to the claims
services costs. Claims service costs are the basis for the PY 2013 forecast of
unallocated loss adjustment expense (ULAE) as summarized in Chapter 3, Exhibit C.
The PY 2013 ULAE forecast is influenced by many factors such as the recent claims
initiatives, changes in staffing, and the bodily injury cost pressures. In comparison to
these factors, the amount of impact related to the pension and post-retirement benefits
adjustment is relatively small and therefore assumed to have no impact on the rate
indication.
3. $4.5 million for the Basic insurance portion of the adjustment to general operating
expenses. Please see the response to information request 2013.1 RR BCUC.8.1,
Attachment A – Indicated Rate Change Calculation by Components, Line (4) which
provided this amount.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.214.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Therefore, the only amount that has an impact on the overall Basic insurance rate indication is
the $4.5 million attributable to the Basic insurance portion of the adjustment on general
operating expenses. This corresponds to a +0.2 percentage point impact on the PY 2013 rate
change and is thusly shown as the “Impact of IAS 19R and Assumptions Changes” line item in
Chapter 3, Figure 3.2.
214.1.1
In the response to information request 2013.1 RR BCUC.127.3, only the Basic insurance portion
of the $7 million exclusion amount related to a change in the rate used to discount pension
liabilities (approximately $4 million) was used in the calculation. As such, the resultant Basic
insurance rate impact of +0.2 percentage points did not reflect a split according to claims
services costs and other general operating expenses.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.215.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.215.1 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit B-1, Chapter 7, pp. 7-16 to 7-17 Exhibit B-3-1, 2013.1 RR BCUC.128.3 Unique Items – Restructuring Costs Figure 7.5 of Exhibit B-1 includes FTEs by Employee Group:
The following table was provided in 2013.1 RR BCUC 128.3:
With respect to the 22 Bargaining Unit and 175 Management and Confidential FTE reductions provided in 2013.1 RR BCUC 128.3, please provide a breakdown of these FTE reductions by year.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.215.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Response:
ICBC is showing, in the table below, a summary of the staff reductions by employee group by
year, as regards to the $25 million restructuring cost provision.
2012 Corporate Restructure Costs - Provision of $25 million (Accrued and Expensed in 2012 Actual)
Total Forecast
FTEs Included in Provision
2012 Forecast
2012 Actual
2013 Forecast
2013 Outlook
Bargaining Unit
Staff Reduction FTEs 22 14 12 8 -
Management and Confidential
Staff Reduction FTEs 175 153 151 22 8
Total Staff Reduction FTEs (1) 197 167 163 30 8
Note 1: Staff reduction FTEs exclude other positions which were eliminated as part of
the corporate-wide restructuring with no provision required.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.215.1.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.215.1.1 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit B-1, Chapter 7, pp. 7-16 to 7-17 Exhibit B-3-1, 2013.1 RR BCUC.128.3 Unique Items – Restructuring Costs Figure 7.5 of Exhibit B-1 includes FTEs by Employee Group:
The following table was provided in 2013.1 RR BCUC 128.3:
Please reconcile the FTE reductions of 22 for Bargaining Unit and 175 for Management and Confidential employees provided in 2013.1 RR BCUC 128.3 to Figure 7.5 of Exhibit B-1.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.215.1.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Response:
In the response to information request 2013.1 RR BCUC.128.3, ICBC presented a summary of
the estimated staff reductions by employee group at the corporate level, showing full-time
equivalent (FTE) reductions of 22 for Bargaining Unit and 175 for Management and Confidential
employees.
ICBC further detailed, in the response to information request 2013.2 RR BCUC.215.1, the staff
reductions by employee group by year at the corporate level, as regards to the $25 million
restructuring cost provision, for 2012 actual and 2013 forecast.
ICBC presents, in the table below, a comparison of these staff reductions at the corporate level
against the information shown in the Application, Chapter 7, Figure 7.5:
As indicated in Chapter 7, footnote 11, on page 7-16, the values shown in Figure 7.5 reflect
ICBC’s labour resources in support of ICBC’s core operations, including operations and non-
Transformation Program (TP) projects. Whereas the core operations staff reductions will be
2012 Actual
2013 Forecast
Bargaining Unit 3,822 3,808 14 12 22
Management and Confidential 1,054 926 128 151 175
4,876 4,734 142 163 197
Response to 2013.1 RR BCUC.128.3 and 2013.2
RR BCUC.215.1
Reduction in ICBC's FTEs
in Core Operations2012 Actual
vs.2013
Forecast
11 Total ICBC FTEs exclude contractors as well as employees seconded to support TP and Olympics (both funded 100% by Optional insurance) and FTEs working on cost recoverable government initiatives. Total ICBC FTEs reflect labour resources in support of ICBC’s core operations, including operations and non-TP projects.
Figure 7.5 - FTEs by Employee Group
Total ICBC FTEs 11
Employee Group
Total Forecast
FTEs Included in Provision
2012 Actual FTEs Related to Provision
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.215.1.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
similar to those shown in the responses to information requests 2013.1 RR BCUC.128.3 and
2013.2 RR BCUC.215.1 at the corporate level, the values will not be exactly the same.
In addition, in Chapter 7, Section C.2, ICBC has indicated that core operations staffing will be
impacted in 2013 forecast by, for example:
Significant business change impacting short-term staffing in Claims Division.
Staff seconded from Insurance and Driver Licensing Division to support government
initiatives.
Return of Information Services Division staff to their core positions as demand for TP
project support diminishes.
Decrease in use of temporary staffing resources as warranted.
For these reasons, Chapter 7, Figure 7.5 will not directly reconcile to the FTE reductions of 22
Bargaining Unit and 175 Management and Confidential employees at the corporate level, as
regards to the $25 million restructuring cost provision in the response to information request
2013.1 RR BCUC.128.3.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.215.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.215.2 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit B-1, Chapter 7, pp. 7-16 to 7-17 Exhibit B-3-1, 2013.1 RR BCUC.128.3 Unique Items – Restructuring Costs Figure 7.5 of Exhibit B-1 includes FTEs by Employee Group:
The following table was provided in 2013.1 RR BCUC 128.3:
215.2 Please provide the number of FTE reductions that are expected to take place in 2013 for each Bargaining Unit and Management and Confidential employees.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.215.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
215.2.1 Please provide the amount of any severance costs included in 2013 forecast operating costs related to the FTE reductions identified in the preceding IR, broken down between Management and Confidential and Bargaining Unit employees. Response:
215.2
With respect to the 2012 corporate restructuring costs presented in the table above and as
provided in the response to information request 2013.1 RR BCUC.128.3, it was anticipated that
there will be staff reductions of 8 Bargaining Unit full-time equivalents (FTEs) and 22
Management and Confidential FTEs at the corporate level in the 2013 forecast. Please also
see the response to information request 2013.2 RR BCUC.215.1 as regards to the breakdown
of FTE reductions by year.
However, as discussed in the responses to information requests 2013.1 RR COPE.1.1 and
2013.2 RR BCUC.205.1, ICBC has met the commitment to the 2012 Government Review of
ICBC recommendation by reducing its workforce by over 260 positions, and reducing total
Management and Confidential staffing to a level more consistent with 2008.
215.2.1 Related to the FTEs noted above in the response to information request 2013.2 RR
BCUC.215.2, there is no provision for severance costs included in the 2013 forecast operating
expenses. The severance costs related to these staff reductions are already included in the $25
million restructuring cost provision.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.216.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.216.1 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit B-1, Chapter 7, p. 7-19 Exhibit B-3-1, 2013.1 RR BCUC.129.1 Operating Expenses for Actuarial Rate Indication – PSEC Bargaining Mandate In 2013.1 RR BCUC.129.1, ICBC states: “ICBC complied with the Public Sector Employers’ council (PSEC) Bargaining Mandate in that it has delivered on the planned savings/revenues in support of the 2012 Cooperative Gains Mandate in the 2013 forecast period. The increase in Bargaining Unit compensation will have a zero impact on ICBC’s net income. In addition to savings in operating expenses of approximately $3 million (derived from, for example, reductions in advertising costs and consolidated lease space)…” Please provide a breakdown of the $3 million in operating cost savings related to the PSEC Bargaining Mandate by expense category. Response:
Further to the response to information request 2013.1 RR BCUC.129.1, the $3 million in
operating cost savings are made up of $2.5 million in advertising cost reductions and $0.5
million in reduced building lease costs.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.216.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.216.2 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit B-1, Chapter 7, p. 7-19 Exhibit B-3-1, 2013.1 RR BCUC.129.1 Operating Expenses for Actuarial Rate Indication – PSEC Bargaining Mandate In 2013.1 RR BCUC.129.1, ICBC states: “ICBC complied with the Public Sector Employers’ council (PSEC) Bargaining Mandate in that it has delivered on the planned savings/revenues in support of the 2012 Cooperative Gains Mandate in the 2013 forecast period. The increase in Bargaining Unit compensation will have a zero impact on ICBC’s net income. In addition to savings in operating expenses of approximately $3 million (derived from, for example, reductions in advertising costs and consolidated lease space)…” Please provide a copy of the PSEC Bargaining Mandate and identify where in the document it is indicated that an increase in Bargaining Unit compensation should have a zero impact on ICBC’s net income. Response:
This response was filed confidentially with the Commission.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.217.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.217.1 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit B-1, Chapter 7, pp. 7-6, 7-13, 7-28 to 7-29 Exhibit B-3-1, 2013.1 RR BCUC.131.1.1, 131.2 Depreciation Expense In 2013.1 RR BCUC.131.2, ICBC states: “The Genesys Upgrade project was completed prior to the beginning of 2013. The depreciation expense for Genesys Upgrade project was reflected in 2012 actual results.” In 2013.1 RR BCUC 131.1.1, ICBC states: “The 2013 forecast for depreciation was derived from the budgeting cycle, which commenced in the latter part of 2012. Since that time however, ICBC has continued to comply with the cost control and containment tactic of prioritizing and re-scoping projects in order to reduce the number of projects, to manage project scope, and to control the associated costs. As a result, ICBC expects depreciation expense to be slightly favourable to the forecast $22 million stated in the Application, Chapter 7.” On p. 7-28 of Exhibit B-1, ICBC submits that depreciation expense for the Genesys Upgrade project is $1 million in actual 2012 and $2 million in forecast 2013. Given that the Genesys Upgrade project was completed prior to the beginning of 2013 and the depreciation expense was reflected in actual 2012 results, please explain why an increase of $1 million in depreciation expense for the Genesys Upgrade project is required in forecast 2013. Response:
The Genesys Upgrade project was completed prior to the beginning of 2013. The project
consisted of a number of asset acquisitions for which the largest acquisition did not start
depreciating until it was available for use in June 2012. Therefore, the $1 million amount in
2012 Actual reflects only a half a year’s depreciation whereas the 2013 Forecast amount of $2
million reflects a full year’s depreciation.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.217.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.217.2 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit B-1, Chapter 7, pp. 7-6, 7-13, 7-28 to 7-29 Exhibit B-3-1, 2013.1 RR BCUC.131.1.1, 131.2 Depreciation Expense In 2013.1 RR BCUC.131.2, ICBC states: “The Genesys Upgrade project was completed prior to the beginning of 2013. The depreciation expense for Genesys Upgrade project was reflected in 2012 actual results.” In 2013.1 RR BCUC 131.1.1, ICBC states: “The 2013 forecast for depreciation was derived from the budgeting cycle, which commenced in the latter part of 2012. Since that time however, ICBC has continued to comply with the cost control and containment tactic of prioritizing and re-scoping projects in order to reduce the number of projects, to manage project scope, and to control the associated costs. As a result, ICBC expects depreciation expense to be slightly favourable to the forecast $22 million stated in the Application, Chapter 7.” On p. 7-28 of Exhibit B-1, ICBC submits that depreciation expense for the Genesys Upgrade project is $1 million in actual 2012 and $2 million in forecast 2013. 217.2 Please indicate the Project line items of Figure 7.9 (i.e. Information Technology, Facilities and Other Capital) that are impacted by the “the cost control and containment tactic of prioritizing and re-scoping projects in order to reduce the number of projects, to manage project scope, and to control the associated costs”, which is expected to result in a slightly favourable depreciation expense to the $22 million 2013 forecast. 217.2.1 Please provide the most up to date forecast 2013 depreciation expense in the same format as Figure 7.9. Response: 217.2
Both of the “Base Depreciation” line items (Information Technology, and Facilities and Other
Capital) were impacted by the cost control and containment tactic relating to projects. Each line
item is anticipated to be lower than 2013 Forecast by $1 million. As a result, ICBC expects
depreciation to be favourable by $2 million overall, as reflected in the table below in response to
information request 2013.2 RR BCUC.217.2.1.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.217.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
217.2.1
ICBC presents the 2013 Outlook depreciation expense in the same format as in the Application,
Chapter 7, Figure 7.9:
($ millions)
Project 2009 Actual
2010 Actual
2011 Actual
2012 Actual
2013 Foreca
st
2013 Outloo
k
$ Change Higher / (Lower)
Base Depreciation
Information Technology $ 9 $ 9 $ 10 $ 9 $ 9 $ 8 $ (1)
Facilities and Other Capital 6 5 5 6 7 6 (1)
Total Base Depreciation 15 14 15 15 16 14 (2)
Data Centre Relocation - - - 1 1 1 -
DRSS - - - - 2 2 -
VoIP - - - 1 1 1 -
Genesys Upgrade - - - 1 2 2 -
Total Depreciation $ 15 $ 14 $ 15 $ 18 $ 22 $ 20 $ (2)
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.218.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.218.1 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit B-1, Chapter 7, p. 7-31 Exhibit B-3-1, 2013.1 RR BCUC.132.1, 132.2 Other Operating Expenses In 2013.1 RR BCUC 132.1, ICBC states: “The term “operationalizing projects” means that the additional operating costs, net of savings, to be incurred as a result of projects that will be completed and implemented during the year are reflected and centrally planned.” In 2013.1 RR BCUC.132.2, ICBC states: “The 2013 forecast also includes a general provision of $4 million… ICBC established and centrally planned a small provision at the corporate level in case of potential adverse events, as well as to provide for initiatives that may be introduced to address claims costs control initiatives. The general provision of $4 million is less than 1% of overall corporate operating expenses and is not unreasonable given the significant reductions targeted for 2013 forecast operating expenses.” For each project that is included in the “Operationalizing Project” category, please provide the name of the project, the forecast additional operating costs, the forecast cost savings, the expected completion date and the relevant division.
Response:
Please see the table below:
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.218.1.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.218.1.1 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit B-1, Chapter 7, p. 7-31 Exhibit B-3-1, 2013.1 RR BCUC.132.1, 132.2 Other Operating Expenses In 2013.1 RR BCUC 132.1, ICBC states: “The term “operationalizing projects” means that the additional operating costs, net of savings, to be incurred as a result of projects that will be completed and implemented during the year are reflected and centrally planned.” In 2013.1 RR BCUC.132.2, ICBC states: “The 2013 forecast also includes a general provision of $4 million… ICBC established and centrally planned a small provision at the corporate level in case of potential adverse events, as well as to provide for initiatives that may be introduced to address claims costs control initiatives. The general provision of $4 million is less than 1% of overall corporate operating expenses and is not unreasonable given the significant reductions targeted for 2013 forecast operating expenses.” Are the “Operationalizing Project” costs pro-rated to account for the expected completion date of each project? Please discuss. Response:
In general, the estimated costs associated with operationalizing a project are pro-rated to
account for the expected completion date of the project at the time the project plan is set, based
on details outlined in the project’s business case or project documentation. Only after the
project has completed and is operational will the budget for additional operating expenses be
transferred from the corporate level to the divisional cost centres.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.218.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.218.2 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit B-1, Chapter 7, p. 7-31 Exhibit B-3-1, 2013.1 RR BCUC.132.1, 132.2 Other Operating Expenses In 2013.1 RR BCUC 132.1, ICBC states: “The term “operationalizing projects” means that the additional operating costs, net of savings, to be incurred as a result of projects that will be completed and implemented during the year are reflected and centrally planned.” In 2013.1 RR BCUC.132.2, ICBC states: “The 2013 forecast also includes a general provision of $4 million… ICBC established and centrally planned a small provision at the corporate level in case of potential adverse events, as well as to provide for initiatives that may be introduced to address claims costs control initiatives. The general provision of $4 million is less than 1% of overall corporate operating expenses and is not unreasonable given the significant reductions targeted for 2013 forecast operating expenses.” Please discuss why ICBC has not forecast specific, identifiable costs related to potential adverse events and initiatives that may be introduced to address claims costs control initiatives, rather than establishing a general provision for $4 million. Response:
When the 2013 budget was prepared, ICBC forecasted specific identifiable costs related to
claims cost control initiatives wherein (a) the likelihood of occurrence is almost certain, and (b)
the costs are identifiable and measurable. Please see the responses to information requests
2013.1 RR BCUC.154.4, 2013.1 RR IBC.13.1-2, and 2013.1 RR BCUC.6.1 for descriptions of
initiatives that the Claims Division undertook to address rising bodily injury costs.
The general provision of $4 million in other operating expenses was established in order to
provide for:
Potential unspecified and unforeseen adverse events.
Divisions challenged to meet tight operating budget targets.
Additional claims cost control initiatives that may need to be implemented during the
fiscal year.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.218.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
The provision amount of $4 million is less than 1% of ICBC’s corporate operating expenses and
is not unreasonable given ICBC’s cost containment program, which aims to reduce and manage
operating expenses at lower levels.
ICBC believes that a general provision, which is centrally held, would challenge divisions to
better manage costs within their own respective divisional operating budget targets.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.218.2.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.218.2.1 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit B-1, Chapter 7, p. 7-31 Exhibit B-3-1, 2013.1 RR BCUC.132.1, 132.2 Other Operating Expenses In 2013.1 RR BCUC 132.1, ICBC states: “The term “operationalizing projects” means that the additional operating costs, net of savings, to be incurred as a result of projects that will be completed and implemented during the year are reflected and centrally planned.” In 2013.1 RR BCUC.132.2, ICBC states: “The 2013 forecast also includes a general provision of $4 million… ICBC established and centrally planned a small provision at the corporate level in case of potential adverse events, as well as to provide for initiatives that may be introduced to address claims costs control initiatives. The general provision of $4 million is less than 1% of overall corporate operating expenses and is not unreasonable given the significant reductions targeted for 2013 forecast operating expenses.” Please describe the ‘potential adverse events’ referenced by ICBC in response to 2013.1 RR BCUC.132.2. Response:
Potential adverse events are not specifically known. ICBC therefore maintains a centrally-held
general provision to account for costs that may result from legal actions or any other adverse
events that could negatively impact the corporation. Certainly, there have been unanticipated
incidents in the past that resulted in a negative outcome for ICBC and additional operating
costs.
Please also see the response to information request 2013.2 RR BCUC.218.2.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.218.3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.218.3 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit B-1, Chapter 7, p. 7-31 Exhibit B-3-1, 2013.1 RR BCUC.132.1, 132.2 Other Operating Expenses In 2013.1 RR BCUC 132.1, ICBC states: “The term “operationalizing projects” means that the additional operating costs, net of savings, to be incurred as a result of projects that will be completed and implemented during the year are reflected and centrally planned.” In 2013.1 RR BCUC.132.2, ICBC states: “The 2013 forecast also includes a general provision of $4 million… ICBC established and centrally planned a small provision at the corporate level in case of potential adverse events, as well as to provide for initiatives that may be introduced to address claims costs control initiatives. The general provision of $4 million is less than 1% of overall corporate operating expenses and is not unreasonable given the significant reductions targeted for 2013 forecast operating expenses.” Please provide the impact on the PY 2013 indicated rate change if the $4 million general provision is excluded from corporate operating expenses. Response:
The Basic insurance portion of the $4 million general provision is approximately $2 million. If
the general provision is excluded from corporate operating expenses, the impact to the Basic
insurance rate indication would be slightly less than 0.1%.
Please see the response to information request 2013.2 RR BCUC.160.1.1, Attachment A –
Sensitivity Summary for a list of sensitivity scenarios discussed in information requests.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.219.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.219.1 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit B-1, Figure 7D.1 and Figure 7D.2 Cost Allocation Tables In Figure 7D.1 of Exhibit B-1, in footnote 1, ICBC states: “The allocators Net Claims Costs – OOP and Net Claims Costs – HOC no longer appear due to reorganization. In 2011, the Claims Division underwent a reorganization resulting in Regional Claims merging with Head Office Claims, Ongoing Claims Services, and Out of Province Bodily Injury. The consolidated area is named Customer and Injury Services Operations – see Figure 7D.2. The allocator for Customer and Injury Services Operations is derived by proportionately blending the allocators of the merged areas resulting in the allocators Net Claims Costs – Out of Province and Net Claims Costs – Head Office Claims no longer appearing in Figure 7D.1.” Does the allocator under the Customer and Injury Services Operations area result in a different Basic Insurance allocation amount than what would otherwise have been derived pre reorganization? If so, please provide the calculation to support the Basic Insurance allocation amount using the pre-reorganization allocation methodology. Response:
The allocator used in allocating Customer and Injury Services Operations results in the same
Basic insurance allocation amount that would otherwise have been derived pre-reorganization.
The purpose of adopting a proportionately blended allocator was to result in the same Basic
insurance amount than would otherwise have been derived pre-reorganization.
Please also see the response to information request 2013.2 RR IBC.46.1.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.219.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.219.2 Reference: OPERATING EXPENSES AND ALLOCATION INFORMATION Exhibit B-1, Figure 7D.1 and Figure 7D.2 Cost Allocation Tables In Figure 7D.1 of Exhibit B-1, in footnote 1, ICBC states: “The allocators Net Claims Costs – OOP and Net Claims Costs – HOC no longer appear due to reorganization. In 2011, the Claims Division underwent a reorganization resulting in Regional Claims merging with Head Office Claims, Ongoing Claims Services, and Out of Province Bodily Injury. The consolidated area is named Customer and Injury Services Operations – see Figure 7D.2. The allocator for Customer and Injury Services Operations is derived by proportionately blending the allocators of the merged areas resulting in the allocators Net Claims Costs – Out of Province and Net Claims Costs – Head Office Claims no longer appearing in Figure 7D.1.” Other than Net Claims Costs – OOP and Net Claims Costs – HOC, please confirm that all allocators included in Figure 7D.1 are consistent with the allocators used in the 2012 Revenue Requirements Application as approved by the Commission. If not confirmed, please identify and explain any differences. Response:
Other than Net Claims Costs – Out of Province (OOP) and Net Claims Costs – Head Office
Claims (HOC), all allocators included in the Application, Chapter 7, Appendix 7 D, Figure 7D.1
are consistent with the allocators used in the Revenue Requirements Application for the 2012
Policy Year as approved by the Commission.
As noted in Appendix 7 D, Figure 7D.1, footnote 1, Net Claims Costs – OOP and Net Claims
Costs – HOC no longer appear due to reorganization. Irrespective, they are also consistent with
the allocators used in the Revenue Requirements Application for the 2012 Policy Year as
approved by the Commission as these allocators are now part of the proportionately blended
allocator used to allocate Customer and Injury Services Operations. The purpose of adopting a
proportionately blended allocator was to result in the same amount of costs being allocated to
Basic insurance that would otherwise have been derived pre-reorganization.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.220.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.220.1 Reference: Operating Expenses and Allocation Exhibit B-4, 2013.1 RR IBC.31.2 Financial Allocation In 2013.1 RR IBC.31.2, ICBC states: “The next filing related to financial allocation, to be filed by December 31, 2014, stems from the significant business change in ICBC’s Claims Division and will include a detailed work effort study based on the new functional-centric claims delivery service model, the new claims job hierarchy, and the changeover to a new Claims Management System Solution. It would be premature to undertake an update of ICBC’s work effort study before that time as Claims Transformation will still be very much in progress and a period of stabilization is required in order for claims staff to become accustomed to the new Claims system and procedures.” At what point in 2014 will the work effort study be undertaken and will the transformation project be sufficiently advanced to provide reliable allocations for future operations? Response:
Once all claim offices have transitioned onto the new Claims management system, ICBC
anticipates that it will need a three to six month stabilization period before it will be able to
undertake the work effort study. Based on current projections, the new Claims management
system should be implemented within all claim offices by the end of Q2 2014. This would allow
ICBC to undertake the work effort study in the October to November timeline. The timeline for
completion of the Claims management system implementation, providing for a three to six
month stabilization period, and undertaking the work effort study is narrow. Any delay in
completion of the Claims management system implementation could impact ICBC’s ability to
undertake a reliable work effort study and file the results by the end of 2014.
There are other factors that could impact the work effort study, such as the ability to produce
claims reports, similar to reports that were used in previous work efforts studies, and that are
used to assist the participants in the work effort study process. The changeover to the new
Claims management system has resulted in change to ICBC’s claims data model (for example,
discontinuation in the use of claims characteristics such as Kind of Loss codes that represent
types of claims and coverages). However, at this time ICBC does not foresee that delays in
producing new reports would impede its ability to still provide reliable work effort study results.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.221.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.221.1 Reference: Operating Expenses and Allocation Exhibit B-3-1, 2013.1 RR BCUC.135.1, 2013.1 RR BCUC.135.4 Future System Changes In 2013.1 RR BCUC.135.1, ICBC states: “The scope of the Transformation Project does not include any changes regarding signature collection or decal delivery, although it does provide a foundation for potential future capabilities.” In 2013.1 RR BCUC.135.4, ICBC also states: “ICBC’s future systems may provide the ability to enable customers to perform some transactions online via brokers using ICBC systems; however the types of transactions have not been determined at this time.” If future systems enable online transaction abilities, which may presumably be outside the Transformation Project timeline, does this mean Basic Insurance policyholders may pay a portion or all of these costs if there are future system upgrades? Response:
Yes, it is possible that Basic insurance policyholders may pay a portion of these costs which
would be based on the Commission approved allocation methodology that would be in place at
the time of any future system upgrades.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.222.1-2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.222.1-2 Reference: GOVERNMENT INITIATIVES Exhibit B-1, Chapter 8, p. 8-3 Exhibit B-3-1, 2013.1 RR BCUC.140.1 Government Initiatives Funded by ICBC- Canadian Driver Licence Agreement (CDLA) On page 8-3 of the Application ICBC states with respect to the CDLA initiative: “Implementation will commence in 2014 with preparatory work underway in 2013. One-time costs for the initiative are estimated to be $3.2 million and on-going costs are estimated to be $0.6 million annually. As indicated in Figure 7.21 of Chapter 7, the 2013 forecast expense on this initiative is $1 million dollars.” In 2013.1 RR BCUC.140.1 ICBC states: “There have been ongoing inter-jurisdictional discussions which will impact CDLA scope and implementation, resulting in project development delays and expenses being lower than estimated for 2013.” 222.1 Please clarify in what year ICBC expects to pay the one-time costs of 3.2 million for the CDLA initiative. 222.2 Do the delays and changes to CDLA scope result in any changes to the one-time cost of $3.2 million or ongoing costs of $0.6 million annually? If so, please provide the new estimates of one-time and ongoing costs if available. Response:
The Canadian Driver Licence Agreement (CDLA) is an initiative of the Canadian Council of
Motor Transport Administrators (CCMTA). The CCMTA is a national organization comprising
representatives of the provincial, territorial, and federal governments of Canada which makes
decisions on administration and operational matters dealing with licensing, registration, and
control of motor vehicle transportation and highway safety. CCMTA members have identified
the need for CDLA changes, leading to ongoing intergovernmental discussions which have
resulted in project delays and may result in further changes to scope, cost, and timing. The
$3.2 million one-time cost estimate and $0.6 million annual ongoing cost estimate were
prepared based on an earlier CDLA scope. Discussions have not concluded and therefore
updated one-time and ongoing cost estimates are not known. The timing of expenditures is also
yet unknown.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.223.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.223.1 Reference: PERFORMANCE MEASURES Exhibit B-1, p. 9-2, Figure 9.1 Exhibit B-3-1, 2013.1 RR BCUC.105.1 Bodily Injury Claims Statistics In 2013.1 RR BCUC.105.1 – Attachment A, ICBC provides Table 1 as follows:
Figure 9.1 in the Application shows the Performance Measures Results and 2013 Forecast. As the Legal Representation Rate is included in the Performance Measures Results table, would ICBC consider the six metrics as shown above to be informative as part of performance measures? Why or why not? Response:
ICBC seeks to establish performance measures that provide the appropriate organizational
focus while at the same time avoiding performance measures that could result in unintended
consequences such as paying claimants more than is fair and reasonable. While ICBC does
consider the six metrics as informative and important in managing injury claims, they can also
be impacted by a number of factors outside of ICBC’s control therefore ICBC would not consider
them as appropriate performance measures.
Information such as number of litigated claims forms part of the Legal Representation Rate, and
bodily injury exposures are used in determining staffing requirements, but by themselves do not
reflect performance results. Performance measures that inform management decisions, such
as legal representation, need to be based on available and reliable information and focused on
ICBC’s ability to take action.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.223.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
ICBC is currently in a transformation process and once the future landscape of data is finalized,
ICBC is planning to review its performance measures. However, as stated in the response to
information request 2013.2 RR BCUC.224.1-2, ICBC is not in a position to focus its attention on
reviewing its suite of performance measures at this time.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.224.1-2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.224.1-2 Reference: PERFORMANCE MEASURES Exhibit B-1, Chapter 9, p. 9-1 Exhibit B-3-1, 2013.1 RR BCUC.143.1-2 Review of Performance Measures In 2013.1 RR BCUC.143.1-2, ICBC states: “ICBC believes that any further measures should be developed in the context of the full suite of performance measures in order to ensure appropriate measures that reflect ICBC’s strategic focus. ICBC is currently undergoing a transformation process and at this stage the future landscape of data is not yet fully developed. Therefore, ICBC does not consider that the performance measures should be modified or added to at this time.” 224.1 When should a comprehensive review of performance measures be done (e.g. 2014, 2015, or 2016 Revenue Requirements)? 224.2 As performance measures relate to the transformation process, would it be efficient to combine the review of ICBC’s performance measures with the financial allocation filing relating to the business change in ICBC’s Claims Division that is anticipated to be filed on or before December 31, 2014? Response:
224.1
ICBC is not in a position to have a comprehensive review of its performance measures until it
has had an opportunity to further implement its transformation process and better understand
the future landscape of data available. As part of the transformation process that ICBC is
currently undergoing, it is planning on reviewing its performance measures especially in the
various customer facing and support divisions as well as on a corporate basis. As noted in the
Application, Chapter 6, given the magnitude of Claims Transformation and the scope of
changes, full benefits from Claims Transformation will not be achieved before 2016, which will
impact performance and performance measures. ICBC is also working towards implementing a
new modern and flexible policy administration system in 2015. Once these large changes are
implemented ICBC will require a period of time to accumulate data in the new systems, and
then to explore modifications and additions to its suite of performance measures. ICBC does
not expect to be in a position to file a review of performance measures until late 2016 and the
timing may align with a 2017 Revenue Requirements Application.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.224.1-2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
224.2
It would not be efficient to combine the review of ICBC’s performance measures with the
financial allocation filing relating to the business change in ICBC’s Claims Division that is
anticipated to be filed on or before December 31, 2014 because ICBC will still be undergoing its
transformation process during that time and will not be in a position to modify or add to its
performance measures at this time. Filing in 2014 would be premature and not meaningful as
ICBC would likely only have to come forward to the Commission with revised performance
measures post full Transformation Program implementation.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.225.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.225.1 Reference: PERFORMANCE MEASURES Exhibit B-1-1, 2012 Revenue Requirements Application, Chapter 9, p. 9-2 Exhibit B-3-1, 2013.1 RR BCUC.144.1 Performance Measure Overview In 2013.1 RR BCUC.144.1, ICBC provides Attachment A – Restated Figure 9.1, which includes the forecast targets for each 2010 to 2012 compared to actual. ICBC states that: “ICBC does not measure all of its performance measures mid-year and as such cannot provide a 2013 outlook for all…” In its December 1, 2011 filing with the Commission relating to the 2012 Revenue Requirements Application, Chapter 9, on page 9-2, ICBC also provided Figure 9.1 which showed the performance measures results of 2011 forecast and 2011 outlook. The 2011 outlook included items such as Insurance Services Satisfaction, Driver Licensing Satisfaction, Customer Claims Satisfaction (BCUC), etc.
Recognizing that ICBC was able to provide the 2011 outlook in December 2011, please explain why ICBC now cannot provide the 2013 outlook in this Application. Response:
Outlooks for individual measures rely on extrapolation of interim data to the end of the year
based on a combination of business expertise and quantitative analysis. In some cases,
outlooks for certain metrics are generated regularly for internal management and reporting
purposes, while in other cases outlooks are generated only on an as-needed, ad-hoc basis. For
certain measures, full-year outlooks may have limited business value, and therefore, with
consideration of controlling operating costs and focusing business and analytical expertise on
corporate priorities, certain outlooks have not been produced this year on either a regular or ad-
hoc basis.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.225.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
As discussed in the response to information request 2013.1 RR BCUC.143.5, some of the
performance measures that ICBC reports to the Commission are used to inform strategic and
management decisions, and others are not. Where they are used to inform strategic and
management decisions, this can often be done with interim data, rather than requiring the
generation of full-year outlooks. For example, interim data combined with business expertise
can be used to support qualitative expectations around meeting full-year targets, such as those
provided in the responses to information requests 2013.1 RR BCUC.147.2.1 and 2013.1 RR
BCUC.148.3.
As a result of organizational changes and a focus on controlling operating costs, there have
been significant changes within ICBC’s organizational structure since the December 1, 2011
filing of the Revenue Requirements Application for the 2012 Policy Year, including an overall
reduction in analytical capacity through a greater focus on shared services with a focus on key
corporate priorities, such as the successful implementation and monitoring of the
Transformation Program, and the analysis of bodily injury cost increases, including investigation
relating to causes and impacts of the recent acceleration in legal representation. In
consequence, ad-hoc outlooks are not currently being produced for certain measures where it
would provide limited business value in support of key corporate priorities. This includes
several of the measures that are included in the Application, Chapter 9, Figure 9.1. Specifically
this applies to the Service performance measures (aside from the Legal Representation Rate as
discussed in the response to information request 2013.1 RR BCUC.144.1) and the Injury
Severity measures.
As for the other Financial and Efficiency performance measures where outlooks were not
included in the response to information request 2013.1 RR BCUC144.1, Attachment A –
Restated Figure 9.1, ICBC’s outlook was the same as the 2013 forecast provided in Chapter 9,
Figure 9.1.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.226.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.226.1 Reference: PERFORMANCE MEASURES Exhibit B-1, Chapter 9, p. 9-2 Exhibit B-3-1, 2013.1 RR BCUC.145.2 Review of Performance Measures In 2013.1 RR BCUC.145.2 which asked “What is the impact on employee bonuses, if any, given the observed unfavourable customer service measures performance?” ICBC states: “In any event, the Service performance measures as shown in Chapter 9, Figure 9.1 are not part of ICBC’s Short Term Incentive Pay (STIP) plan measures.” Why would the Performance Measures not be used for STIP? Should customer satisfaction be a component in the STIP plan to ensure a fair balance between corporate performance and customer satisfaction performance? Response:
ICBC determined it is more appropriate to use Customer Experience scores as part of the Short
Term Incentive Pay (STIP) Plan to drive performance toward the company’s goal of improving
customer experience. This score reflects a broader measure of how customers experience key
ICBC interactions, as reflected in the first three measures shown in the Application, Chapter 9,
Figure 9.1. It includes satisfaction as well as other key experience attributes.
The Customer Experience score is an average of the following customer experience attribute
questions. For the first six attributes ICBC asks, “Based on your recent experience with ICBC
(or broker) please indicate if the following attributes describe ICBC?”
Trust – fosters atmosphere of trust.
Price/value – offers good value for the price paid.
Reliable – reliable to deal with.
Protection – provides protection and peace of mind.
Respect –respects our customers.
Hassle free – offers easy and hassle free service.
Satisfaction – how satisfied you were with the way ICBC (or broker) dealt with your
claim/licensing transaction/purchase of insurance.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.226.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
In 2013, customer experience is measured at the divisional level for STIP purposes for two
divisions only. For the Claims and the Insurance and Driver Licensing Divisions, the divisional
component of incentive pay will be impacted negatively if these Divisions do not meet specific
Customer Experience score targets.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.227.1-2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.227.1-2 Reference: PERFORMANCE MEASURES Exhibit B-3-1, 2013.1 RR BCUC.146.1-2 Service Measures – Customer Surveys In 2013.1 RR BCUC.146.1-2, ICBC provides the survey costs for 2012 and anticipated survey costs for 2013, which totals to $1.97 million in 2012 and $1.70 million in 2013. ICBC states: “The proportion of these costs allocated to Basic insurance in 2012 was 55%, and the proportion of these costs allocated to Basic insurance in 2013 is expected to be 13%... In 2013, the new surveys have been operationalized. Since the primary purpose of the Insurance surveys is in support of broker financial awards which are allocated 100% to Optional insurance, the cost of the Insurance customer surveys in 2013 is allocated 100% to Optional insurance.” [Emphasis added] 227.1 Please clarify what costs, if any, are allocated to Basic Insurance in 2013. 227.2 If any costs are allocated to Basic Insurance in 2012 or 2013, please provide an allocation breakdown by line items for each year. Response:
227.1
For 2013, with the exception of Insurance survey costs which are allocated 100% to Optional
insurance, all other survey costs are partially allocated to Basic insurance.
227.2
Allocation to Basic (%) 2012 2013 Forecast
Claims 51% 48%
Driver Licensing 51% 48%
Customer Approval Index 51% 48%
General Costs for Survey Management 51% 48%
Insurance 57% 0%
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.227.3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.227.3 Reference: PERFORMANCE MEASURES Exhibit B-3-1, 2013.1 RR BCUC.146.1-2 Service Measures – Customer Surveys In 2013.1 RR BCUC.146.1-2, ICBC provides the survey costs for 2012 and anticipated survey costs for 2013, which totals to $1.97 million in 2012 and $1.70 million in 2013. ICBC states: “The proportion of these costs allocated to Basic insurance in 2012 was 55%, and the proportion of these costs allocated to Basic insurance in 2013 is expected to be 13%... In 2013, the new surveys have been operationalized. Since the primary purpose of the Insurance surveys is in support of broker financial awards which are allocated 100% to Optional insurance, the cost of the Insurance customer surveys in 2013 is allocated 100% to Optional insurance.” [Emphasis added] Does the Application show the customer survey costs and allocation percentages? Response:
The customer survey costs for Claims, Driver Licensing, Customer Approval Index, and General
administration of the overall survey program are included in the Application, Chapter 7, Figure
7.13. The same costs, from an allocation perspective, are included in Chapter 7, Appendix 7 D,
Figure 7D.2, page 7D-6 under the heading “Market Research”. As shown, the allocation to
Basic insurance for 2012 for Market Research is 50.7%.
The development of the Insurance survey in 2012 was recorded in a corporate project on
customer measurement and its costs are reflected in “Projects” in Chapter 7, Figure 7.10. The
same costs, from an allocation perspective, are included under various headings in Chapter 7,
Appendix 7 D, Figure 7D.2 as the overall project was allocated among various lines of business.
The corporate project costs are included in amounts shown for “Insurance Project Expense”
(page 7D-6), “Infrastructure Expenditure” (page 7D-5), “Claims General Support” (page 7D-3),
and “Driver Licensing” (page 7D-7). As shown in Chapter 7, Appendix 7 D, Figure 7D.2, the
allocation to Basic insurance for 2012 is 57.4% for “Insurance Project Expense”, 50.0% for
“Infrastructure Expenditure”, and 59.8% for “Claims General Support”. The allocation to Non-
insurance for 2012 for Driver Licensing is 100%.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.227.4 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.227.4 Reference: PERFORMANCE MEASURES Exhibit B-3-1, 2013.1 RR BCUC.146.1-2 Service Measures – Customer Surveys In 2013.1 RR BCUC.146.1-2, ICBC provides the survey costs for 2012 and anticipated survey costs for 2013, which totals to $1.97 million in 2012 and $1.70 million in 2013. ICBC states: “The proportion of these costs allocated to Basic insurance in 2012 was 55%, and the proportion of these costs allocated to Basic insurance in 2013 is expected to be 13%... In 2013, the new surveys have been operationalized. Since the primary purpose of the Insurance surveys is in support of broker financial awards which are allocated 100% to Optional insurance, the cost of the Insurance customer surveys in 2013 is allocated 100% to Optional insurance.” [Emphasis added] Why does the allocation of customer survey costs seem to change every year? How does ICBC determine the allocation of customer survey costs? Response:
As noted in the response to information request 2013.1 RR BCUC.146.1-2, the new surveys
were operationalized in 2013. With the operationalization, the allocation was updated to reflect
the primary purpose of the Insurance surveys. This is consistent with the annual update of
allocator values for Market Research. Market Research is allocated using a Weighted Average
– Projects allocator. The projects with costs included under Market Research vary from year to
year and the allocator values are updated accordingly to reflect the projects (e.g., surveys)
currently being worked on.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.228.1-3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.228.1-3 Reference: PERFORMANCE MEASURES Exhibit B-3-1, 2013.1 RR BCUC.147.1 Service Measures – Insurance Services Satisfaction In 2013.1 RR BCUC.147.1, ICBC states: “The satisfaction target for ICBC’s Insurance Services Satisfaction is set based on past historical norms for providing base service levels that ICBC maintains.” 228.1 Please clarify the meaning of “historical norms”. Is this method based on historical target norms or historical actual achievement norms? 228.2 Generally speaking, how does ICBC set its performance targets? 228.3 Would ICBC agree that actual achievements in past years (for Insurance Services Satisfaction or in general) are indicative in setting the target for the coming year(s)? If not, why not? Response:
ICBC has responded to all three sub-questions in the paragraphs below.
ICBC sets its services satisfaction performance targets to provide internal direction on a
standard of service that ICBC provides to our customers. In setting targets for a given year,
ICBC reviews past targets and considers prior years’ actual achievement of service levels, in
conjunction with a forecast and assessment of factors in ICBC’s operating environment that may
influence its delivery and achievement of service levels.
For example, in 2012 the target for Insurance Services Satisfaction was set at 93% which
reflected past targets (historical target norms) as well as anticipated business changes in
ICBC’s operating environment. The actual achievement for 2012 was 97%, above target, and
consistent with the actual results for 2010 and 2011. These results were considered for setting
the 2013 target for Insurance Services Satisfaction to 95% from historical target norms, to
reflect ICBC’s aim of maintaining a high level of customer satisfaction. ICBC is focused on
achieving customer satisfaction at or greater than the target.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.229.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.229.1 Reference: PERFORMANCE MEASURES Exhibit B-1, Appendix 10 B Revised Service Plan 2013-2015 Exhibit B-4, 2013.1 RR COPE.1.5.4 to 1.5.5 Review of Performance Measures In 2013.1 RR COPE.1.5.4 ICBC states: “Employees will learn the results of the employee opinion survey once the third party survey provider, Aon Hewitt, tabulates all the results and provides their final report to ICBC. This will take up to eight weeks from the date the survey closed on October 11, 2013.” If available, please summarize the results of the report and how it will be used by ICBC. Response:
Please see Attachment A – 2013 Employee Opinion Survey Results for a summary of the 2013
results and how the results will be used by ICBC.
ICBC’s Information Request Response
Insurance Corporation of British Columbia
December 23, 2013
2013.2 RR BCUC.229.1 – Attachment A – 2013 Employee Opinion Survey Results
1 Aon Hewitt
2013 Employee Opinion Survey Results
• This is the 10th year that ICBC has conducted an employee opinion survey
• Open 17 days (September 25 to October 11, 2013)
• 3,539 employees responded, representing a 71% response rate
Survey Background
2
2 Aon Hewitt
Corporate and Divisional Participation Rates
Division 2013
ICBC Overall 71%
Transformation 71%
Claims 66%
Corporate Services 76%
Communications and Marketing 74%
Insurance & Driver Licensing 80%
Finance 76%
Human Resources 80%
Information Services 67%
Corporate and Divisional Engagement Results
Division 2013
ICBC Overall 34%
Transformation 28%
Claims 27%
Corporate Services 28%
Communications and Marketing 52%
Insurance & Driver Licensing 48%
Finance 36%
Human Resources 47%
Information Services 28%
3 Aon Hewitt
Drivers of engagement Key Driver 2013
Benefits 54
Career Opportunities 31
Corporate Social Responsibility 55
Co-workers 77
Employee Health & Well-Being 44
Employer Reputation 32
Learning & Development 43
Manager 58
Managing Performance 24
Manager Once Removed (prev. Middle Management) 49
Pay 28
People / HR Practices 36
Physical Work Environment 69
Recognition 36
Resources 39
Retirement Savings 51
Senior Leadership 24
Sense of Accomplishment (prev. Intrinsic Motivation) 54
Work/Life Balance 54
Work Processes 34
Work Tasks 49
5
How data will be used
• Review results of the 2013 Employee Opinion Survey with all leaders and employees.
• Focus on addressing survey results in the context of driving business strategy (i.e., align employee efforts to support business outcomes, including transformational initiatives).
• Evolve employee opinion approach by contracting new vendor that allows fully customizable questions aligned to ICBC’s corporate strategy.
• As part of the new approach, introduce the opportunity for pulse-checks which allows more regular opportunities to assess employee opinions on a number of workplace factors and/or dimensions.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.7.1C Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.7.1C Reference: INVESTMENTS Exhibit B-3-2, 2013.1 RR BCUC.1.8C; 2013.1 RR BCUC.2.1C Investment Strategy (Please respond to this IR on the public record on a non-confidential basis if possible) In response to 2013.1 RR BCUC.1.8C, ICBC states: “…The Commission’s role is to fix Basic insurance rates, not to manage ICBC’s investments. Instead, ICBC’s obligations and responsibilities in the management of its investment portfolio are governed in accordance with the standard set out in section 492 of the Insurance Companies Act (Canada). This standard requires ICBC to make investments for its insurance business in the manner that "a reasonable and prudent person would apply in respect of a portfolio of investments to avoid undue risk of loss and to obtain a reasonable return”. ICBC’s investment assets are managed in accordance with the ICBC Statement of Investment Policy and Procedures which is approved by ICBC’s Board of Directors.” In response to 2013.1 RR BCUC.2.1C, ICBC further states: “ICBC’s prime investment objective is to maintain sufficient assets to meet claims obligations while delivering an investment return within prudent investment parameters to minimize insurance costs to customers.” If the Commission has no jurisdiction over one or more components of ICBC’s strategic mix, how does the Commission fulfill its responsibility to ensure that ICBC’s investment strategies are efficient and to the benefit of Basic Insurance policyholders, so that rates are reasonable and the MCT is not eroded? In ICBC’s view, what are the Commission’s responsibilities relating to ICBC’s investment strategies? Response:
Although the Commission has no jurisdiction to direct the components of ICBC’s strategic asset
mix, the Commission can assess the reasonableness of the investment income component of
the Basic insurance rate indication by examining ICBC’s investment governance practices.
Sound governance practices would involve the following:
1) A clearly defined governance structure which includes the existence of critical decision
making bodies including the ICBC Board of Directors; Investment Committee; in-house
investment team; and external investment managers.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.7.1C Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2) The existence of documented investment beliefs and policies which are reviewed on a
regular basis and:
a. Align with regulatory requirements.
b. Clearly articulate investment objectives.
c. Define an asset allocation that aligns with the articulated objectives.
d. Clearly define roles and responsibilities for approval, performance review, and
management of assets.
e. Include asset class policies that address quality; diversification; liquidity and duration
characteristics of the investments.
3) The existence of regular monitoring and reporting practices.
4) Regular internal and compliance auditing.
5) Annual external audits.
It is ICBC’s view that it is not the Commission’s role to set ICBC’s investment strategy and that
this responsibility resides with the ICBC Investment Committee, and ultimately the ICBC Board
of Directors.
British Columbia Utilities Commission Information Request No. 2013.2 RR BCUC.7.2C Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCUC.7.2C Reference: INVESTMENTS Exhibit B-3-2, 2013.1 RR BCUC.1.8C; 2013.1 RR BCUC.2.1C Investment Strategy (Please respond to this IR on the public record on a non-confidential basis if possible) In response to 2013.1 RR BCUC.1.8C, ICBC states: “…The Commission’s role is to fix Basic insurance rates, not to manage ICBC’s investments. Instead, ICBC’s obligations and responsibilities in the management of its investment portfolio are governed in accordance with the standard set out in section 492 of the Insurance Companies Act (Canada). This standard requires ICBC to make investments for its insurance business in the manner that "a reasonable and prudent person would apply in respect of a portfolio of investments to avoid undue risk of loss and to obtain a reasonable return”. ICBC’s investment assets are managed in accordance with the ICBC Statement of Investment Policy and Procedures which is approved by ICBC’s Board of Directors.” In response to 2013.1 RR BCUC.2.1C, ICBC further states: “ICBC’s prime investment objective is to maintain sufficient assets to meet claims obligations while delivering an investment return within prudent investment parameters to minimize insurance costs to customers.” Which independent agency, if any, would have general oversight of ICBC’s investment policy and activities? Response:
ICBC’s investment activities are appropriately a matter for ICBC management, consistent with
its investment policy that has been approved by the ICBC Board of Directors. A subset of the
ICBC Board of Directors makes up the Investment Committee. The Investment Committee has
oversight of ICBC’s investment activities and the portfolio performance. ICBC is subject to the
investment parameters specified in the Insurance Companies Act (Canada).
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.1.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCPSO.1.1 Reference: Ex. B-4, ICBC Responses to Intervener IR#1, BCPSO 6.2, and Ex. B-3, ICBC Responses to BCUC IR#1, 17.1 Insured Vehicles Per Household - Rate Impact on “ICBC’s observation of the flattening of vehicles per household ratio is due to faster growth rate of households than vehicles. The post-recession growth rate of households is about 1.6%.” - BCUC 17.1 Does ICBC believe the increasing real cost of vehicle insurance has any effect on the number of insured vehicles per household? Please explain why or why not. Response:
ICBC believes that it is reasonable to assume that the cost of owning and operating a vehicle,
which includes the cost of vehicle insurance, can influence the number of insured vehicles per
household. However the specific causal link between the cost of insurance and the number of
vehicles per household has not been tested. It would be difficult to do so since many factors
influence household decisions to purchase and operate vehicles. These include fuel prices,
travel patterns (including transit use, cycling, and carpooling), vehicle prices, vehicle finance
and lease rates, maintenance costs, and household income, among others.
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.2.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCPSO.2.1 Reference: Ex. B-4, ICBC Responses to Intervener IR#1, BCPSO 8.1 Loss Costs - BI Frequency Limits “ICBC believes the lower bound to BI frequency is 0%.” Please explain whether the above statement means ICBC believes it possible for there to be zero instances of bodily injury during an accident year. Response:
ICBC believes that bodily injury claims frequency may approach zero over time as a result of
improvements in vehicle technologies, including safety features and other innovations such as
driverless cars that may eventually replace the current driver-dependent vehicle fleet. In that
eventuality, the liability for bodily injuries might no longer fall on the owner or operator of a
vehicle, reducing or eliminating the number of claims against automobile third party liability
coverage. While ICBC does not believe this will occur in the near-term, it could happen
eventually in the future, and would tend to invalidate any lower bound for bodily injury frequency
at a level higher than 0%.
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.2.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCPSO.2.2 Reference: Ex. B-4, ICBC Responses to Intervener IR#1, BCPSO 8.1 Loss Costs - BI Frequency Limits “ICBC believes the lower bound to BI frequency is 0%.” Is ICBC aware of other jurisdictions where auto insurers realised a zero BI frequency? If so, where has that occurred and during what period? Response:
ICBC is not aware of any other jurisdiction where an auto insurer has realized a zero claim
frequency during an accident year, for a third party liability product covering bodily injuries.
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.3.1-2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCPSO.3.1-2 Reference: Ex. B-4, ICBC Responses to Intervener IR#1, BCPSO 10.1 and IBC 19.1-2 Loss Costs - Pedestrian- and Cyclist-Involved Crashes
3.1 ICBC states the above table shows data on the number of accidents reported to ICBC involving pedestrians and cyclists. How many of these accidents involve claims made by the pedestrian or cyclist against the motorist’s insurance? 3.2 How many of the pedestrian- and cyclist-involved accidents resulted in fatalities in each year? Response:
3.1
From 2003 to 2012, approximately 90% of ICBC-reported crashes involving pedestrians and
cyclists involved claims made against a motorist’s policy.
3.2
Details on how many pedestrian- and cyclist-involved crashes resulted in fatalities are provided
below in Table 1.
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.3.1-2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Table 1: Pedestrian and Cyclist Fatalities 2003 to 2012
Year ICBC-Reported Crashes in BC*
Fatal Pedestrian Crash Fatal Cyclist Crash
2003 80 7
2004 73 7
2005 63 6
2006 63 13
2007 57 7
2008 53 9
2009 55 9
2010 53 7
2011 46 6
2012 61 10
* Source: Business Information Warehouse. Counts are based on open and closed death benefit claims made as of November 30, 2013, whether currently paid or not. Counts may change due to late reporting and adjustments. No rounding has been applied to these data. Counts include crashes that occurred in parking lots or involved parked vehicles.
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.3.3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCPSO.3.3 Reference: Ex. B-4, ICBC Responses to Intervener IR#1, BCPSO 10.1 and IBC 19.1-2 Loss Costs - Pedestrian- and Cyclist-Involved Crashes
“…analytics identified the fact that pedestrian and cyclist claims increased a few years ago and now represent a significant proportion of all BI claims. A situational assessment was undertaken to understand the magnitude and nature of the issue. Information gathered led the department to increase the focus on pedestrians and cyclists and plan new initiatives in 2013 targeting these vulnerable road users.” - IBC 19.1-2, Att. A, p. 11 What does ICBC currently believe are the most likely causes for the apparent spike in cyclist-involved crashes that started in 2010? Response:
An increase in cyclist-involved crashes reported to ICBC was observed around 2010, but has
more recently resumed a relatively flat trend. Likely causes include an increase in cyclists on
the road and distraction due to the use of personal electronic devices.
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.3.4 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCPSO.3.4 Reference: Ex. B-4, ICBC Responses to Intervener IR#1, BCPSO 10.1 and IBC 19.1-2 Loss Costs - Pedestrian- and Cyclist-Involved Crashes
Please explain whether ICBC expects the percentage of pedestrian- or cyclist-involved accidents resulting in fatalities to change from year to year, or remain relatively constant. Response:
Less than 1% of all cyclist involved crashes and 3% of all pedestrian involved crashes result in a
fatality. These numbers have remained relatively constant from 2008 to 2012 and the current
assumption is that they will continue to follow this trend.
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.4.1-2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCPSO.4.1-2 Reference: Ex. B-4, ICBC Responses to Intervener IR#1, BCPSO 13.3 Loss Costs - MR Frequency - Claimants Per Claim 4.1 Please tabulate the average claimants per claim for each of 2000, and 2003 through 2012. 4.2 If the number of claimants per claim was the same for PY2013 as it was for 2000, what would the test year’s expected loss cost estimate be? Response:
4.1
Please find in Table 1 the average number of claimants per Accident Benefits claim, for accident
years 2000, and 2003 through 2012, for Autoplan policies.
Table 1 - Average number of claimants per Accident Benefits claim, by accident year, for Autoplan policies, as reported at 12 and 17 months
Loss Year 2000 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
at 12 months 1.212 1.190 1.178 1.172 1.157 1.155 1.158 1.163 1.164 1.167 1.169
at 17 months 1.219 1.196 1.185 1.178 1.165 1.163 1.166 1.170 1.170 1.173 1.176
Note: it is very rare for a claimant to have an Accident Benefits claim without a Medical Rehabilitation component to it, thus these ratios are valid for Medical Rehabilitation as well.
4.2
Using the ratios from Table 1 of information request 2013.2 RR BCPSO.4.1 (above) at 17
months of development and assuming the following:
The ratio for policy year 2013 is the same as the ratio for accident year 2012.
The average severity per claimant is independent of the average number of claimants
per Accident Benefits claim.
Then, if the number of claimants per Accident Benefit claim was the same for policy year 2013
as it was for accident year 2000, the impact on the policy year 2013 Medical Rehabilitation loss
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.4.1-2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
cost would be around +3.7% (1.219 / 1.176 - 1). This would impact the policy year 2013
Medical Rehabilitation loss cost by $1.37, increasing it from $37.37 to $38.74.
Please note the Medical Rehabilitation Plate Owner policy year 2013 loss cost, $37.37, is a
weighted average of the personal and commercial loss costs by their exposures. The policy
year 2013 personal and commercial loss costs are calculated as the product of frequency and
severity found in the Application, Chapter 3, Exhibit A.2.2. The policy year 2013 personal and
commercial exposures are also found in Chapter 3, Exhibit A.2.2.
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.5.1-2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCPSO.5.1-2 Reference: Ex. B-4, ICBC Responses to Intervener IR#1, BCPSO 27.1 Loss Costs - Commercial PD Frequency - GDP Impact 5.1 In the Commercial PD frequency model, what is the coefficient for the expected GDP impact? 5.2 Please explain whether the coefficient estimates assume zero mean error and a symmetrical (and normal) error distribution around the parameter estimate. Response:
5.1
As provided in the response to information request 2013.1 RR BCUC.20.1.2, Attachment A – T-
Tests for Econometric Variables, the GDP coefficient in the Commercial Property Damage
frequency model is 0.000001. This is a positive coefficient which means it correlates positively
with claims frequency.
5.2
The coefficient estimates for the Commercial Property Damage frequency model assume a zero
mean error and a symmetrical (and normal) error distribution around the parameter estimate.
The following paragraphs explain why these assumptions are accurate for this coverage.
As described in the Application, Chapter 3, Exhibit D.0 and in the response to 2012.2 RR
BCOAPO.20.1, a residual versus fitted values plot is used to investigate the assumption that
regression errors are drawn from the distribution with zero mean and constant variance. The
data points in the residual versus fitted values plot for Commercial Property Damage frequency
in the Application, Chapter 3, Exhibit D.0 appear to be scattered randomly within a horizontal
band. Therefore, the assumptions for a zero mean and constant variance hold.
The Q-Q plots provided in the Application, Chapter 3, Exhibit D.0 are used to assess whether
the regression errors, or residuals, follow a standard normal distribution. The data points shown
in the Q-Q plot for Commercial Property Damage frequency appear to follow an approximately
straight line, as required for the assumption of a standard normal distribution to hold.
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.6.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCPSO.6.1 Reference: Ex. B-4, ICBC Responses to Intervener IR#1, BCPSO 29.3, and Ex. B-3, ICBC Responses to BCUC IR#1, 111.3 and 111.4 Loss Costs - Fraudulent Claims Impact “The Special Investigation Unit does not differentiate between Commercial and Personal BI claims investigated and ICBC’s claims systems currently are not able to accurately calculate the incidence of fraudulent claims per year; therefore, ICBC is unable to provide the difference in frequency of fraud associated with Commercial BI claims.” - BCPSO 29.3 Will ICBC's currently planned systems allow the corporation to accurately calculate fraudulent claims? If not, what additional resources would ICBC require in order to quantify fraud from claims data? Response:
The frequency and cost of fraudulent and exaggerated claims is difficult to measure.
Typically, fraudulent and exaggerated claims are identified or reported on a case by case basis
and referred to the Special Investigation Unit. There are various ways these types of files are
identified including, but not limited to: through the normal course of a claim investigation;
through tips from the public; through Intelligence and Cyber Unit investigations; and/or, through
police involvement. This makes accurately calculating fraudulent or exaggerated claims difficult.
Capabilities delivered by Claims Transformation and specifically the new claims system will
enhance ICBC’s ability to mitigate the risk of fraudulent claims by improving data collection
quality and integrity, ensuring the consistent application of best practices, and file handling
protocols, and increasing the focus on claims risk.
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.6.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCPSO.6.2 Reference: Ex. B-4, ICBC Responses to Intervener IR#1, BCPSO 29.3, and Ex. B-3, ICBC Responses to BCUC IR#1, 111.3 and 111.4 Loss Costs - Fraudulent Claims Impact “The Special Investigation Unit does not differentiate between Commercial and Personal BI claims investigated and ICBC’s claims systems currently are not able to accurately calculate the incidence of fraudulent claims per year; therefore, ICBC is unable to provide the difference in frequency of fraud associated with Commercial BI claims.” - BCPSO 29.3 Aside from claims systems data analysis, what other means are available to ICBC to estimate fraudulent claim activity? Response:
Some of the other means that are available to ICBC to estimate fraudulent activity include
tracking Intelligence and Cyber Unit investigations for actionable outcomes, as well as using
Intelligence and Cyber Unit investigations to analyze trends related to suspicious connections
between customers, such as those that take place with staged accidents.
ICBC’s Special Investigations Unit monitors fraud and exaggerated investigation referrals to
identify possible trends. ICBC then builds ad hoc reports to determine if there are any related
suspicious activities that may affect other ICBC claims.
ICBC also monitors tip and referral information that may be provided by outside sources in order
to monitor fraudulent claim activity.
ICBC is currently working to develop fraud scheme reports that, in the future, will use the new
claims system and provide more accurate information to identify potential fraud trends.
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.6.3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCPSO.6.3 Reference: Ex. B-4, ICBC Responses to Intervener IR#1, BCPSO 29.3, and Ex. B-3, ICBC Responses to BCUC IR#1, 111.3 and 111.4 Loss Costs - Fraudulent Claims Impact “The Special Investigation Unit does not differentiate between Commercial and Personal BI claims investigated and ICBC’s claims systems currently are not able to accurately calculate the incidence of fraudulent claims per year; therefore, ICBC is unable to provide the difference in frequency of fraud associated with Commercial BI claims.” - BCPSO 29.3 Has ICBC surveyed the general public on auto insurance fraud, and is ICBC aware of any surveys conducted in BC that address attitudes toward insurance fraud? If so, please identify those surveys and briefly describe their findings. If not, does ICBC believe such surveys would be beneficial--whether conducted by the corporation or another party? Response:
ICBC is not aware of any surveys conducted in BC that address attitudes toward insurance
fraud. ICBC is accountable for the detection, investigation, and prevention of exaggerated and
fraudulent claims. Fraudulent behaviour ultimately increases claims costs and affects the
premiums of all ICBC customers. As noted in the June 2012 KPMG Forensic Report on Auto
Insurance Fraud in Ontario prepared for the Insurance Bureau of Canada, “…surveys related to
the frequency of fraudulent behaviour or the amount of insurance fraud are likely to have limited
usefulness in assessing the extent of insurance fraud.”1
Through identification, investigation, and deterrence, ICBC is committed to reducing the
incidences of fraudulent claims. ICBC employees are trained to identify potential fraudulent
activities and to investigate. In addition, capabilities delivered by Claims Transformation will
enhance ICBC’s ability to mitigate the risk of fraudulent claims by improving data collection,
quality and integrity, ensuring the consistent application of best practices and file handling
protocols, and increasing the focus on claims risk.
1 KPMG Forensic Report, “Auto Insurance Fraud in Ontario”, Insurance Bureau of Canada, June 13, 2012, page 18.
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.6.4 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCPSO.6.4 Reference: Ex. B-4, ICBC Responses to Intervener IR#1, BCPSO 29.3, and Ex. B-3, ICBC Responses to BCUC IR#1, 111.3 and 111.4 Loss Costs - Fraudulent Claims Impact “The Special Investigation Unit does not differentiate between Commercial and Personal BI claims investigated and ICBC’s claims systems currently are not able to accurately calculate the incidence of fraudulent claims per year; therefore, ICBC is unable to provide the difference in frequency of fraud associated with Commercial BI claims.” - BCPSO 29.3 If ICBC is "not able to accurately calculate the incidence of fraudulent claims per year," explain how it determines the correct allocation of resources to devote to fraud detection, investigation, and prevention. Response:
Please see the response to information request 2013.2 RR BCUC.195.6.
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.6.5 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCPSO.6.5 Reference: Ex. B-4, ICBC Responses to Intervener IR#1, BCPSO 29.3, and Ex. B-3, ICBC Responses to BCUC IR#1, 111.3 and 111.4 Loss Costs - Fraudulent Claims Impact “The Special Investigation Unit does not differentiate between Commercial and Personal BI claims investigated and ICBC’s claims systems currently are not able to accurately calculate the incidence of fraudulent claims per year; therefore, ICBC is unable to provide the difference in frequency of fraud associated with Commercial BI claims.” - BCPSO 29.3 What rate of return does ICBC realise on its fraud investigation expenditures? Response:
While ICBC measures the number of Special Investigation Unit (SIU) referrals, number of
investigations through the Intelligence and Cyber Unit with actionable results, number of
criminal charges laid, number of civil denials as a result of SIU recommendations, number of
SIU investigations and feedback from adjusting employees, the information obtained does not
allow for a meaningful quantification of the return on investment of fraud investigation
expenditures.
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.6.6 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCPSO.6.6 Reference: Ex. B-4, ICBC Responses to Intervener IR#1, BCPSO 29.3, and Ex. B-3, ICBC Responses to BCUC IR#1, 111.3 and 111.4 Loss Costs - Fraudulent Claims Impact “The Special Investigation Unit does not differentiate between Commercial and Personal BI claims investigated and ICBC’s claims systems currently are not able to accurately calculate the incidence of fraudulent claims per year; therefore, ICBC is unable to provide the difference in frequency of fraud associated with Commercial BI claims.” - BCPSO 29.3 In June, 2012, KPMG prepared a study for the Insurance Bureau of Canada entitled “Auto Insurance Fraud in Ontario”, located at: http://www.ibc.ca/en/Insurance_Crime/documents/KPMG%20Report-Auto%20Insurance%20Fraud%20in%20Ontario%20dated%20June%2013,%202012.pdf The KPMG report states that “data analytics provide a robust and effective approach to identify suspicious insurance claims.” On page 12 of the Revised Service Plan 2013-2015), ICBC mentions that it uses “analytics” to detect fraud. Please describe whether the “analytics” mentioned in the Revised Service Plan are similar in nature to the “data analytics” in the KPMG study. Response:
ICBC does not solely focus on “suspicious insurance claims” but includes the investigation into
other areas of potential fraud such as false driver’s licence documentation from non-reciprocal
jurisdictions, proper vehicle identification, and identity thefts. As a result, ICBC’s investigations
and analytics are more encompassing than the referenced KPMG report.
ICBC’s Service Plan description regarding “analytics” pertains to existing analysis conducted,
where potential fraudulent claims are identified through methods currently available today.
However, it is expected that the capabilities delivered by Claims Transformation will enhance
ICBC’s ability to mitigate the risk of fraudulent claims by improving data collection quality and
integrity, ensuring the consistent application of best practices and file handling protocols, and
increasing the focus on claims risk.
Please see also the response to information request 2013.2 RR BCUC.195.2.
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.6.7 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCPSO.6.7 Reference: Ex. B-4, ICBC Responses to Intervener IR#1, BCPSO 29.3, and Ex. B-3, ICBC Responses to BCUC IR#1, 111.3 and 111.4 Loss Costs - Fraudulent Claims Impact “The Special Investigation Unit does not differentiate between Commercial and Personal BI claims investigated and ICBC’s claims systems currently are not able to accurately calculate the incidence of fraudulent claims per year; therefore, ICBC is unable to provide the difference in frequency of fraud associated with Commercial BI claims.” - BCPSO 29.3 The response to BCUC IR#1 111.3 included the table below showing the BI investigations undertaken by the SIU. For each of the years in that table, how many of the investigations led to ICBC charges against alleged fraudsters?
Response:
The table below shows charges laid by Crown Counsel against alleged fraudsters as a result of
completed Special Investigation Unit (SIU) investigations for the years 2008 to 2012.
Year Charges Laid
2008 115
2009 200
2010 268
2011 94
2012 25
At the end of 2010, the SIU separated its accountability and reporting structure into two distinct
areas: Claims and Driver Licensing. The data for the years 2008 to 2010 include both the
Claims and Driver Licensing charge counts while 2011 and 2012 reflect Claims investigation
charges only.
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.6.7 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Several changes to SIU priorities, starting in 2010, altered the focus of SIU and that impacted
the number of fraud charges laid. First, SIU increased its efforts on reducing injury claims costs
by allocating more resources to the Intelligence and Cyber Unit. Second, with the move from a
geographic to a more functional organizational model, SIU was realigned to mirror this model
with dedicated SIU teams working with specific claims functional teams. This realignment
supports more emphasis in reducing overall bodily injury claims costs as opposed to specifically
investigating claims for the purposes of laying criminal charges. At the same time, SIU has
become more targeted in its criminal investigation concentrating on areas such as premeditated
and organized fraud and repeat offenders.
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.7.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCPSO.7.1 Reference: Ex. B-4, ICBC Responses to Intervener IR#1, BCPSO 34.1 Risk Management - Costs of Legal Representation of Claims ”Like other insurers, ICBC has experienced higher rates of growth in bodily injury claims costs. In response to these pressures, a number of other jurisdictions implemented changes to insurance products, including the introduction of caps and/or deductibles on certain heads of damage. These changes represent significant and permanent, or at least long-term, shifts for insurers in these jurisdictions.” - BCPSO 34.1 Does ICBC believe the increased proportion of legally represented claims is a “permanent and significant” cost shift? If so, please explain why ICBC believes the change is permanent. Response:
Historically, the rate at which claims became legally represented had been steadily increasing,
and since about 2012 the rate has accelerated. ICBC is currently investigating the factors
underlying this trend and therefore believes it is too early to say whether this is a permanent and
significant cost shift. ICBC expects that its Claims initiatives aimed at reducing both
representation rates and the costs associated with represented claims will mitigate the adverse
cost implications of the recently observed acceleration in the rate of represented claims.
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.8.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCPSO.8.1 Reference: Ex. B-4, ICBC Responses to Intervener IR#1, BCPSO 39.1-2, and Ex. B-4, ICBC Responses to Intervener IR#1, PI 1.1 Rate Indication - Current Year in Context Please show a table similar to those provided in response to Pemberton Insurance IR#1 1.1, for ten years (or for as many years as the available data permit), but depicting Base Case only, and including a row at the bottom with a cumulative rate indication index (with the existing rates as the base -- i.e., 1.000). (Please note BCPSO acknowledges the inherent diminution of forecast reliability as projections are made farther into the future.) Response:
As requested, please see the following table which includes a row at the bottom with a
cumulative rate indication index for the three year forecast provided in the response to the
information request 2013.1 RR PI.1.1. ICBC has not expanded this information beyond the
three year forecast since, as mentioned in the information request, there is a diminution of
forecast reliability as projections are made further into the future.
The base scenario is based on the forecast assumptions that are reflected in the Application
and they are also the underlying assumptions used in Chapter 4, Figure 4.10. Additional
assumptions used for this scenario are as follows:
The 4.9% rate increase and the proposed Basic insurance Capital Management Plan
have been approved by the Commission.
There is no loss cost forecast variance for future years.
Loss trend includes all loss related expenses.
The line items: investment income, operating expense, change in average premium, and
other as shown in Chapter 3, Figure 3.2 have been combined into the “other” component
shown in the tables below.
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.8.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Components Under Base Scenario Impact (percentage points of indicated rate change)
2013 2014 2015 2016
Removal of Prior Year's Capital Build 0.0 0.0 0.0 -1.8
Removal of Prior Year's Rate Exclusion
0.0 6.6 3.2 0.0
Loss Cost Forecast Variance 6.6 0.0 0.0 0.0
Loss Trend 4.4 3.2 2.5 2.7
Capital Maintenance Provision 0.9 0.1 0.1 0.2
Other -0.4 -0.3 -0.3 -0.2
Rate Change to Cover Costs 11.5 9.6 5.5 0.9
Capital Build 0.0 0.0 1.8 4.9
Rate Exclusion -6.6 -3.2 0.0 0.0
Indicated Rate Change 4.9 6.4 7.3 5.8
Cumulative Rate Indication Index 1.049 1.116 1.198 1.267
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.9.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCPSO.9.1 Reference: Ex. B-4, ICBC Responses to Intervener IR#1, BCPSO 45.4, and Ex. B-3, ICBC Responses to BCUC IR#1, 7.2 Represented Claims - Percentage Limits
Per the charts in BCUC IR#1 7.2, does ICBC believe there is an upper bound (at some figure below 100%) for the "percent represented"? If so, what is the expected upper bound, and why does ICBC believe it reasonable? Response:
Because ICBC operates in a full tort system where injured parties have the right to seek
representation as well as the right to seek redress through the legal process, ICBC does not
believe there is an upper bound to representation.
As a practical matter, ICBC is not expecting that the legal representation rate would reach
100%, but cannot speculate beyond that due to the number of factors that may affect a
claimant’s decision to seek legal representation.
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.9.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCPSO.9.2 Reference: Ex. B-4, ICBC Responses to Intervener IR#1, BCPSO 45.4, and Ex. B-3, ICBC Responses to BCUC IR#1, 7.2 Represented Claims - Percentage Limits
How does ICBC's "percent represented" compare to comparable insurers? Response:
ICBC notes that the graph included in this information request is the more unfavourable of two
possible scenarios presented in the response to information request 2013.1 RR BCUC.7.2.
BC is the only province in Canada that operates in both a full tort system and with a Crown
corporation, ICBC, as the sole provider of Basic insurance. Similarly, there are no jurisdictions
within the US that operate in a comparable tort environment with a similar governance structure
and similar mandatory third party liability limits such as those which exist in BC. It would
therefore be very difficult, if not impossible, to make reasonable comparisons even if “percent
represented” data was readily available.
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.10.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCPSO.10.1 Reference: Ex. B-4, ICBC Responses to Intervener IR#1, BCPSO 45.5, and Ex. B-3, ICBC Responses to BCUC IR#1, 81.6, 144.1, and 154.4 Represented Claims - Customer Satisfaction and “ICBC customer satisfaction surveys do provide information on an injury claimant’s recent claims experience with ICBC, for those claimants that are not legally represented.”- BCPSO 45.5 Which "customer satisfaction surveys" are referred to in the response? Response:
The ICBC customer satisfaction survey that provides information on an injury claimant’s recent
claims experience with ICBC, for those claimants that are not legally represented, refers to
Claims Services Satisfaction scores referenced in the Application, Chapter 9, Section B.1.3.
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.10.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCPSO.10.2 Reference: Ex. B-4, ICBC Responses to Intervener IR#1, BCPSO 45.5, and Ex. B-3, ICBC Responses to BCUC IR#1, 81.6, 144.1, and 154.4 Represented Claims - Customer Satisfaction and “ICBC customer satisfaction surveys do provide information on an injury claimant’s recent claims experience with ICBC, for those claimants that are not legally represented.”- BCPSO 45.5 The ICBC Service Plan reports Claims Satisfaction for 2012 at 90%. The response to BCUC IR#1 81.6 shows represented claims at 43% for 2012. Does ICBC believe those opting for represented claims could be deemed satisfied customers? Response:
Many represented customers do not wish to be surveyed by ICBC while they have an ongoing
injury claim, whether on advice from their counsel or their own choice; therefore, represented
claimants are not included in the Claims Customer Satisfaction survey.
The reasons for choosing legal representation are not limited to service satisfaction and a
customer who has opted for legal representation for the purposes of their bodily injury claim
could be satisfied or dissatisfied.
As discussed in the response to information request 2013.1 RR BCUC.154.1, the Legal
Representation Rate should not be relied upon, on its own, to measure service quality.
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.10.3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCPSO.10.3 Reference: Ex. B-4, ICBC Responses to Intervener IR#1, BCPSO 45.5, and Ex. B-3, ICBC Responses to BCUC IR#1, 81.6, 144.1, and 154.4 Represented Claims - Customer Satisfaction and “ICBC customer satisfaction surveys do provide information on an injury claimant’s recent claims experience with ICBC, for those claimants that are not legally represented.”- BCPSO 45.5 Please explain how the Claims Services Satisfaction score is determined. (If via a survey, please provide a copy of the applicable questions. Response:
The Claims Service Satisfaction score is based on survey data. Please refer to the Application,
Chapter 9, Section B.1.3. The overall Claims Service Satisfaction question is; “Thinking about
the insurance claim you made with ICBC on [MONTH/DAY], would you say that you were
(random reversal) very satisfied, somewhat satisfied, somewhat dissatisfied or very dissatisfied
with the way ICBC dealt with your claim?”
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.10.4 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCPSO.10.4 Reference: Ex. B-4, ICBC Responses to Intervener IR#1, BCPSO 45.5, and Ex. B-3, ICBC Responses to BCUC IR#1, 81.6, 144.1, and 154.4 Represented Claims - Customer Satisfaction and “ICBC customer satisfaction surveys do provide information on an injury claimant’s recent claims experience with ICBC, for those claimants that are not legally represented.”- BCPSO 45.5 Please provide a copy of the Claimant Attitudes Survey (English). Response:
The Claimant Attitudes Survey is a telephone survey that is currently “in the field”, being used to
collect data on customer attitudes that may influence their decision to get represented. Data
collection is currently underway, and is expected to continue into early 2014. Consequently,
making the questions public at this time (either directly or through media attention), may bias
customer responses and compromise the validity of the survey.
As indicated in 2013.2 RR BCUC.199.1, once the data are collected and analyzed, ICBC plans
to file relevant survey results with the Commission. ICBC expects that the results will be
available for the 2014 Revenue Requirements Application.
Please also note that, as indicated above, the survey was designed to measure customer
attitudes that may influence their decision to get represented. These attitudes are not
necessarily formed by specific claims experiences. They may simply reflect general
impressions, perceptions, and values of customers, including those who never filed a claim. In
contrast, customer satisfaction is measured with a reference to a recent claims experience. It is
tracked by other surveys designed for this purpose.
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.10.5 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCPSO.10.5 Reference: Ex. B-4, ICBC Responses to Intervener IR#1, BCPSO 45.5, and Ex. B-3, ICBC Responses to BCUC IR#1, 81.6, 144.1, and 154.4 Represented Claims - Customer Satisfaction and “ICBC customer satisfaction surveys do provide information on an injury claimant’s recent claims experience with ICBC, for those claimants that are not legally represented.”- BCPSO 45.5 Please provide a chart showing each of the actual Claims Services Satisfaction and Accident Benefit Only Satisfaction scores and the Legal Representation Rate for the most recent eight (8) years. Response: The following is a chart with actual Claims Services Satisfaction and Accident Benefit Only
Satisfaction scores and the Legal Representation Rate for the most recent eight years.
Please also see the response to information request 2013.2 RR BCPSO.10.2.
78% 80% 82% 83% 81% 84% 85% 86%
60% 66% 67% 66%
70% 76%
80% 81%
34% 34% 36% 37% 39% 40% 40% 45%
0%
20%
40%
60%
80%
100%
2005 2006 2007 2008 2009 2010 2011 2012
Claims Services Satisfaction (BCUC)
Accident Benefit Only Satisfaction (BCUC)
Representation Rate
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.11.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCPSO.11.1 Reference: Ex. B-4, ICBC Responses to Intervener IR#1, BCPSO 47.1, and Ex. B-3, ICBC Responses to BCUC IR#1, 103.1 and 105.2 Represented Claims - Factors Influencing “Claimants who are injured and may not have the time, capacity, or wherewithal to prove their injuries or quantify their damages may simply wish to have a lawyer advance the claim for them. It is therefore reasonable to assume that a proportion of the injury claims reported to ICBC in any given year are represented at the outset or become represented through the claims process. Regardless of a claim being represented or unrepresented, there are case by case differences. Medical evidence, wage loss information, occupational duties, and lifestyle impacts are important factors in determining the value of the claim.” – BCPSO 47.1 Regarding medical evidence, has ICBC observed certain health care or other professionals whose names appear in association with represented claims significantly more frequently than their peers? Response:
ICBC has observed differences in frequency amongst health care professionals appearing as
experts on represented injury claims. However, caution must be exercised in drawing
inferences from this information, as medical experts who tend to appear more frequently may
choose to specialize in that area of practice for a variety of reasons. It should also be noted that
medical practitioners may choose to restrict their practice to providing independent medical
examinations and opinions for plaintiffs, defendants, or both.
ICBC considers the weight of an expert opinion against the totality of evidence in assessing the
value of a represented claim. ICBC operates within the legal system in adherence with the
Supreme Court Civil Rules, BC Regulation 168/2009 regarding witness or expert evidence.
Where a case proceeds to trial, a judge makes findings of fact and gives weight to expert
evidence based on assessment of the particular facts of case, applying legal precedents in civil
tort case law.
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.11.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCPSO.11.2 Reference: Ex. B-4, ICBC Responses to Intervener IR#1, BCPSO 47.1, and Ex. B-3, ICBC Responses to BCUC IR#1, 103.1 and 105.2 Represented Claims - Factors Influencing “Claimants who are injured and may not have the time, capacity, or wherewithal to prove their injuries or quantify their damages may simply wish to have a lawyer advance the claim for them. It is therefore reasonable to assume that a proportion of the injury claims reported to ICBC in any given year are represented at the outset or become represented through the claims process. Regardless of a claim being represented or unrepresented, there are case by case differences. Medical evidence, wage loss information, occupational duties, and lifestyle impacts are important factors in determining the value of the claim.” – BCPSO 47.1 Please describe how the following factors correlate with the probability of the claimant opting for legal representation: wage loss, occupational duties (or type of employment), claimant age, vehicle book value. Response:
ICBC does not have analysis to answer the probability of legal representation for these factors.
While statistical analysis is not available there are intuitive correlations that can affect the
probability of the claimant opting for legal representation.
Wage loss and occupational duties may have some correlation to rate of legal representation
based on the complexity of assessing and proving an economic loss. For example, in
calculating the value of lost income, some forms of income are not easily quantified and may be
more speculative, seasonal, or based on other economic or external factors which can fluctuate
greatly even between income earners in the same field of work. This can make a fixed period of
disability more difficult to quantify thereby making settlement discussions more complicated.
Assessment of the duration of disability that affects the ability to earn income may vary based
on occupational duties, job demands, an employer’s duty to accommodate or ability to facilitate
gradual return to full or modified duties, etc. Where income loss is more difficult to prove or
where there are areas of dispute, it is reasonable to assume that some claimants may choose to
have a lawyer advance their claim for them. While vehicle value pertains to Optional insurance,
ICBC can advise that it is possible that a dispute over the actual cash value of a vehicle may
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.11.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
cause a customer to seek legal representation, especially when it is more difficult to ascertain
the true value of the vehicle such as can be the case in more unique or rare automobiles.
There is no evidence to suggest that claimant age has any direct correlation with the current
rate of legal representation, with the exception of the segment of claimants over 65 years old,
which appear to have a lower rate of legal representation.
ICBC is currently exploring these relationships further as it investigates the rising trend of Legal
Representation Rate. Please see the response to information request 2013.1 RR BCUC.154.2.
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.12.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCPSO.12.1 Reference: Ex. B-3, ICBC Responses to BCUC IR#1, 149.6 Represented Claims - Customer Satisfaction and Please provide a version of the table shown in response to BCUC IR#1 149.6, but with a column added showing the legal representation rate for each claim transaction type. Response:
For the reasons discussed below, ICBC is unable to provide a table with comparable
information on the legal representation rate for accident benefits, bodily injury, and material
damage claims.
An equivalent Legal Representation Rate is not used for accident benefit claims as there is a
difference between representation of accident benefits and bodily injury claims. Legal
representation on accident benefits claims is usually more a matter of process as opposed to
active legal representation. Accident benefits claims involve statutory first party contractual
benefits that ICBC is committed to honouring and there is a low incidence of active litigation. It
is generally the case that plaintiff counsel representing a client involved in bodily injury claim will
also represent them respecting their accident benefit claim. Their involvement in these claims is
typically administrative in nature, and the vast majority of litigation related to accident benefits
involves Notices of Civil Claim issued to protect against lapsed limitation dates (while the bodily
injury claim is being handled) rather than to disputes respecting entitlements.
Coverage for material damage is provided through ICBC’s Optional insurance (competitive)
coverage and is not regulated by the Commission.
The Legal Representation Rate for bodily injury in 2012 was 45%.
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.13.1-6 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCPSO.13.1-6 Reference: Ex. B-4, ICBC Responses to Intervener IR#1, BCPSO 15.2, and Ex. B-3, ICBC Responses to BCUC IR#1, 154.4 Loss Costs - BI Claims - Low Velocity Impact (LVI) Program “For a number of years, ICBC had maintained the Low Velocity Impact (LVI) program. The Program involved having a committee review claims with minor or no material damage against a specific set of criteria. If the criteria were satisfied, then ICBC would not consider injury compensation. The original Program was very successful in helping to reduce bodily injury claims costs. However, the effect of the committee-based process was often to delay the determination of whether a claimant’s injury claim would be accepted by ICBC. It also was creating friction between the claimant and their adjuster because it took the decision making and accountability away from the adjuster and shifted it to someone that was not in direct contact with the claimant. These shortcomings could intuitively have a negative effect on representation rates. ICBC has abandoned the LVI program, based on the concern that the friction associated with the LVI program was a potential contributor to the growing representation rates, and the cost of the program was now exceeding the benefits that were the original impetus for the program. The claims will be managed by the customer’s adjuster, who will be able to make a quicker assessment of their situation to help meet their needs faster.” - BCUC 154.4, Att. A, p. 8 13.1 When did ICBC discontinue the LVI program? 13.2 Please explain the basis for the statement (above) that LVI was “very successful in helping to reduce bodily injury claims costs”; how did ICBC reach this conclusion? 13.3 Please explain whether LVI included investigating hospital admissions records. 13.4 Please explain whether LVI included investigating other health care treatment records. 13.5 How were the LVI program’s benefits quantified? Please explain using a numerical example. 13.6 During what year did LVI costs exceeded the program’s benefits? Response:
13.1
The Low Velocity Impact (LVI) Program was discontinued in February 2013.
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.13.1-6 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
13.2
Please see the response to information request 2013.2 RR BCUC.200.1 which discusses,
among other things, that net impact of the LVI Program was a reduction in the number of claims
paid against ICBC liability policies.
13.3
Depending on the individual circumstances of the claim, hospital admission records could form
part of the investigation of a potential LVI claim. The absence or presence of objective injury
signs in a LVI crash is relevant in assessing whether an injury claim is compensable. In some
instances, hospital admission records could assist in understanding the individual
circumstances of a case.
13.4
For the reasons stated in the response to information request 2013.2 RR BCPSO.13.3 above,
health care treatment records could also form part of the investigation of a potential LVI claim.
13.5
ICBC did not identify an annual benefit to the LVI Program. Because the LVI Program
Guidelines reduced the number of tort claims paid, reductions in overall bodily injury payments
was achieved.
As indicated in the response to information request 2013.2 RR BCUC.200.2, in comparing
representation rates for the past five years, ICBC found that LVI claims had a greater rate of
legal representation than any other category of bodily injury claims, including those with
significant vehicle impact or injury.
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.13.1-6 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
13.6
ICBC has not identified a point in time when LVI costs exceeded the benefits of the LVI
Program.
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.14.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCPSO.14.1 Reference: Ex. B-4, ICBC Responses to Intervener IR#1, BCPSO 15.2, and Ex. B-3, ICBC Responses to BCUC IR#1, 154.4 Attachment A, p.9 Loss Costs - MR Claims - Treatment Approval Policy Change “ICBC has implemented changes to the way claimants can access chiropractic, physiotherapy and massage treatments. In the past, a claimant would have to have the therapist contact ICBC for approval and follow up was causing delays in initiating treatment and frustrating billing experiences. Now, ICBC has arranged with the medical providers that claimants only need to present their claim number (issued when the claimant reports their loss to ICBC) to a treating therapist and they are immediately authorized to treat up to 20 visits for accident related injuries.” - BCUC 154.4, Att. A, p.9 Please describe whether and how costs related to chiropractic, physiotherapy and massage treatment providers have changed since ICBC implemented the changes described in the above excerpt. Response:
As this is a relatively new initiative, the full impact of this change will take some time to be
realized.
While timely access to treatment may result in higher and earlier payments of accident benefits,
as stated in the Application, Chapter 3, the objective is to have a favourable impact on legal
representation rate and bodily injury claims costs.
ICBC believes that increased utilization is resulting in higher accident benefits average severity,
and easier access to benefits is increasing accident benefit frequency.
Please see the responses to information requests 2013.1 RR BCUC.6.1 and 2013.1 RR
BCUC.6.3 for more information.
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.15.1-4 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCPSO.15.1-4 Reference: Ex. B-4, ICBC Responses to Intervener IR#1, BCPSO 53.1 and 53.3, and Ex. B-4, ICBC Responses to Intervener IR#1, TREAD 19.4, and Ex. B-3, ICBC Responses to BCUC IR#1, 123.1 Operating Expenses - Compensation - Bonus Structure
15.1 Do the figures shown in the above table in response to BCPSO IR#1 53.1 include bonuses based solely on duties devoted to ICBC’s Basic insurance operations? 15.2 What proportion of each of the Bargaining Unit and the Management and Confidential staff perform duties supporting both Basic and Optional sides of ICBC business? 15.3 For the test year, what proportion of the figures shown are expected to go to BI Adjusters? 15.4 Explain how the incentive payouts for each of BI Adjusters, Material Damage Managers, Actuaries, and Other Management are determined, and how (if at all) the bonuses are mathematically related to the eventual settlement amounts. Response:
15.1 The table provided in the response to information request 2013.1 RR BCPSO.53.1-2 presents
the performance-based incentive payouts for each employee group (Bargaining Unit and
Management and Confidential) for 2011 actual, 2012 actual, and 2013 forecast at the corporate
level, on an integrated basis, inclusive of duties pertaining to the Basic insurance, Non-
insurance, and Optional insurance lines of business.
15.2 As discussed in the Application, Chapter 7, page 7-3, paragraph 10, ICBC operates and
manages the company on an integrated basis, providing both Basic insurance and Optional
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.15.1-4 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
insurance products and services, which benefits ICBC’s customers in terms of ease of service
and economies of scale which in turn leads to cost efficiencies.
ICBC FTEs, whether Bargaining Unit or Management and Confidential, are determined based
on operational requirements, service and business demands at a cost centre level. The duties
performed at the cost centre level support either Basic insurance, Non-insurance, or Optional
insurance lines of business. ICBC applies the Commission-approved financial allocation
methodology at the cost centre level, and then aggregates all of the cost centres in order to
determine the operating expense components which may be recovered through Basic insurance
rates.
15.3
For the 2013 forecast year (i.e., the test year) shown in the information request’s table, $7
million is forecasted to be paid to the Bargaining Unit employees group for Gainsharing. Of this
amount, approximately 11.5% (or $0.8 million) is expected to be paid to the Bodily Injury
Adjusters which include Senior Injury Adjusters and Injury Adjusters.
15.4
For Bargaining Unit employees including Bodily Injury Adjusters, their incentive pay plan
(i.e., Gainsharing) is based on the Collective Agreement between ICBC and the Canadian
Office and Professional Employees’ Union (COPE), Local 378.
ICBC’s Management and Confidential employees including Material Damage Managers,
Actuaries, and other Management are eligible to participate in the 2013 Short Term Incentive
Pay (STIP) plan.
The measures developed for ICBC’s incentive pay plans including Gainsharing and STIP are in
alignment with ICBC’s objectives and strategies. Incentives for Bodily Injury Adjusters under
Gainsharing and incentives for Material Damage Managers, Actuaries or other Management
under the STIP plan are not mathematically related to the eventual settlement amounts.
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.15.1-4 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Please see the response to information request 2013.1 RR BCUC.123.1 for the details related
to ICBC’s 2013 STIP Plan for Management and Confidential employees and the 2013
Gainsharing for Bargaining Unit employees.
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.15.5 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCPSO.15.5 Reference: Ex. B-4, ICBC Responses to Intervener IR#1, BCPSO 53.1 and 53.3, and Ex. B-4, ICBC Responses to Intervener IR#1, TREAD 19.4, and Ex. B-3, ICBC Responses to BCUC IR#1, 123.1 Operating Expenses - Compensation - Bonus Structure
“Discounted payouts for all levels would have been in effect for actual net income up to the 2011 net income target; which was set at $217 million. ICBC’s 2011 actual net income was $140 million, in the range between $35 and $217 million. As a result, the 2011 STIP payout was discounted at all levels accordingly. In early 2013, the financial trigger target for the 2013 STIP Plan year was increased to be 100% of ICBC’s 2013 net income target, below which discounts to STIP payments will apply.” - TREAD 19.4 Please explain how the target net income is determined. Response:
The net income target adopted as the financial trigger target for ICBC’s 2013 Short Term
Incentive Pay Plan is the same net income target as stated on page 27 in ICBC’s Revised
Service Plan 2013-2015 that is included in the Application, Chapter 10, Appendix 10 B, and is
also posted on ICBC’s website (www.icbc.com).
For the 2013 forecast, ICBC’s net income target is set at $257 million.
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.16.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCPSO.16.1 Reference: Ex. B-4, ICBC Responses to Intervener IR#1, BCPSO 55.1 Operating Expenses - Forecast Performance Does ICBC agree that ideally the average variation between forecast and actual operating costs over the period shown in Figure 7B.1 would have been 0%, with the variance range including both positive and negative values? If not, please explain why not. Response:
No, ICBC does not agree that ideally the average variation between forecast and actual
operating costs over the period shown in the Application, Chapter 7, Appendix 7 B, Figure 7B.1
would have been 0%, with a variance range including both positive and negative values.
In the fall of each year, ICBC prepares its annual budget for the upcoming fiscal year, based on
the best information available at the time. ICBC is mindful of the potential impact of increases in
operating costs on Basic insurance rates. Once the budget is set, ICBC then charges its
divisions with the responsibility to proactively manage and control operating costs within their
own respective budget targets. As discussed in the response to information request 2013.1 RR
TREAD.22.6, ICBC fosters a culture of cost containment and financial discipline. Costs incurred
are generally managed within pre-established budgets. Exceptions are determined on a case
by case basis. ICBC’s management is aware that if actual expenditures are lower than budget,
then this will benefit policyholders. On the other hand, if actual expenditures are higher than
budget, then capital levels may be negatively impacted.
As indicated in the response to information request 2013.1 RR BCPSO.55.1-2, the favourable
variances in 2008 to 2010 were mainly due to one-off items. In addition, the favourable
variances in 2011 and 2012 were a consequence of ICBC’s intensive effort to manage and
control operating expenses in order to minimize pressures on Basic insurance rates and in
response to the recommendations of the 2012 Government Review of ICBC.
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.17.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCPSO.17.1 Reference: Ex. B-4, ICBC Responses to Intervener IR#1, BCPSO 57.1, and Ex. B-3, ICBC Responses to BCUC IR#1, 143.5 Performance Measurement - Customer Satisfaction ICBC states that “feedback from customers about ICBC”s insurance services has been very positive over the last number of years, and survey results do not indicate that there are issues with the accessibility or convenience of ICBC’s distribution channel. This is also true with respect to seniors (65+), who have consistently rated ICBC higher than non-seniors, on average." – BCPSO 57.1 Please explain whether seniors’ claims service satisfaction scores differ from the overall customer base. If they differ, describe the areas where seniors rate ICBC lower than other customer groups. Response:
Seniors’ scores are higher than the overall customer base for Claims Services Satisfaction
scores in all areas.
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.18.1-2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR BCPSO.18.1-2 Reference: Ex. B-4, ICBC Responses to Intervener IR#1, BCPSO 63.2 Represented Claims - Factors Influencing ICBC states that “Because plaintiff counsel are almost universally retained for motor vehicle claims on the basis of a contingency agreement, and the proliferation of loans available to plaintiffs that allow them to fund their disbursements, a customer’s ability to pay is not thought to be a factor in avoiding representation.” – BCPSO 63.2 18.1 Please give examples of loans ICBC is referring to in the above statement. 18.2 Please comment on whether ICBC believes there is any differential in claimants’ ability to access such loans based on each of age and income. Response:
18.1
In some cases, plaintiff counsel may agree to pay for all expert reports for their clients, as many
of these clients would not be able to afford these expenses themselves. These paid expenses
become part of the client’s claims against the liable motorist for damages and costs. Plaintiff
counsel may charge interest on these expenses and the interest rates can vary greatly
depending on the law firm.
Plaintiffs can also obtain loans through financing companies. Examples of some financing
companies who advertise these services include:
Bridge Point Financial Services.
Claims Funding International.
LawMax.
Lexfund Management.
Rhino Legal Finance.
Settlement Lenders.
BC Pensioners' and Seniors' Organization Information Request No. 2013.2 RR BCPSO.18.1-2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
18.2
Law firms and lending institutions may base their loans on many different variables; however,
ICBC cannot comment on those practices.
On May 13, 2013, the British Columbia Supreme Court ruled that interest incurred by plaintiffs
on loans arranged to finance their litigation is recoverable from the defendant as a
disbursement, provided the interest was necessary or proper and reasonable having regard to
the circumstances of the plaintiff.
Canadian Direct Insurance Information Request No. 2013.2 RR CDI.1.1-2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR CDI.1.1-2 Reference: The New Basic Capital Management Plan for the Rate Smoothing Framework Exhibit B-1, Chapter 4, pps. 4-13 to 14, paras. 46 and 47 Section D.3 – Capital Maintenance In its Information Request No. CDI 10.3 regarding the proposed new Capital Management Target CT Ratio of 150% to be transitioned over a ten year period, it was noted that the current Capital Management Plan had a 20 year transition period (2006 to 2026) to ensure ICBC could maintain a solvency rate of 130%. CDI asked this question: “Given this, why is ICBC proposing to shorten the transition period to ten years to reach the new target of 150%?” ICBC’s response was to refer to its response to Information Request BCUC No. 71.2 for the reasons for this proposal. It explained it proposed “a ten year transition period to 2023 in order to maintain similar timing of when the full maintenance provision will be captured in rates”. 1.1 Please explain the need to maintain similar timing to accord with the 2023 date set for the full maintenance provision to be captured in the rates? 1.2 Can ICBC not adhere to the current 20 year Capital Maintenance plan or is it more convenient for ICBC to adopt the 10 year period? If so, why is that the case? Response:
1.1
The capital maintenance provision should reflect the full capital management target in order to
maintain, all else equal, the target capital level for Basic insurance. The purpose of the
transient target was to limit the rate impact on customers as the capital maintenance provision
was incrementally increased until the full capital management target could be achieved. During
the years when the maintenance provision is based on a transient target, the management
target cannot be maintained as a result of the growth rate in capital required (all else equal).
ICBC had concluded that the overall customer impact of changing the end of the transition
period from 2026 to 2023 was slight (please see the response to information request 2013.1 RR
CDI.10.4-6); therefore ICBC has proposed to shorten the transition period to 10 years.
Canadian Direct Insurance Information Request No. 2013.2 RR CDI.1.1-2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
1.2
The decision to propose a 10 year transition period was not based on convenience, but rather
that there is a marginal difference in the rate impact between the two transition periods and the
construct is not as easily explained to, and understood by, stakeholders. ICBC is content to
leave it to the Commission to decide whether the marginal rate differential is worth maintaining
this complex construct for a longer transition period. ICBC’s own view is that the change to 10
years makes sense.
Canadian Direct Insurance Information Request No. 2013.2 RR CDI.2.1-2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR CDI.2.1-2 Reference: The New Basic Capital Management Plan for the Rate Smoothing Framework Exhibit B-1, Chapter 4, pps. 4-7 to 8, paras. 23 and 26, Section C.2-Basic MCT Ratio ICBC states at para. 33: “Since any adoption of a rate that is less than that needed to cover costs depletes Basic Capital, it is expected that the rate smoothing framework will create greater volatility for the Basic MCT Ratio”. Then at para. 26, ICBC notes: “Government directed a transfer of $373 million of Optional insurance capital to Basic insurance to replenish Basic capital as at December 31, 2012. … The transfer, combined with an increase in net unrealized investment gains, resulted in an increase of 37 percentage points in the MCT Ratio, bringing the MCT Ratio as at year end 2012 to 137% which is above the current capital management target. Without the Optional transfer the MCT ratio at year end 2012 would have been marginally above 100%, the regulatory minimum MCT ratio. The 2013 Revenue Requirements Application Public Workshop (Exhibit B-2 at Slide 24) indicates the implications for 2013 RRA. In forecasting a lower MCT level as a result of it being limited to a 4.9% rate increase by regulation rather than a rate increase of 11.5% to cover costs, ICBC indicates it will require capital of $130 million per annum to make up the difference. 2.1 Can ICBC confirm it will require $130M in capital for PY 2013? 2.2 If the answer to 2.1 is yes, will it require a direction from the government to transfer the required amount from Optional insurance capital to Basic insurance capital? Response:
2.1
Yes, ICBC can confirm that the exclusion of the 6.6 percentage point loss cost forecast variance
for the 2013 policy year will reduce Basic capital by up to $130 million.
2.2
ICBC confirms that a direction from government would be required to permit the transfer of
Optional insurance capital to Basic insurance. ICBC does not anticipate such a direction from
Canadian Direct Insurance Information Request No. 2013.2 RR CDI.2.1-2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
government to transfer capital from Optional insurance to Basic insurance due to the anticipated
depletion from the policy year 2013 rate exclusion of 6.6 percentage points. Government in fact
recently directed a transfer of capital from Optional insurance to Basic insurance prior to the
introduction of the rate smoothing framework that includes a full exclusion of the 2013 loss cost
forecast variance from the policy year 2013 rate change. Please see the Government directive
of December 13, 2012 with respect to Optional Excess Capital Transfer approved by Order in
Council 082/13, February 19, 2013, provided in the Application, Chapter 4, Appendix 4 B.
ICBC’s expectation is that the rate smoothing framework will function appropriately without a
further infusion of Optional insurance capital in most circumstances.
Canadian Direct Insurance Information Request No. 2013.2 RR CDI.2.3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR CDI.2.3 Reference: The New Basic Capital Management Plan for the Rate Smoothing Framework Exhibit B-1, Chapter 4, pps. 4-7 to 8, paras. 23 and 26, Section C.2-Basic MCT Ratio ICBC states at para. 33: “Since any adoption of a rate that is less than that needed to cover costs depletes Basic Capital, it is expected that the rate smoothing framework will create greater volatility for the Basic MCT Ratio”. Then at para. 26, ICBC notes: “Government directed a transfer of $373 million of Optional insurance capital to Basic insurance to replenish Basic capital as at December 31, 2012. … The transfer, combined with an increase in net unrealized investment gains, resulted in an increase of 37 percentage points in the MCT Ratio, bringing the MCT Ratio as at year end 2012 to 137% which is above the current capital management target. Without the Optional transfer the MCT ratio at year end 2012 would have been marginally above 100%, the regulatory minimum MCT ratio. The 2013 Revenue Requirements Application Public Workshop (Exhibit B-2 at Slide 24) indicates the implications for 2013 RRA. In forecasting a lower MCT level as a result of it being limited to a 4.9% rate increase by regulation rather than a rate increase of 11.5% to cover costs, ICBC indicates it will require capital of $130 million per annum to make up the difference. Is the Rate Smoothing Framework expected to cover MCT targets from PY 2014 onwards, or will further transfer of capital from Optional insurance likely be required? Response:
The rate smoothing framework is expected to keep the MCT ratio in excess of the regulatory
minimum of 100% MCT. The proposed new Basic insurance Capital Management Plan was
designed to manage Basic capital to a particular capital management target above the
regulatory minimum using capital provisions in the indicated rate changes. Additional adverse
events in the near future (e.g., adverse market returns) could occur and result in continued
capital depletion that causes the MCT ratio to fall below the regulatory minimum. This would be
considered an extraordinary circumstance. Should this occur, then ICBC must act in
compliance with the Government directive of March 19, 2013 with respect to Rate Smoothing
approved by Order in Council 153/13, March 18, 2013.
Canadian Direct Insurance Information Request No. 2013.2 RR CDI.2.3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
As indicated in response to information request 2013.2 RR CDI.2.1-2 ICBC does not anticipate
a direction from government to transfer capital from Optional insurance to Basic insurance in the
near-term. Any such transfer is a decision that rests with government. In the past, ICBC has
only transferred capital from the Optional insurance business to the Basic insurance business at
the direction of government.
Canadian Direct Insurance Information Request No. 2013.2 RR CDI.3.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR CDI.3.1 Reference: The New Basic Capital Management Plan for the Rate Smoothing Framework Exhibit B-1, Chapter 4, p. 4-11, paras. 36 and 37, Section D.2 – Proposed New Basic Capital Management Target At para. 36, ICBC defines the existing Capital Management Target of 130% MCT as the “Solvency Target”. It then states at para. 37: “The recent amendments to Special Direction IC2, and in particular the definition of the Capital Management Target, now require an additional margin (the rate smoothing margin) addressing the fact that the Solvency Target does not account for the use of capital for rate smoothing”. Does this statement mean that capital from Optional insurance is limited to achieving the Solvency Target of 130% for Basic Insurance? Response:
The quoted statement referred to in the information request is unrelated to the use of capital
from Optional insurance. As indicated in the Government directive of December 13, 2012 with
respect to Optional Excess Capital Transfer approved by Order in Council 082/13, February 19,
2013, included in the Application, Chapter 4, Appendix 4 B, the 2012 transfer of capital from the
Optional insurance business to the Basic insurance business was done in order to restore Basic
capital equal to or above the regulatory minimum and not to achieve the solvency target of
130% MCT. As described in response to information request 2013.1 RR BCUC.64.3, the
purpose of historical Optional capital transfers was also to ensure that Basic capital levels
remain above the regulatory minimum of 100% MCT. In situations where Optional capital was
transferred, the transfer was never contingent on the capital management target at the time.
ICBC does not assume any infusions of capital from other sources such as from the Optional
insurance business in order to achieve the new capital management target of 150% MCT.
Gordon Adair Information Request No. 2013.2 RR GA.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR GA.1 Reference: At 2013.1 RR BCUC.154.2 with reference to the factors that contribute to legal representation, ICBC states: “ICBC expects to have the benefit of further analysis on this topic in mid-2014.” Please provide an undertaking to make the results of this analysis available upon completion of this “high priority corporate project”. Response:
As indicated in the response to information request 2013.1 RR BCUC.154.2, ICBC is
investigating possible factors that contribute to legal representation and expects to have the
results by mid-2014. As discussed in the response to information request 2013.2 RR
BCUC.199.1, ICBC will provide relevant results of this analysis.
Gordon Adair Information Request No. 2013.2 RR GA.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR GA.2 Reference: At 2013.1 RR BCUC.154.4 – Attachment A – Legal Representation Rate, pages 5-6 ICBC states: “More importantly, it has become evident that ICBC’s initiatives have not had the same favourable impact amount British Columbia’s growing multicultural population. While it is early days into the analysis, ICBC has seen significant increases in representation in the Indo Canadian and Asian communities.” What analysis was conducted to identify “significant increases in representation” within these communities? Response:
The analysis from which ICBC concluded that significant increases in early legal representation
was occurring in these communities compared representation rates across various communities
in the Lower Mainland and Fraser Valley. The communities with higher early legal
representation coincided with those with higher multi-cultural populations. This conclusion is
consistent with anecdotal evidence from ICBC’s community outreach efforts which include
speaking to leaders of such multi-cultural communities.
ICBC has used this information to identify where there is an opportunity, geographically and
demographically, to allocate resources and develop strategies for specific claimant segments
and communities such as the multi-cultural information campaign to explain the claims process
and the dedicated Punjabi claims line. Please see the responses to information requests
2013.1 RR BCUC.111.1 and 2013.2 RR BCUC.196.1 for more information.
Gordon Adair Information Request No. 2013.2 RR GA.3.1-2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR GA.3.1-2 Reference: At 2013.1 RR BCUC.154.4 – Attachment A – Legal Representation Rate, page 8, ICBC states that the Minor Damage Claim program was abandoned “Based on the concern that the friction associated with the LVI program was a potential contributor to the growing representation rates, and the cost of the program was now exceeding the benefits that were the original impetus for the program. 3.1 Please provide figures to illustrate the volume of LVI claims as percentage of total BI claims reported for each of the years 2006-2012. 3.2 Based on the total volume of LVI claims reported for each of the years 2006-2012, please indicate what percentage of claims fell under each of the following categories: 1. LVI claims closed without legal representation and claim not paid 2. LVI claims closed with legal representation and claim not paid 3. LVI claims closed without representation and claim paid 4. LVI claims closed with legal representation and claim paid. Response:
3.1
3.2
Total ICBC 2006 2007 2008 2009 2010 2011 2012
BI Exposures Opened 62,838 61,948 58,714 56,779 58,971 60,267 60,346
LVI BI Exposures Opened 15,505 16,427 15,274 15,512 15,318 15,120 17,265
LVI BI Expsoures Opened as % of Total BI Exposures Opened 24.7% 26.5% 26.0% 27.3% 26.0% 25.1% 28.6%
2006 2007 2008 2009 2010 2011 2012
Unrepresented LVI Exposure closures without payment 51% 49% 47% 45% 40% 37% 35%
Represented LVI Exposure closures without payment 2% 2% 2% 2% 2% 2% 2%
Unrepresented LVI Exposure closures with payment 27% 26% 27% 26% 30% 30% 27%Represented LVI Exposure closures with payment 20% 22% 23% 24% 21% 17% 11%
LVI Exposures still open 0% 1% 1% 3% 7% 14% 25%
Gordon Adair Information Request No. 2013.2 RR GA.4 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR GA.4 Reference: At 2013.1 RR BCUC.154.4 – Attachment A – Legal Representation Rate, page 8, ICBC asserts that the LVI program was successful in reducing bodily injury claims costs but that the program has been identified as a “potential contributor to the growing representation rates, and the cost of the program was now exceeding the original impetus for the program.” ICBC identifies the following reasons to support their belief that the LVI program was contributing to growing representation rates: 1. The committee-based process created delays: “However, the effect of the committee-based process was often to delay the determination of whether a claim’s injury claim would be accepted by ICBC.” 2. That the decision-making was no longer within the adjusters accountability but had been shifted to someone that was not in direct contact with the claimant: “It was also creating friction between the claimant and their adjuster because it took the decision making and accountability away from the adjuster and shifted it to someone that was not in direct contact with the claimant. These shortcomings could intuitively have a negative effect on representation rates.” At 2013.1 RR AIC.3.4, ICBC is asked: “Is it fair to say that authorities for adjusters to settle claims without management or committee approval have been reduced over time?” The response provided by ICBC is as follows: “Yes, overall authority levels for adjusters to settle claims without management or committee approval have been reduced over time. Adjuster authority levels were revised to be commensurate with the further enhanced segmentation of bodily injury (BI) claims. Enhanced claims segmentation and reduced authorities provide for increased management focus on BI costs within their specific functional stream, consistent with ICBC’s claims strategy. The file reviews are used to verify that settlement amounts are within appropriate ranges and provides opportunities for coaching, training, and sharing best practices, creating consistency in file handling and improved management of BI claims costs.” ICBC abandoned the LVI program when it was identified as a potential contributor to growing representation. Specifically, ICBC identified that the effect of a “committee-based” process and the removal of “decision-making and accountability” from the adjuster had a “negative effect on representation rates”. Based on this evidence, please discuss how reduced authority levels (that require increased management and committee involvement in the claim settlement process) might also contribute to growth in representation rates.
Gordon Adair Information Request No. 2013.2 RR GA.4 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Response:
ICBC does not believe that reduced authority levels and increased management involvement of
injury claim files will contribute to growth in representation rates. The Low Velocity Impact (LVI)
committee and decision making process of LVI claims is distinguishable from the other payment
authorities, management processes, and file reviews.
Under the previous LVI program a committee determined whether to accept or deny a claim for
bodily injury compensation. The adjuster, while having the ability to provide recommendations,
did not participate in the decision making process.
With respect to the requesting of settlement authority on an injury claim that may exceed the
adjuster’s individual authority level, the adjuster provides their recommendation of quantum,
prepares their rationale, and discusses their strategy to conclude the claim. In this case, the
adjuster is an active participant in the decision making process and has accountability for the
eventual outcome.
ICBC believes that management oversight and increased adjuster support will have a
favourable effect on the quality of settlement offers and legal representation rates, as well as
ensure greater consistency in file handling. Furthermore, increased file reviews gives better
coaching and training opportunities that will assist the adjuster in their skill development. It
should be noted that the authority change referenced in the question is commensurate with the
risk and complexity of work that the individual adjuster job profile requires.
Gordon Adair Information Request No. 2013.2 RR GA.5 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR GA.5 Reference: At 2013.1 RR COPE.1.5.1 ICBC indicates: “There is no proven correlation between ICBC’s employee engagement score and ICBC’s financial results.” Please provide ICBC’s employee engagement scores broken down by division and then within the Claims division by business area and / or by the functional organizational model for the years 2006 through 2012. Response:
The table below outlines ICBC’s employee engagement scores by division (i.e., as existed at
each point in time below) in each respective year from 2006 to 2012.
Divisions 2006 2007 2008 2009 2010 2011 2012
Corporate 52 49 44 49 55 54 33 Insurance 54 52 49 68 69 58 42
Driver Licensing 60 63 64 70 72 74 60
Claims 53 48 37 40 47 46 20
Finance 53 46 51 56 62 55 39
Human Resources 54 57 50 51 69 68 35
Information Services 52 38 41 41 47 48 29
Business Transformation - - - 48 52 58 35
Customer Strategy & Marketing - - - 45 57 58 48
Corporate Communications & Stakeholder Engagement 69 55 52 68 69 70 55
Corporate Affairs - - - - 50 57 29
Note: Divisions shown in the table with no results reflects organizational changes during the period of review.
Gordon Adair Information Request No. 2013.2 RR GA.5 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
The table below outlines the engagement scores within the Claims Division by business area
(i.e., as existed at each point in time below) from 2006 to 2012.
Claims Business Areas 2006 2007 2008 2009 2010 2011 2012
Claims 53 48 37 40 47 46 20
Telephone Claims 58 - - - - - -
Lower Mainland region 52 46 - - - - -
Southern Interior region 51 49 - - - - -
Northern Interior region 70 60 - - - - -
Vancouver Island region 48 47 - - - - -
Area A - - 27 37 43 47 -
Area B - - 23 29 34 38 -
Area C - - 37 38 45 34 -
Area D - - 33 40 41 40 -
Area E - - 38 34 42 41 -
Special Investigation Unit 58 48 28 40 43 32 - Claims Policy, Programs, and Planning 43 47 35 40 51 45 -
Claims Support 55 54 - - - - -
Centralized Claims - 52 57 56 63 60 -
Centralized Estimating - - 48 48 55 56 -
Salvage - - 40 29 47 29 -
Commercial Claims - - 36 47 65 49 -
Head Office Claims - - 17 20 27 52 -
Claims Legal Services - - 50 40 43 54 -
Rehab Services - - - 26 40 52 -
Out of Province - - - 26 42 45 -
Notes: Business areas shown in the table with no results reflects organizational changes during the period of review. There are no results for Claims business areas in 2012 because the company measured results at the divisional
level only.
Insurance Bureau of Canada Information Request No. 2013.2 RR IBC.42.1-3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR IBC.42.1-3 Reference: Response to 2013.1 RR IBC.5.1 ICBC states “The result is a decrease in ICBC’s average premium and premium revenue.” 42.1 We were under the impression that ICBC was being compensated by the provincial government for this discount. Could you please confirm if the decrease in premium revenue due to the 25% discounted Basic insurance premium for seniors is still being offset by a provincial government subsidy? 42.2 Is this amount covering 100% of the senior rate discount? 42.3 Are any other discounts offset by the provincial government? If so, which one(s) and what is the amount of this offset? Response:
42.1
The impression that ICBC is compensated for the senior discount may be due to the Senior
Citizen Automobile Insurance Grant Act (the Act) that was enacted in 1980. The Act consists of
only three subsections. Subsection 1(1) of the Act enables the Lieutenant Governor in Council
to establish regulations, subsection 1(2) sets out what regulations under the Act may include,
and subsection 1(3) sets out provisions that apply if a regulation is established under the Act.
There have been no regulations established under the Act, accordingly there has been no
funding or other activity under the Act.
ICBC has been providing the senior Basic insurance premium discount without any government
subsidy. ICBC has not received any funds, and has not provided any administrative services,
under the Act.
42.2
ICBC does not receive any provincial government subsidy for the senior rate discount.
42.3
ICBC does not receive any subsidy from the provincial government for any premium discounts.
Insurance Bureau of Canada Information Request No. 2013.2 RR IBC.43.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR IBC.43.1 Reference: Responses to 2013.1 RR IBC.28.1-2 and 2013.1 RR IBC.31.1 In response to 2013.1 RR IBC.28.1-2 ICBC explains, regarding its consolidation of key functions, that functions have been realigned into divisions and departments where similar activities are performed. In response to 2013.1 RR IBC.31.1 ICBC explains that changes in ICBC’s division structures may impact allocator values. It is also noted that there have been various other changes to divisions, departments and functions since 2005. Please provide a comparison diagram or chart showing how ICBC’s divisions, departments, as well as the key functions within those divisions and departments, have changed for each year from 2005 to 2013. This information is necessary to understand how allocator values have been impacted and the reliability of the current allocation methodology. Response:
The information requested is of an organizational view of ICBC. A comparison chart showing
ICBC’s divisions and departments since 2005 is provided in Attachment A – ICBC Chart by
Division and Department 2005 – 2013.
As indicated in the response to information request 2013.1 RR IBC.38.1-2, the line of business
view of operating expenses is the presentation used for financial reporting in ICBC’s financial
statements and in actuarial rate indications, not the divisional/organizational view.
ICBC’s corporate operating expenses are allocated to the Basic insurance and Optional
insurance lines of business using the Commission-approved financial allocation methodology.
The methodology is applied at the cost centre level and then aggregated into the lines of
business. Even though ICBC’s organizational structure may change, ICBC has illustrated in the
Application, Chapter 7, Figure 7.23 that the Basic insurance allocation percentage has been
fairly consistent from year to year. This is indicative that changes in allocator values have not
had a material impact on Basic insurance costs used in the actuarial rate indication in the
Application.
In the response to information request 2013.2 RR IBC.46.5, ICBC has provided the allocator
values for each year from 2005 to 2012. The annual allocation table for 2013 cannot be made
available publicly until ICBC’s 2013 Annual Report has been tabled in the Legislature, which is
expected to occur in Q2 2014.
ICBC’s Information Request Response
Insurance Corporation of British Columbia
December 23, 2013
2013.2 RR IBC.43.1 – Attachment A – ICBC Chart by Division and Department 2005 – 2013
Page 1 of 8
ICBC Chart by Division and by Department 2005 - 2013
December - 2005
December - 2006
December - 2007
December - 2008
Corp Dev Services
Corp Dev Services
Corp Dev Services
Corp Dev Services Operations
Operations
Claims
Claims
Corp Communications
Corp Communications
Claims Policy
Clms Policy & Plan'g Customer Service
Customer Service
Claims Servicing
Claims Field Svcs
Loss Mgmt Ops Supp
Loss Mgmt Ops Supp
Claims Support
Clms Centralized Svs Operations - Fraser Valley
Operations-Claims
Clms Specialized Svcs
Operations - GV
Operations-Lower Mainland
Claims Transformation Operations-Claims
Operations-North/Central
Driver Services
Driver Licensing
Operations-Interior
Operations-S. Interior
Driver Lic Policy
Driver Lic Policy Operations-North/Central
Operations-Van Island
Driver Reg Serv
DS Bus Chng & Plan
Operations-S. Interior
Provincial Licensing
Prov Driv Licensing
Prov Driv Licensing Operations-Van Island
United Way
Reg Driver Serv
Reg Driver Licensing
Provincial Driv Licensing
Communications
Communications
United Way
Govt Rel & Policy Supp
Govt Rel & Policy Supp
Media Relations
Media Relations
Privacy & Fair Practices
Privacy & Fair Practices
Strat Communications
Strat Communications
Insurance, Mrkting & U/W
Insurance, Mrkting & U/W
Insurance, Mrkting & U/W
Insurance, Mrkting & U/W
Broker Relations & Sales
Broker Relations & Sales
Broker Relations & Sales
Broker Relations & Sales Ins Ops & Stat Research
Ins Plan’g & Bus Support
Ins Plan’g & Bus Support
Ins Plan’g & Bus Support
Regulatory Affairs
Regul Affairs & Plan'g
Regul Affairs & Plan'g
Regul Affairs & Plan'g Strategic Marketing
Strategic Marketing
Road Safety
Road Safety
Underwriting
Underwriting
Strategic Marketing
Strategic Marketing
Underwriting
Underwriting
Page 2 of 8
December - 2005
December - 2006
December - 2007
December - 2008
Finance
Finance
Finance
Finance
Corp Audit & Risk Mgmt
Corp Audit & Risk Mgmt
Corp Audit & Risk Mgmt
Corp Audit & Risk Mgmt Corporate Actuarial Department
Corporate Actuarial Department
Corporate Actuarial Department
Corporate Actuarial Department
Corporate Controller
Corporate Controller
Corporate Controller
Corporate Controller Corporate Services
Corporate Services
Corporate Services
Investments
Investments
Investments
Investments
Procurement & Corp Svcs Supply Management
Supply Management
Supply Management
HR & Corporate Law
HR & Corporate Law
HR & Corporate Law
HR & Corporate Law
Corporate Law
Corporate Law
Corporate Law
Corporate Law Employee Communications
Compensation & Payroll Serv
Compensation & Payroll Serv
Compensation & Payroll Serv
HR Business Ops
Employee Communications
Employee Communications
Employee Communications HR Strategic Services
HR Services
HR Services
Talent Acquis'n & Consulting
Industrial Relations
Employee Wellness
Employee Relations
Employee Relations Learning & Development
Employee Relations
Organization Development
Organization Development
Organization Development
Workforce Plan & Analytics Information Services
Information Services
IS & Bus Transformation
IS & Bus Transformation
Applications
IS Solutions
Bus Transformation
IS & Bus Transformation IT Architecture
IT Architecture
IS Solutions
IS Solutions
IT Infrastructure
IT Infrastructure
IT Architecture
IT Architecture IT Strat Client Services
IT Strat Client Services
IT Infrastructure
IT Infrastructure
Planning & Change
Planning & Budget
Strat Client Services
Strat Client Services
Planning & Budget
Planning & Budget
Page 3 of 8
December - 2009
December - 2010
December - 2011
Corporate Secretary
Corporate Secretary
Corporate Secretary Claims
Claims
Claims
Claims Programs & Planning
Claims Programs & Planning
Claims Customer Services Claims Field Svcs
Claims Field Services
Claims Injury Services
Clms Centralized Svs
Claims Centralized Services
Claims Programs & Planning Clms Specialized Svcs
Claims Specialized Svcs
Claims Transformation
Claims Transformation
Claims Transformation
TP Claims Projects Unit A
TP Claims Projects
Driver Licensing
Driver Licensing
Driver Licensing
Driver Lic Policy
Driver Lic Policy
Driver Lic Policy DS Bus Chng & Plan
DS Bus Chng & Plan
DL Business Mgmt Services
Prov Driv Licensing
Prov Driv Licensing
Prov Driv Licensing Reg Driver Licensing
Reg Driver Licensing
Reg Driver Licensing
Communications
Communications
Corp Comm & Stakeholder Rel
Corporate Relations
Corporate Relations
Corporate Relations Media Relations
Media Rel & Strat Comm
Media Rel & Strat Comm
Privacy & Fair Practices
Privacy & Freedom of Information
Government Relations
Strat Communications
TP Communications
TP Communications Insurance
Insurance
Insurance
Insurance Broker & Cust Services
Insurance Broker & Cust Services
Broker Distribution
Ins Plan’g & Bus Transformation
Ins Plan’g & Bus Transformation
Contact Centres & Ops
Regulatory Affairs
Underwriting
Personal Insurance Road Safety
Commercial Insurance
Underwriting
Ins Plan’g & Transformation
Page 4 of 8
December - 2009
December - 2010
December - 2011
Strategic Marketing
Strategic Marketing
Customer Strategy & Marketing
Customer & Market Insights
Corp Marketing & Communications
Corp Marketing & Communications
Marketing & Broker Services
Customer & Market Insights
Customer & Market Insights Marketing Strategy & Planning
Marketing Strategy & Planning
Customer & Mktg Strategy
Stakeholder/Community Rel
Customer Relations
Cust & Stakeholder Experience
Customer Transformation Finance
Finance
Finance
Corp Audit & Risk Mgmt
Corp Audit & Risk Mgmt
Corp Audit & Risk Mgmt Corporate Actuarial Department
Corporate Actuarial Department
Corporate Actuarial Department
Corporate Controller
Corporate Controller
Corporate Controller Investments
Investments
Investments
Procurement & Corp Svcs
Procurement & Corp Svcs
Supply Mgmt & Corp Svcs
Finance Transformation
Finance Transformation
INFO Project
INFO Project HR & Corporate Law
Corporate Affairs
Corporate Affairs
Corp Dev Services
Corp Dev Services
Corp Dev Services Corporate Law
Corporate Law
Corporate Law
Emp Relns, Compensation & Payroll Svcs
Regulatory Affairs
Privacy & Freedom of Information
Employee Communications
Road Safety
Regulatory Affairs Talent Acquis'n & Consulting
Road Safety
Organization Development Workforce Plan & Analytics
Page 5 of 8
December - 2009
December - 2010
December - 2011
Human Resources
Human Resources
Compensation Svcs & Emp Relations
Compensation Svcs & Emp Relations
Employee Communications
Talent Acquis'n & Consulting
Talent Acquis'n & Consulting
Organization Development
Organization Development
Change Management
Change Management
HR TP Projects
HR TP Projects
Information Services
Information Services
Information Services
Data Centre Initiatives
IS Solutions
IS Bus & Tech Operations IS Solutions
IS Solutions Delivery
IS Claims
IT Architecture
IT Architecture
IS Corp & Driver Licensing IT Infrastructure
IT Infra Ops & Support
IT Architecture
Strat Client Services
IS Strategic Svcs
Enterprise & Info Mgmt Planning & Budget
IS Transformation Delivery
IS Transformation Delivery
Bus Transformation
Bus Transformation
Bus Transformation
BT TP Planning
BT Prog Planning
BT Prog Planning BT TP Program Mgmt
BT Program Mgmt
BT Program Mgmt
Business Transformation Serv
BT Operations
BT Operations
Page 6 of 8
December - 2012
December - 2013
Claims
Claims
Claims Customer Services
Claims Customer Services Claims Injury Services
Claims Injury Services
Claims Services
Claims Services Claims Legal Services
Claims Legal Services
Claims Programs
Claims Programs Claims Programs & Planning
Claims Transformation
Claims Transformation
Insurance & Driver Licensing
Insurance & Driver Licensing
Broker Distribution & DL
Broker Distribution & DL Contact Centres & Ops
Contact Centres & Ops
Personal Insurance
Personal Insurance Commercial Insurance
Commercial Insurance
Insurance Transformation
Insurance Transformation Road Safety
Road Safety
Communications & Marketing
Communications & Marketing
Corp Marketing & Communications
Customer & Mktg Strategy Customer & Mktg Strategy
Internal Communications
Internal Communications
Ext Comms & Stakeh'r Engmt Ext Comms & Stakeh'r Engmt
Customer Transformation
Customer Transformation
Finance
Finance
Corp Audit & Risk Mgmt
Corp Audit, Risk, & Fin Analysis Corporate Actuarial & Advanced Analytics
Corporate Actuarial & Advanced Analytics
Corporate Controller
Corporate Controller Investments
Investments
Operational Accounting
Page 7 of 8
December - 2012
December - 2013
Corporate Services
Corporate Services
Planning Corp Svcs
Planning Corp Svcs Corp Law & Gen Counsel
Corp Law & Gen Counsel
Privacy & Freedom of Information
Privacy & Freedom of Information Procurement & Facilities
Supply Mgmt & Workplace Ops
Corporate Secretary
Corporate Secretary Human Resources
Human Resources
Compensation Svcs & Emp Relations
Compensation Svcs & Emp Relations Talent Acquis'n & Consulting
Talent Acquis'n & Consulting
Org Dev & Change Mgmt
Org Dev & Change Mgmt Information Services
Information Services
IS Bus & Tech Operations
IS Bus & Tech Operations IS Business Operations
IS Business Operations
IS Claims
IS Claims IS Insurance
IS Insurance
IS Corp & Enterprise
IS Corp & Enterprise IS DL & Enterprise Info Mgt
IS DL & Enterprise Info Mgt
IT Architecture
IT Architecture Technology Platforms & Operations
Tech & Sys Planning
Technology Platforms & Operations Transformation
Transformation
BT Prog Planning
BT Operations BT Program Mgmt
BT Program Mgmt
BT Operations
BT Advisory Services BT Advisory Services
Transformation Claims
Transformation Claims
Page 8 of 8
Notes:
1. In 2007, in defining ICBC's vision as being BC’s preferred auto insurer, the strategy and roadmap focused ICBC on our core business: designing superior products; supporting brokers in selling those products; managing claims; and delivering efficient driver services.
To support this, the Operations Division broke out to create three functional areas: Claims, Driver Licensing & Communications. ICBC's call centres were also aligned to the specific divisions they supported.
2. In 2008, ICBC made organizational changes to the leadership structure in claims by moving senior leaders from a regional model to a field services model which distributed the size and complexity of the office more even across the Director team. A Claims Transformation department was setup to support early work to enable the Claims Transformation Program.
3. In 2009, as part of key 2014 initiatives focused on transformation and customer experience, two new divisions were created in 2009: - Strategic Marketing was separated from the Insurance Division. - The Stakeholder relations group was realigned from Communications into the new Strategic Marketing group. - The Business Transformation group was separated from the Information Services Division to focus on Transformation Program projects.
4. In 2010, the HR & Corporate Law group was separated, creating two divisions; one for Human Resources and one for Corporate Affairs. Road Safety and Regulatory Affairs also moved from the Insurance division into Corporate Affairs.
5. In 2011, ICBC completed its first phase of realigning its Claims Division to a functional based model. At the end of 2011, all of the Communication departments and Stakeholder relations had been centralized from several divisions into the Corporate Communications and Stakeholder Relations Division.
6. At the start of 2012, Claims finalized its functional model. By the end of 2012, a couple of divisions were combined: - Communications and Strategic Marketing Divisions became one division. - Insurance & Driver Licensing became one division.
Insurance Bureau of Canada Information Request No. 2013.2 RR IBC.44.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR IBC.44.1 Reference: Response to 2013.1 RR IBC.31.1 ICBC states that “the type of allocators that are typically impacted by changes in division structures are Shared Service allocators and select Average allocators” [emphasis added]. What allocators in addition to those that are “typically” impacted have also been affected by changes in division structures. Please be specific and include references to Chapter 7, Appendix 7D, Figure 7D.2 and the categories within the divisions listed in the Appendix, as well as the associated allocators. Response:
The types of allocators impacted by changes in division structure are Shared Service allocators
and select Average allocators. Updates to Shared Service allocators and select Average
allocators have captured all applicable circumstances of change in division structure that ICBC
has observed in the past. However, ICBC expects that prospectively, there may be
circumstances in the future, not currently foreseen, in which this is not the case and thusly, the
word “typically” was added in the response to information request 2013.1 RR IBC.31.1.
Insurance Bureau of Canada Information Request No. 2013.2 RR IBC.45.1-2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR IBC.45.1-2 Reference: Response to 2013.1 RR IBC.31.2 The initial Information Request asked whether it is time to update the allocation methodology to better reflect the current Divisions and/or Expense Categories. ICBC’s response refers only to the Claims Division. 45.1 Is ICBC suggesting that changes to divisions and/or expense categories only impact claims-related functions and the associated allocation methodology, allocators and allocator values? 45.2 Are there changes to divisions and/or expense categories that impact allocation methodology, allocators and allocator values that are not claims-related? Response: 45.1
No, ICBC is not suggesting that changes to divisions and/or expense categories impact only
claims-related functions. Rather, the response to information request 2013.1 RR IBC.31.2 was
intended to direct the reader to the area in the company that is undergoing significant business
change – the Claims Division.
Whereas significant business change may occur anywhere in the company, it is the Claims
Division that is currently undergoing significant business change. As the allocation methodology
and allocator used for an area may no longer be appropriate if the area has undergone
significant business change, the response then directed the reader to the next filing related to
financial allocation which will review the allocation methodology and allocator used for Customer
and Injury Services Operations.
Customer and Injury Services Operations is the largest area of allocation within the Claims
Division, and is the area most significantly impacted by ICBC’s current business change.
Customer and Injury Services Operations includes the former Regional Claims – which was
merged with other areas in the move from a geographic-based (i.e., regional) service model to a
functional-centric model.
Insurance Bureau of Canada Information Request No. 2013.2 RR IBC.45.1-2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
45.2
In the Application, Chapter 7, Appendix 7 D, ICBC presents 2012 corporate operating expenses
allocated to Basic insurance, Non-insurance, and Optional insurance lines of business, using
the Commission-approved financial allocation methodology. Chapter 7, Appendix 7 D, Figure
7D.1 describes the allocators used and Figure 7D.2 shows the resulting amounts and allocation
percentages.
Allocator values do change when updated each year to reflect updated financial information for
all of ICBC, including not only the Claims Division but also the divisions that are not claims-
related. Therefore, there are indeed changes, not claims-related, that impact allocator values.
In the response to information request 2013.2 RR IBC.46.5, ICBC has provided the annual
allocation tables for each year from 2005 to 2012. As can be seen from the annual allocation
tables, the allocator values do change from year to year in order to reflect updated financial
information (whether Claims-related or not). Also as indicated in that response, there have
been numerous proceedings regarding allocation, particularly with respect to allocation of
Regional Claim Centres.
As shown in Chapter 7, Figure 7.23, ICBC’s Basic insurance allocation percentage has been
fairly consistent from year to year. This is indicative that changes in allocator values to reflect
updated financial information have not had a material impact on Basic insurance costs used in
the actuarial rate indication in the Application.
Insurance Bureau of Canada Information Request No. 2013.2 RR IBC.46.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR IBC.46.1 Reference: Response to 2013.1 RR IBC.35.3 ICBC explains, in part, how the Claims Division reorganization is expected to impact the current allocators, and explains that the new consolidated area is named Customer and Injury Services Operations and the associated allocator is derived by proportionately blending the allocators of the merged area, and then goes on to state: In addition, as noted in Chapter 7, Appendix 7 D, Figure 7D.2, footnote 1, the management structure relating to Rehabilitation and Out of Province Claims changed resulting in the management group Rehabilitation and Out of Province Claims being discontinued. Also discontinued is Call Centre Support which primarily consisted of facility costs that, as part of the reorganization, are no centralized under Claims Building Support. As these areas have been discontinued, the allocator of Weighted Average – Cost Centres is no longer used to allocate each of Call Centre Support and of Rehabilitation and Out of Province Claims. With regards to the allocator derived by proportionately blending the allocators of the merged areas, is this an allocator that the Commission has approved? Response:
The components of the allocator used in allocating Customer and Injury Services Operations
have been subject to the overview of the Commission. The predominant component of the
allocator is Work Effort. Other components of the allocator are Net Claims Costs – Out of
Province (OOP) and Net Claims Costs – Head Office Claims (HOC) and are discussed in the
response to information request 2013.2 RR BCUC.219.2. The Work Effort allocator, used in
allocating a predominant portion of the costs of Customer and Injury Services Operations, has
been the subject of a number of filings over the last several years that have been reviewed and
approved by the Commission.
Customer and Injury Services Operations includes the former Regional Claims, which was
merged with other areas in the move from a geographic-based (i.e., regional) service model to a
functional-centric model. The latest approved work effort study and associated Work Effort
allocator applies to the former Regional Claims.
As referenced in the response to information request 2013.1 RR IBC.31.2, the next filing related
to financial allocation will include a detailed work effort study based on the new functional-
centric service model. The scope of this work effort study is expected to include the former
Insurance Bureau of Canada Information Request No. 2013.2 RR IBC.46.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Regional Claims and extend to those areas within Customer and Injury Services Operations not
previously part of the former Regional Claims, thus reflecting the new functional-centric service
model. Subject to the upcoming filing related to financial allocation, Customer and Injury
Services Operations in its entirety will be allocated based on Work Effort and it will no longer be
based on the blend of allocators discussed above.
Insurance Bureau of Canada Information Request No. 2013.2 RR IBC.46.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR IBC.46.2 Reference: Response to 2013.1 RR IBC.35.3 ICBC explains, in part, how the Claims Division reorganization is expected to impact the current allocators, and explains that the new consolidated area is named Customer and Injury Services Operations and the associated allocator is derived by proportionately blending the allocators of the merged area, and then goes on to state: In addition, as noted in Chapter 7, Appendix 7 D, Figure 7D.2, footnote 1, the management structure relating to Rehabilitation and Out of Province Claims changed resulting in the management group Rehabilitation and Out of Province Claims being discontinued. Also discontinued is Call Centre Support which primarily consisted of facility costs that, as part of the reorganization, are no centralized under Claims Building Support. As these areas have been discontinued, the allocator of Weighted Average – Cost Centres is no longer used to allocate each of Call Centre Support and of Rehabilitation and Out of Province Claims. If the management group Rehabilitation and Out of Province Claims is discontinued, where are those functions now performed? Please reference Chapter 7, Appendix 7D, Figure 7D.2. Response:
The management structure relating to Rehabilitation and Out of Province Claims existed and
applied in the context of a geographic-based (i.e., regional) service model.
In the move to a functional-centric service model, the management structure for this area is now
recorded under Claims Administrative Support, which uses the same allocator, Weighted
Average – Cost Centres, as shown in the Application, Chapter 7, Appendix 7 D, Figure 7D.2.
Insurance Bureau of Canada Information Request No. 2013.2 RR IBC.46.3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR IBC.46.3 Reference: Response to 2013.1 RR IBC.35.3 ICBC explains, in part, how the Claims Division reorganization is expected to impact the current allocators, and explains that the new consolidated area is named Customer and Injury Services Operations and the associated allocator is derived by proportionately blending the allocators of the merged area, and then goes on to state: In addition, as noted in Chapter 7, Appendix 7 D, Figure 7D.2, footnote 1, the management structure relating to Rehabilitation and Out of Province Claims changed resulting in the management group Rehabilitation and Out of Province Claims being discontinued. Also discontinued is Call Centre Support which primarily consisted of facility costs that, as part of the reorganization, are no centralized under Claims Building Support. As these areas have been discontinued, the allocator of Weighted Average – Cost Centres is no longer used to allocate each of Call Centre Support and of Rehabilitation and Out of Province Claims. If the Call Centre consisted “primarily” of facility costs, what other costs were involved and where are the facility costs and other costs now accounted for with the allocation? Please reference Chapter 7, Appendix 7D, Figure 7D.2 when providing the answer. Response:
Call Centre Support consisted primarily of facility costs. Other costs involved a management
structure relating to Call Centre Support which existed and applied in the context of a
geographic-centric service model.
In the move to a functional-centric service model, the facility costs as noted in the Application,
Chapter 7, Appendix 7 D, Figure 7D.2, footnote 1 and in the response to information request
2013.1 RR IBC.35.3 are centralized under Claims Building Support in Chapter 7, Appendix 7 D,
Figure 7D.2.
In the move to a functional-centric service model, the management structure related to this
former area is now recorded under Claims Administrative Support in Chapter 7, Appendix 7 D,
Figure 7D.2.
Insurance Bureau of Canada Information Request No. 2013.2 RR IBC.46.4 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR IBC.46.4 Reference: Response to 2013.1 RR IBC.35.3 ICBC explains, in part, how the Claims Division reorganization is expected to impact the current allocators, and explains that the new consolidated area is named Customer and Injury Services Operations and the associated allocator is derived by proportionately blending the allocators of the merged area, and then goes on to state: In addition, as noted in Chapter 7, Appendix 7 D, Figure 7D.2, footnote 1, the management structure relating to Rehabilitation and Out of Province Claims changed resulting in the management group Rehabilitation and Out of Province Claims being discontinued. Also discontinued is Call Centre Support which primarily consisted of facility costs that, as part of the reorganization, are no centralized under Claims Building Support. As these areas have been discontinued, the allocator of Weighted Average – Cost Centres is no longer used to allocate each of Call Centre Support and of Rehabilitation and Out of Province Claims. If the management group Rehabilitation and Out of Province Claims and Call Centre Support are discontinued and the allocator Weighted Average - Cost Centres is no longer used, what allocator is now used for the functions that were in these areas and where are the costs now accounted for with the allocation? Please reference Chapter 7, Appendix 7D, Figure 7D.2 when providing the answer. Response:
As described in the response to information request 2013.2 RR IBC.46.2, the management
structure relating to Rehabilitation and Out of Province Claims existed and applied in the context
of a geographic-based (i.e., regional) service model.
In the move to a functional-centric service model, the management structure related to these
areas is now recorded under Claims Administrative Support and the allocator used is Weighted
Average – Cost Centres, as shown in the Application, Chapter 7, Appendix 7 D, Figure 7D.2.
As described in the response to information request 2013.2 RR IBC.46.3, Call Centre Support
consisted primarily of facility costs and other costs associated with a management structure
relating to Call Centre Support which existed and applied in the context of a geographic-based
service model.
In the move to a functional-centric service model, the facility costs are centralized under Claims
Building Support and the allocator used is Square Footage, as shown in Chapter 7, Appendix 7
Insurance Bureau of Canada Information Request No. 2013.2 RR IBC.46.4 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
D, Figure 7D.2. In the move to a functional-centric service model, the management structure
related to this former area is now recorded under Claims Administrative Support and the
allocator used is Weighted Average – Cost Centres, as shown in Chapter 7, Appendix 7 D,
Figure 7D.2.
Insurance Bureau of Canada Information Request No. 2013.2 RR IBC.46.5 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR IBC.46.5 Reference: Response to 2013.1 RR IBC.35.3 ICBC explains, in part, how the Claims Division reorganization is expected to impact the current allocators, and explains that the new consolidated area is named Customer and Injury Services Operations and the associated allocator is derived by proportionately blending the allocators of the merged area, and then goes on to state: In addition, as noted in Chapter 7, Appendix 7 D, Figure 7D.2, footnote 1, the management structure relating to Rehabilitation and Out of Province Claims changed resulting in the management group Rehabilitation and Out of Province Claims being discontinued. Also discontinued is Call Centre Support which primarily consisted of facility costs that, as part of the reorganization, are no centralized under Claims Building Support. As these areas have been discontinued, the allocator of Weighted Average – Cost Centres is no longer used to allocate each of Call Centre Support and of Rehabilitation and Out of Province Claims. Given the reorganization and changes to the areas being allocated, please provide a comparison diagram/chart showing how the content of each cost category in Chapter 7, Appendix 7D, Figure 7D.2, as well as each of the corresponding allocators have changed for each year from 2005 through 2013. Response:
ICBC does not capture data in the manner required to respond to IBC’s request as set out in the
information request. Instead, ICBC has attached the annual allocation tables most recently filed
as in the Application, Chapter 7, Appendix 7 D, Figure 7D.2 with actuals for each year from
2005 to 2012. The annual allocation table for 2013 cannot be made available publicly until
ICBC’s 2013 Annual Report has been tabled in the Legislature, which is expected to occur in Q2
2014.
As indicated in the response to information request 2013.1 RR IBC.38.1-2, Chapter 7, Appendix
7 D, Figure 7D.2 shows a line of business view of operating expenses. The line of business
view of operating expenses is the presentation used for financial reporting in ICBC’s financial
statements and in actuarial rate indications. It is not the divisional view.
ICBC reorganizes its divisions in order to meet operational requirements and to achieve desired
business outcomes. Irrespective of where within the organization a function may reside as a
result of reorganization, ICBC applies the financial allocation methodology as approved by the
Commission. ICBC’s financial allocation methodology was first approved by the Commission in
Insurance Bureau of Canada Information Request No. 2013.2 RR IBC.46.5 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
its January 2005 Decision. There have been numerous proceedings since then regarding
allocation, particularly with respect to allocation of Regional Claim Centres.
In addition to Commission oversight, PricewaterhouseCoopers (PWC) conducts an annual audit
of ICBC’s compliance with the criteria established by sections 23(1)(c)(ii) and 49 of the
Insurance Corporation Act for attributing revenue and costs to ICBC’s Basic, Optional, and Non-
insurance lines of business.
The annual allocation tables provided below reflect the then-current, approved methodology for
each year from 2006 to 2012. The annual allocation table for 2005, appearing in the 2007
Revenue Requirements Application, reflects the July 2006 Decision.
Year Allocation Table
2005 Attachment A – 2007 Revenue Requirements Application, Chapter 7.8, Appendix 1 B, pages 7.8-10 to 7.8-15 - 2006 Approved Allocators Using 2005 Actual Cost Detail
2006 Attachment B – Response to information request 2007.1 RR IBC.45.1, Attachment A – Appendix 1 B – 2006 Approved Allocators Using 2006 Actual Cost Detail
2007 Attachment C – 2007 Approved Allocators Using 2007 Actual Cost Detail
2008 Attachment D – 2008 Approved Allocators Using 2008 Actual Cost Detail
2009 Attachment E – 2010 Streamlined Revenue Requirements Application, Chapter 7, Appendix 7 E, pages 7E-3 to 7E-7, Figure 7E.2 – 2009 Approved Allocators Using 2009 Actual Cost Detail
2010 Attachment F – Revenue Requirements Application for the 2012 Policy Year, Chapter 7, Figure 7.A.2 – 2010 Approved Allocators Using 2010 Actual Cost Detail
2011 Attachment G – 2011 Approved Allocators Using 2011 Actual Cost Detail
2012 Attachment H – This Application, Chapter 7, Appendix 7 D, pages 7D-3 to 7D-7, Figure 7D.2 – 2012 Approved Allocators Using 2012 Actual Cost Detail
ICBC’s Information Request Response
Insurance Corporation of British Columbia
December 23, 2013
2013.2 RR IBC.46.5 – Attachment A – 2007 Revenue Requirements Application, Chapter 7.8, Appendix 1 B, pages 7.8-10 to 7.8-15 –
2006 Approved Allocators Using 2005 Actual Cost Detail
ICBC’s Information Request Response
Insurance Corporation of British Columbia
December 23, 2013
2013.2 RR IBC.46.5 – Attachment B – Response to Information Request 2007.1 RR IBC.45.1, Attachment A – Appendix 1 B –
2006 Approved Allocators Using 2006 Actual Cost Detail
ICBC’s Information Request Response
Insurance Corporation of British Columbia
December 23, 2013
2013.2 RR IBC.46.5 – Attachment C – 2007 Approved Allocators Using 2007 Actual Cost Detail
2007 Approved Allocators Using 2007 Actual Cost Detail
Page 1 of 6
Claims Services
BasicInsurance
Non-insurance
OptionalInsurance Total
BasicInsurance
Non-insurance
OptionalInsurance Total
Regional Claim Centres Work Effort 85,423 - 48,949 134,373 63.6% 0.0% 36.4% 100.0%
Call Centre Department Newly Opened Exposures -
TCD
8,850 - 13,276 22,126 40.0% 0.0% 60.0% 100.0%
Claims General Support Claims Division Average 12,694 3 8,104 20,801 61.0% 0.0% 39.0% 100.0%
Claims System Support Claims Division Average 11,484 3 7,331 18,818 61.0% 0.0% 39.0% 100.0%
In-House Counsel
(Provincial Litigation
Services)
Work Effort - Provincial
Litigation
9,720 - 512 10,231 95.0% 0.0% 5.0% 100.0%
Centralized Estimating
Facilities
Net Claims Cost - MD 2,912 - 4,190 7,102 41.0% 0.0% 59.0% 100.0%
Material Damage
Support
Net Claims Cost - MD 2,288 - 3,292 5,580 41.0% 0.0% 59.0% 100.0%
Head Office Claims Net Claims Cost - HOC 1,943 - 3,116 5,059 38.4% 0.0% 61.6% 100.0%
Rehabilitation Directly attributable to
Basic
3,850 - - 3,850 100.0% 0.0% 0.0% 100.0%
Salvage Net Claims Cost - MD 1,517 - 2,183 3,700 41.0% 0.0% 59.0% 100.0%
Call Centre Support Weighted Average - Cost
Centres
1,320 94 1,357 2,771 47.6% 3.4% 49.0% 100.0%
Customer Service (low
value BI)
Directly attributable to
Basic
2,485 - - 2,485 100.0% 0.0% 0.0% 100.0%
Customer Service
Support
Weighted Average - Cost
Centres
977 282 980 2,239 43.6% 12.6% 43.8% 100.0%
Heavy Equipment Net Claims Cost - HE 328 - 1,720 2,047 16.0% 0.0% 84.0% 100.0%
Claims Litigation
Support
Work Effort - Provincial
Litigation
1,641 - 86 1,727 95.0% 0.0% 5.0% 100.0%
Out of Province BI Directly attributable to
Basic
1,475 - - 1,475 100.0% 0.0% 0.0% 100.0%
Ongoing Claim
Services
Net Claims Cost - OOP
MD
563 - 881 1,444 39.0% 0.0% 61.0% 100.0%
BI Support Work Effort 1,270 - 67 1,337 95.0% 0.0% 5.0% 100.0%
Head Injury Work Effort 775 - 194 968 80.0% 0.0% 20.0% 100.0%
Customer Advocacy Claims Division Average 496 317 813 61.0% 0.0% 39.0% 100.0%
Fleet Claims Premiums Written 369 - 329 698 52.8% 0.0% 47.2% 100.0%
Optional Coverage Directly attributable to
Optional
- - 619 619 0.0% 0.0% 100.0% 100.0%
Claims Dispute
Resolution - MD
Collision / Property
Damage Split
147 - 291 438 33.5% 0.0% 66.5% 100.0%
Claims Dispute
Resolution - BI
Work Effort 383 - 38 420 91.0% 0.0% 9.0% 100.0%
Claims Basic Projects Directly attributable to
Basic
309 - - 309 100.0% 0.0% 0.0% 100.0%
Customer Service
(Litigation)
Work Effort - Provincial
Litigation
72 - 4 76 95.0% 0.0% 5.0% 100.0%
Structured Settlement Directly attributable to
Optional
- - 66 66 0.0% 0.0% 100.0% 100.0%
153,290 382 97,902 251,575 60.9% 0.2% 38.9% 100.0%
Disclosure on Statement of Operations
Basic Insurance
Non-insurance
Optional Insurance Total
Claims Services 153,290 97,902 251,192 61.0% 39.0% 100.0%
Included in Non-insurance, last page of appendix 382 382 100.0% 100.0%
Total Claims Services 153,290 382 97,902 251,575
* Rounding may affect totals and allocation percentages
Total Claims Services
Claims Services Allocator
$ in thousands* Allocation %*
2007 Approved Allocators Using 2007 Actual Cost Detail
Page 2 of 6
Loss Management (Including Auto Crime)
Loss Management Allocator BasicInsurance
Non-insurance
OptionalInsurance Total Basic
InsuranceNon-
insuranceOptional
Insurance Total
Road Safety Initiatives Directly attributable to
Basic
36,643 - - 36,643 100.0% 0.0% 0.0% 100.0%
Fraud Management Weighted Average -
Cost Centres
5,087 - 2,992 8,079 63.0% 0.0% 37.0% 100.0%
Regional Loss Prevention 100% Basic with
Exceptions
3,010 - 482 3,492 86.2% 0.0% 13.8% 100.0%
Auto Crime Expenditures Comprehensive
Coverage - Market
Share
328 - 925 1,253 26.2% 0.0% 73.8% 100.0%
Road Safety Project Ops Road Safety Division
Average
1,206 103 1,309 92.1% 0.0% 7.9% 100.0%
46,275 4,502 50,777 91.1% 0.0% 8.9% 100.0%
* Rounding may affect totals and allocation percentages
$ in thousands* Allocation %*
Total Loss Management
2007 Approved Allocators Using 2007 Actual Cost Detail
Page 3 of 6
Administrative
BasicInsurance
Non-insurance
OptionalInsurance Total
BasicInsurance
Non-insurance
OptionalInsurance Total
ISD Shared Services:
Insurance, Claims, Non-
insurance
Corporate Shared Services
Ratio
12,865 4,039 12,865 29,769 43.2% 13.6% 43.2% 100.0%
Infrastructure
Expenditure
Finance Shared Services
Ratio
5,293 5,052 10,345 51.2% 0.0% 48.8% 100.0%
Human Resources
Division
Corporate Shared Services
Ratio
4,067 1,277 4,067 9,411 43.2% 13.6% 43.2% 100.0%
Facilities Management Square Footage 3,889 1,024 3,889 8,802 44.2% 11.6% 44.2% 100.0%
Finance Shared
Services - Insurance
Operations
Finance Shared Services
Ratio
3,608 - 3,608 7,215 50.0% 0.0% 50.0% 100.0%
Corporate Costs Finance Shared Services
Ratio
3,190 - 3,190 6,380 50.0% 0.0% 50.0% 100.0%
Regional Claims, Road
Safety and Licensing
Administration
Weighted Average - Cost
Centres
2,864 - 2,864 5,728 50.0% 0.0% 50.0% 100.0%
Customer Collections Weighted Average -
Transactions
1,883 827 1,883 4,592 41.0% 18.0% 41.0% 100.0%
Supply Management
Department
Work Effort 1,622 575 1,622 3,818 42.5% 15.1% 42.5% 100.0%
Finance Division
Banking Operations
Work Effort 1,697 - 1,697 3,395 50.0% 0.0% 50.0% 100.0%
Document Services Square Footage 1,446 381 1,446 3,272 44.2% 11.6% 44.2% 100.0%
General Counsel Work Effort 1,278 639 1,278 3,196 40.0% 20.0% 40.0% 100.0%
Facilities Management
(Victoria)
Square Footage 76 2,898 76 3,051 2.5% 95.0% 2.5% 100.0%
Executive Office Finance Shared Services
Ratio
1,508 - 1,508 3,016 50.0% 0.0% 50.0% 100.0%
Customer Contact Call
Centre
Premiums Written 1,465 - 1,465 2,930 50.0% 0.0% 50.0% 100.0%
Freedom of Information
Department
Work Effort 1,388 - 1,388 2,776 50.0% 0.0% 50.0% 100.0%
Regulator Costs Directly attributable to Basic 1,119 - 1,119 2,238 50.0% 0.0% 50.0% 100.0%
Investment Portfolio
Management
Investment Income Ratio 974 - 974 1,948 50.0% 0.0% 50.0% 100.0%
External Corporate
Communications
Work Effort 637 190 637 1,464 43.5% 13.0% 43.5% 100.0%
Insurance & Telephone
Claims Training
Insurance Division Average 634 - 634 1,269 50.0% 0.0% 50.0% 100.0%
Project Management
Service Costs
Finance Shared Services
Ratio
604 - 604 1,208 50.0% 0.0% 50.0% 100.0%
Corporate Management
Reporting
Work Effort 596 - 596 1,192 50.0% 0.0% 50.0% 100.0%
Claims Training Claims Division Average 472 472 945 50.0% 0.0% 50.0% 100.0%
Communication -
Government relations
Work Effort 229 152 229 610 37.5% 25.0% 37.5% 100.0%
Corporate Strategic
Services
Corporate Shared Services
Ratio
203 64 203 470 43.2% 13.6% 43.2% 100.0%
Allocation %*Operating Costs - Administrative Allocator1
$ in thousands*
2007 Approved Allocators Using 2007 Actual Cost Detail
Page 4 of 6
Administrative: Cont’d
BasicInsurance
Non-insurance
OptionalInsurance Total
BasicInsurance
Non-insurance
OptionalInsurance Total
Claims Administrative
Support
Weighted Average - Cost
Centres
178 178 356 50.0% 0.0% 50.0% 100.0%
Drivers Services Admin 325 325 0.0% 100.0% 0.0% 100.0%
Fair Practices Review Work Effort - Provincial
Litigation
114 114 228 50.0% 0.0% 50.0% 100.0%
BT Shared Services Corporate Shared Services 76 24 76 175 43.2% 13.6% 43.2% 100.0%
Insurance Support
(Admin)
Weighted Average - Cost
Centres
62 24 62 148 42.0% 16.1% 42.0% 100.0%
Material Damage Fees Net Claims Costs - MD (2,036) (2,036) (4,072) 50.0% 0.0% 50.0% 100.0%
Interest on Receivables Weighted Average -
Transactions
(5,413) (5,413) (10,826) 50.0% 0.0% 50.0% 100.0%
46,588 12,440 46,346 105,373 44.2% 11.8% 44.0% 100.0%
Disclosure on Statement of Operations
Basic Insurance
Non-insurance
Optional Insurance Total
Total Admin Costs 46,588 46,346 92,934 50.1% 49.9% 100.0%
Included in Non-insurance, last page of appendix 12,440 12,440 100.0% 100.0%
Total Administrative 46,588 12,440 46,346 105,373
1 Using the Allocator indicated, a portion of the costs is allocated to non-insurance . The remainder of the costs are allocated
equally between Basic insurance and Optional insurance (see page 42 of the January 2005 BCUC Decision)
Total Administrative
* Rounding may affect totals and allocation percentages
Allocation %*Allocator1
$ in thousands*Operating Costs - Administrative
Non-insurance Administrative
BasicInsurance
Non-insurance
OptionalInsurance Total
BasicInsurance
Non-insurance
OptionalInsurance Total
Registration and
Licensing - 7,589 - 7,589 0.0% 100.0% 0.0% 100.0%
ISD Non-insurance
Vehicle Application - 3,290 - 3,290 0.0% 100.0% 0.0% 100.0%
Non-insurance Project
Expense - 766 - 766 0.0% 100.0% 0.0% 100.0%
Government Revenue
Administration - 915 - 915 0.0% 100.0% 0.0% 100.0%
Vehicle Records - 503 - 503 0.0% 100.0% 0.0% 100.0%
Non-insurance (Victoria)
Telephone Education - 277 - 277 0.0% 100.0% 0.0% 100.0%
Insurance Corporate
Cost - - 0.0% 100.0% 0.0% 100.0%
Corporate Costs - () - () 0.0% 100.0% 0.0% 100.0%
Distribution Fees - (128) - (128)
- 13,212 - 13,212 0.0% 100.0% 0.0% 100.0%Total Non-insurance operating costs, included in Non-insurance, last page of this appendix
Operating Costs - Non-insurance Allocator
Directly attributable to Non-
insurance
$ in thousands* Allocation % *
2007 Approved Allocators Using 2007 Actual Cost Detail
Page 5 of 6
Insurance Services
BasicInsurance
Non-insurance
OptionalInsurance Total
BasicInsurance
Non-insurance
OptionalInsurance Total
Insurance System Support Premiums Written 4,537 - 3,742 8,279 54.8% 0.0% 45.2% 100.0%
Field Broker Support Work Effort 2,778 707 3,585 7,069 39.3% 10.0% 50.7% 100.0%
Optional Coverage Directly attributable to
Optional
- - 5,151 5,151 0.0% 0.0% 100.0% 100.0%
Bad Debts & Allowances Weighted Average -
Transactions
1,910 144 1,550 3,604 53.0% 4.0% 43.0% 100.0%
Marketing and Broker
Services
Premiums Written - With
Exception
2,104 - 1,012 3,117 67.5% 0.0% 32.5% 100.0%
Insurance Project Expense Insurance Division Average 1,626 - 1,178 2,804 58.0% 0.0% 42.0% 100.0%
General Broker Support &
Direct Sales
Premiums Written 1,521 - 1,255 2,776 54.8% 0.0% 45.2% 100.0%
Insurance Basic Projects Directly attributable to Basic 2,693 - - 2,693 100.0% 0.0% 0.0% 100.0%
Chief Underwriter Premiums Written - With
Exception
1,309 - 1,271 2,580 50.7% 0.0% 49.3% 100.0%
Insurance Business
Support
Weighted Average - Cost
Centres
1,136 266 1,175 2,577 44.1% 10.3% 45.6% 100.0%
Actuarial Weighted Average - FTE 1,112 - 1,112 2,224 50.0% 0.0% 50.0% 100.0%
Garage & Fleet Weighted Average - FTE 758 77 711 1,546 49.0% 5.0% 46.0% 100.0%
Registration and Licensing Directly attributable to Non-
insurance except for some
minor costs that are allocated
based on transaction volume
- 1,447 34 1,481 0.0% 97.7% 2.3% 100.0%
Insurance Services
Applications Support
Insurance Division Average 836 - 606 1,442 58.0% 0.0% 42.0% 100.0%
Insurance Corporate Cost Finance Shared Services
Ratio, modified by
Commission Decision
716 - 716 1,432 50.0% 0.0% 50.0% 100.0%
Customer Accounting Weighted Average -
Transactions
527 490 238 1,255 42.0% 39.0% 19.0% 100.0%
Internet Services Premiums Written 640 - 528 1,168 54.8% 0.0% 45.2% 100.0%
Market Research Weighted Average - Projects 561 - 582 1,143 49.1% 0.0% 50.9% 100.0%
Insurance Business
Analysis
Weighted Average - Cost
Centres
447 171 444 1,062 42.1% 16.1% 41.8% 100.0%
Specialty Lic & Ins Weighted Average - Special
Coverages
98 371 580 1,050 9.4% 35.3% 55.3% 100.0%
Insurance Broker Team Premiums Written 562 - 464 1,026 54.8% 0.0% 45.2% 100.0%
Product Research Premiums Written 474 - 391 865 54.8% 0.0% 45.2% 100.0%
Insurance Planning Work Effort 265 265 265 794 33.3% 33.3% 33.3% 100.0%
Regional Marketing Work Effort 371 37 334 742 50.0% 5.0% 45.0% 100.0%
Insurance Processing Premiums Written - Insurance
Processing
208 204 171 583 35.6% 35.0% 29.4% 100.0%
Operating Costs - Insurance Allocator
$ in thousands* Allocation %*
2007 Approved Allocators Using 2007 Actual Cost Detail
Page 6 of 6
Insurance Services: Cont’d
BasicInsurance
Non-insurance
OptionalInsurance Total
BasicInsurance
Non-insurance
OptionalInsurance Total
Product Development Premiums Written 289 - 239 528 54.8% 0.0% 45.2% 100.0%
ADP Technical Premiums Written 254 - 210 464 54.8% 0.0% 45.2% 100.0%
Insurance Support
(Autoplan)
Weighted Average - Cost
Centres
77 276 69 423 18.3% 65.3% 16.4% 100.0%
Funds Management Premiums Written 131 - 108 239 54.8% 0.0% 45.2% 100.0%
Mgr. Of Comm. Lines Commercial Vehicle
Premiums Written
80 - 69 148 53.8% 0.0% 46.2% 100.0%
Collector Vehicle Program Weighted Average - FTE 14 72 58 145 10.0% 50.0% 40.0% 100.0%
Specialty Coverages and
Business Development
Support
Weighted Average - Cost
Centres
- - -
Premium Financing Plan
Operations
Premiums Written (1) - (1) (2) 54.8% 0.0% 45.2% 100.0%
28,035 4,527 27,849 60,411 46.4% 7.5% 46.1% 100.0%
Disclosure on Statement of Operations
Basic Insurance
Non-insurance
Optional Insurance Total
Operating Costs 28,035 27,849 55,884 50.2% 49.8% 100.0%
Included in Non-insurance, last page of this appendix 4,527 4,527 100.0% 100.0%
Total Insurance Services 28,035 4,527 27,849 60,411
* Rounding may affect totals and allocation percentages
Total Insurance Services
$ in thousands* Allocation %*Operating Costs - Insurance Allocator
Non-insurance Operations
Non-insurance Costs Allocator BasicInsurance
Non-insurance
OptionalInsurance Total Basic
InsuranceNon-
insuranceOptional
Insurance Total
Claims servicesSee Claims
Services382 382 0.0% 100.0% 0.0% 100.0%
Administrative See Adminstrative 12,440 12,440 0.0% 100.0% 0.0% 100.0%
Insurance See Insurance 4,527 4,527 0.0% 100.0% 0.0% 100.0%
Non-insurance
Aministrative
Directly attributable
to Non-insurance13,212 13,212 0.0% 100.0% 0.0% 100.0%
Non-insurance
Administrative30,561 30,561 0.0% 100.0% 0.0% 100.0%
Driver ServicesDirectly attributable
to Non-insurance41,250 41,250 0.0% 100.0% 0.0% 100.0%
71,811 71,811 0.0% 100.0% 0.0% 100.0%
* Rounding may affect totals and allocation percentages
Total Non-insurance Costs
$ in thousands* Allocation %*
ICBC’s Information Request Response
Insurance Corporation of British Columbia
December 23, 2013
2013.2 RR IBC.46.5 – Attachment D – 2008 Approved Allocators Using 2008 Actual Cost Detail
2008 Approved Allocators Using 2008 Actual Cost Detail
Page 1 of 6
Claims Services
BasicInsurance
Non-insurance
OptionalInsurance Total
BasicInsurance
Non-insurance
OptionalInsurance Total
Regional Claim Centres Work Effort 86,055 - 50,838 136,893 62.9% 0.0% 37.1% 100.0%
Call Centre Department Newly Opened
Exposures - TCD
9,087 - 13,630 22,717 40.0% 0.0% 60.0% 100.0%
Claims System Support Claims Division Average 11,650 7,541 19,191 60.7% 0.0% 39.3% 100.0%
Claims General Support Claims Division Average 11,591 7,503 19,093 60.7% 0.0% 39.3% 100.0%
In-House Counsel
(Provincial Litigation
Services)
Work Effort - Provincial
Litigation
10,309 - 543 10,852 95.0% 0.0% 5.0% 100.0%
Centralized Estimating
Facilities
Net Claims Cost - MD 3,142 - 4,522 7,664 41.0% 0.0% 59.0% 100.0%
Material Damage
Support
Net Claims Cost - MD 2,407 - 3,464 5,872 41.0% 0.0% 59.0% 100.0%
Head Office Claims Net Claims Cost - HOC 2,165 - 3,360 5,526 39.2% 0.0% 60.8% 100.0%
Claims Administrative
Support **
Weighted Average -
Cost Centres
2,563 - 2,563 5,127 50.0% 0.0% 50.0% 100.0%
Salvage Net Claims Cost - MD 1,780 - 2,562 4,342 41.0% 0.0% 59.0% 100.0%
Rehabilitation Directly attributable to
Basic
4,051 - - 4,051 100.0% 0.0% 0.0% 100.0%
Centralized Claims
Injury Centre ***
Directly attributable to
Basic
3,563 - - 3,563 100.0% 0.0% 0.0% 100.0%
Call Centre Support Weighted Average -
Cost Centres
995 - 1,121 2,115 47.0% 0.0% 53.0% 100.0%
Heavy Equipment Net Claims Cost - HE 541 - 1,464 2,005 27.0% 0.0% 73.0% 100.0%
Claims Litigation
Support
Work Effort - Provincial
Litigation
1,631 - 86 1,717 95.0% 0.0% 5.0% 100.0%
Out of Province BI Directly attributable to
Basic
1,441 - - 1,441 100.0% 0.0% 0.0% 100.0%
Ongoing Claim Services Net Claims Cost - OOP
MD
615 - 752 1,367 45.0% 0.0% 55.0% 100.0%
BI Support Work Effort 1,284 - 68 1,351 95.0% 0.0% 5.0% 100.0%
Fleet Claims Commercial Vehicle
Premium - Online
753 - 293 1,046 72.0% 0.0% 28.0% 100.0%
Head Injury Work Effort 752 - 188 940 80.0% 0.0% 20.0% 100.0%
Customer Advocacy Claims Division Average 450 291 741 60.7% 0.0% 39.3% 100.0%
Optional Coverage
(Claims)
Directly attributable to
Optional
- - 619 619 0.0% 0.0% 100.0% 100.0%
Claims Dispute
Resolution - MD
Collision / Property
Damage Split
141 - 285 426 33.0% 0.0% 67.0% 100.0%
Claims Dispute
Resolution - BI
Work Effort 266 - 30 295 90.0% 0.0% 10.0% 100.0%
Claims Basic Projects Directly attributable to
Basic
242 - - 242 100.0% 0.0% 0.0% 100.0%
Commercial Claims Weighted Average -
Cost Centres
80 - 108 188 42.4% 0.0% 57.6% 100.0%
157,555 101,830 259,385 60.7% 0.0% 39.3% 100.0%
Disclosure on Statement of Operations
Basic Insurance
Non-insurance
Optional Insurance Total
Claims Services 157,555 101,830 259,385 60.7% 39.3% 100.0%
* Rounding may affect totals and allocation percentages
** Regional Claims, Road Safety and Licensing Administration and Claims Administrative Support moved from Administrative to Claims Services. To preserve
the allocation used as an Administrative expense, it is allocated equally between Basic and Optional (see page 42 of the January 2005 BCUC Decision).
*** Renamed from Customer Service (low value BI)
Total Claims Services
Claims Services Allocator
$ in thousands* Allocation %*
2008 Approved Allocators Using 2008 Actual Cost Detail
Page 2 of 6
Road Safety and Loss Management Services
Loss Management Allocator BasicInsurance
Non-insurance
OptionalInsurance Total Basic
InsuranceNon-
insuranceOptional
Insurance Total
Road Safety Initiatives Directly attributable to
Basic
37,435 - - 37,435 100.0% 0.0% 0.0% 100.0%
Fraud Management Weighted Average -
Cost Centres
5,274 - 3,206 8,480 62.2% 0.0% 37.8% 100.0%
Regional Loss Prevention 100% Basic with
Exceptions
1,998 - 299 2,298 87.0% 0.0% 13.0% 100.0%
Road Safety Project Ops Road Safety Division
Average
794 - 57 851 93.3% 0.0% 6.7% 100.0%
Auto Crime Expenditures Comprehensive
Coverage - Market
Share
206 - 583 789 26.1% 0.0% 73.9% 100.0%
Vehicle Immobilizer Directly attributable to
Optional
- - 156 156 0.0% 0.0% 100.0% 100.0%
45,707 - 4,302 50,009 91.4% 0.0% 8.6% 100.0%
$ in thousands* Allocation %*
Total Loss Management
2008 Approved Allocators Using 2008 Actual Cost Detail
Page 3 of 6
Administrative
BasicInsurance
Non-insurance
OptionalInsurance Total
BasicInsurance
Non-insurance
OptionalInsurance Total
ISDBTS Shared
Services: Insurance,
Claims, Non-insurance
**
Corporate Shared Services
Ratio
15,407 4,968 15,407 35,782 43.1% 13.9% 43.1% 100.0%
Human Resources
Division
Corporate Shared Services
Ratio
4,191 1,373 4,191 9,755 43.0% 14.1% 43.0% 100.0%
Facilities Management Square Footage 3,823 1,022 3,823 8,667 44.1% 11.8% 44.1% 100.0%
Finance Shared
Services - Insurance
Operations
Finance Shared Services
Ratio
4,228 - 4,228 8,456 50.0% 0.0% 50.0% 100.0%
Infrastructure
Expenditure
Finance Shared Services
Ratio
3,742 3,742 7,484 50.0% 0.0% 50.0% 100.0%
Customer Collections Weighted Average -
Transactions
2,026 553 2,026 4,605 44.0% 12.0% 44.0% 100.0%
Supply Management
Department
Work Effort 1,600 591 1,600 3,791 42.2% 15.6% 42.2% 100.0%
Finance Division
Banking Operations
Work Effort 1,774 - 1,774 3,548 50.0% 0.0% 50.0% 100.0%
Document Services Square Footage 1,529 409 1,529 3,466 44.1% 11.8% 44.1% 100.0%
Corporate Costs (Admin) Finance Shared Services
Ratio
3,921 - 3,921 7,842 50.0% 0.0% 50.0% 100.0%
General Counsel Work Effort 1,233 779 1,233 3,245 38.0% 24.0% 38.0% 100.0%
Customer Contact Call
Centre
Premiums Written 1,619 - 1,619 3,237 50.0% 0.0% 50.0% 100.0%
Executive Office Finance Shared Services
Ratio
1,613 - 1,613 3,226 50.0% 0.0% 50.0% 100.0%
Facilities Management
(Victoria)
Square Footage 77 2,942 77 3,097 2.5% 95.0% 2.5% 100.0%
Freedom of Information
Department
Work Effort 1,475 - 1,475 2,950 50.0% 0.0% 50.0% 100.0%
Investment Portfolio
Management
Investment Income Ratio 1,392 - 1,392 2,784 50.0% 0.0% 50.0% 100.0%
Regulator Costs Directly attributable to Basic 866 - 866 1,731 50.0% 0.0% 50.0% 100.0%
Business Intelligence Corporate Shared Services
Ratio
778 139 778 1,695 45.9% 8.2% 45.9% 100.0%
Call Centres Support
(Admin)
Weighted Average - Cost
Centres
672 233 672 1,576 42.6% 14.8% 42.6% 100.0%
External Corporate
Communications
Work Effort 665 199 665 1,528 43.5% 13.0% 43.5% 100.0%
Insurance & Telephone
Claims Training
Insurance Division Average 642 - 642 1,284 50.0% 0.0% 50.0% 100.0%
Claims Training Claims Division Average 505 505 1,010 50.0% 0.0% 50.0% 100.0%
Project Management
Service Costs
Finance Shared Services
Ratio
486 - 486 972 50.0% 0.0% 50.0% 100.0%
Communication -
Government relations
Work Effort 275 183 275 734 37.5% 25.0% 37.5% 100.0%
$ in thousands* Allocation %*Operating Costs - Administrative Allocator1
2008 Approved Allocators Using 2008 Actual Cost Detail
Page 4 of 6
Administrative: Cont’d
BasicInsurance
Non-insurance
OptionalInsurance Total
BasicInsurance
Non-insurance
OptionalInsurance Total
Corporate Strategic
Services
Corporate Shared Services
Ratio
258 85 258 601 43.0% 14.1% 43.0% 100.0%
Drivers Services Admin Directly attributable to Non-
insurance
456 456 0.0% 100.0% 0.0% 100.0%
Fair Practices Review Work Effort - Provincial
Litigation
148 148 295 50.0% 0.0% 50.0% 100.0%
Administrative Support
***
Weighted Average - Cost
Centres
97 8 73 177 54.5% 4.3% 41.2% 100.0%
Material Damage Fees Net Claims Costs - MD (2,039) (2,039) (4,079) 50.0% 0.0% 50.0% 100.0%
Unclaimed 2001
Dividend Payment
Cheques
Retained Earnings (1,897) (2,619) (4,516) 42.0% 0.0% 58.0% 100.0%
Interest on Receivables Weighted Average -
Transactions
(5,167) (5,167) (10,333) 50.0% 0.0% 50.0% 100.0%
45,938 13,938 45,192 105,069 43.7% 13.3% 43.0% 100.0%
Disclosure on Statement of Operations
Basic Insurance
Non-insurance
Optional Insurance Total
Total Admin Costs 45,938 45,192 91,131 50.4% 49.6% 100.0%
Included in Non-insurance, last page of appendix 13,938 13,938 100.0% 100.0%
Total Administrative 45,938 13,938 45,192 105,069 * Rounding may affect totals and allocation percentages
** Combined with BT Shared Services. Renamed from ISD Shared Services: Insurance, Claims, Non-insurance
*** Includes Administrative Basic Projects allocated 100% Basic
Operating Costs - Administrative Allocator1
Total Administrative
1 Using the Allocator indicated, a portion of the costs is allocated to non-insurance . The remainder of the costs are allocated equally between Basic insurance and
Optional insurance (see page 42 of the January 2005 BCUC Decision), except for unusual items: for 2008, Unclaimed 2001 Dividend Payment Cheques.
$ in thousands* Allocation %*
Non-insurance Administrative
BasicInsurance
Non-insurance
OptionalInsurance Total
BasicInsurance
Non-insurance
OptionalInsurance Total
Registration and
Licensing - 6,410 - 6,410 0.0% 100.0% 0.0% 100.0%
Non-insurance Project
Expense - 3,825 - 3,825 0.0% 100.0% 0.0% 100.0%
ISD Non-insurance
Vehicle Application - 3,063 - 3,063 0.0% 100.0% 0.0% 100.0%
Government Revenue
Administration
Directly attributable to Non-
insurance - 915 - 915 0.0% 100.0% 0.0% 100.0%
Vehicle Records - 557 - 557 0.0% 100.0% 0.0% 100.0%
Non-insurance
(Victoria) Telephone
Education
- 264 - 264 0.0% 100.0% 0.0% 100.0%
- 15,034 - 15,034 0.0% 100.0% 0.0% 100.0%Total Non-insurance operating costs, included in Non-insurance, last page of this appendix
Operating Costs - Non-insurance Allocator
$ in thousands* Allocation % *
2008 Approved Allocators Using 2008 Actual Cost Detail
Page 5 of 6
Insurance Services
BasicInsurance
Non-insurance
OptionalInsurance Total
BasicInsurance
Non-insurance
OptionalInsurance Total
Insurance System Support Premiums Written 4,530 - 3,752 8,282 54.7% 0.0% 45.3% 100.0%
Field Broker Support Work Effort 2,746 700 3,554 7,000 39.2% 10.0% 50.8% 100.0%
Bad Debts & Allowances Weighted Average -
Transactions
2,516 45 1,932 4,492 56.0% 1.0% 43.0% 100.0%
General Broker Support &
Direct Sales
Premiums Written 1,892 - 1,567 3,460 54.7% 0.0% 45.3% 100.0%
Insurance Project Expense Insurance Division Average 1,997 - 1,385 3,382 59.1% 0.0% 40.9% 100.0%
Marketing and Broker
Services
Premiums Written - With
Exception
2,107 - 1,271 3,378 62.4% 0.0% 37.6% 100.0%
Insurance Basic Projects Directly attributable to Basic 3,104 - - 3,104 100.0% 0.0% 0.0% 100.0%
Chief Underwriter Premiums Written - With
Exception
1,361 - 1,310 2,671 51.0% 0.0% 49.0% 100.0%
Actuarial Weighted Average - FTE 1,341 - 1,213 2,554 52.5% 0.0% 47.5% 100.0%
Driver Accountability Premiums Written 1,210 - 1,002 2,212 54.7% 0.0% 45.3% 100.0%
Optional Coverage Directly attributable to
Optional
- - 2,113 2,113 0.0% 0.0% 100.0% 100.0%
Garage & Fleet Weighted Average - FTE 987 84 787 1,859 53.1% 4.5% 42.3% 100.0%
Market Research Weighted Average - Projects 796 - 719 1,515 52.5% 0.0% 47.5% 100.0%
Registration and
Licensing
Directly attributable to Non-
insurance except for some
minor costs that are allocated
based on transaction volume
- 1,348 40 1,388 0.0% 97.1% 2.9% 100.0%
Customer Accounting Weighted Average -
Transactions
585 517 258 1,360 43.0% 38.0% 19.0% 100.0%
Internet Services Premiums Written 716 - 593 1,310 54.7% 0.0% 45.3% 100.0%
Insurance Business
Support
Weighted Average - Cost
Centres
574 179 534 1,287 44.6% 13.9% 41.5% 100.0%
Corporate Web-Site Corporate Shared Services
Ratio
637 174 422 1,234 51.7% 14.1% 34.2% 100.0%
Insurance Corporate Cost Finance Shared Services
Ratio, modified by
Commission Decision
589 - 589 1,178 50.0% 0.0% 50.0% 100.0%
Specialty Lic & Ins Weighted Average - Special
Coverages
107 410 578 1,095 9.8% 37.5% 52.8% 100.0%
Insurance Planning Work Effort 332 332 332 995 33.3% 33.3% 33.3% 100.0%
Insurance Services
Applications Support
Insurance Division Average 572 - 397 969 59.1% 0.0% 40.9% 100.0%
Product Research Premiums Written 486 - 402 888 54.7% 0.0% 45.3% 100.0%
Regional Marketing Work Effort 420 42 378 841 50.0% 5.0% 45.0% 100.0%
Product Development Premiums Written 361 - 299 660 54.7% 0.0% 45.3% 100.0%
Insurance Processing Premiums Written - Insurance
Processing
218 214 180 613 35.6% 35.0% 29.4% 100.0%
Insurance Business
Analysis
Weighted Average - Cost
Centres
199 74 184 457 43.5% 16.1% 40.4% 100.0%
Insurance Support
(Autoplan)
Weighted Average - Cost
Centres
81 288 74 443 18.3% 64.9% 16.8% 100.0%
ADP Technical Premiums Written 221 - 183 404 54.7% 0.0% 45.3% 100.0%
Allocation %*Operating Costs - Insurance Allocator
$ in thousands*
2008 Approved Allocators Using 2008 Actual Cost Detail
Page 6 of 6
Insurance Services: Cont’d
BasicInsurance
Non-insurance
OptionalInsurance Total
BasicInsurance
Non-insurance
OptionalInsurance Total
Funds Management Premiums Written 131 - 108 239 54.7% 0.0% 45.3% 100.0%
Collector Vehicle Program Weighted Average - FTE 15 76 61 153 10.0% 50.0% 40.0% 100.0%
Mgr. Of Comm. Lines Commercial Vehicle
Premiums Written
83 - 66 150 55.7% 0.0% 44.3% 100.0%
30,915 4,484 26,287 61,685 50.1% 7.3% 42.6% 100.0%
Disclosure on Statement of Operations
Basic Insurance
Non-insurance
Optional Insurance Total
Operating Costs 30,915 26,287 57,202 54.0% 46.0% 100.0%
Included in Non-insurance, last page of this appendix 4,484 4,484 100.0% 100.0%
Operating Costs - Insurance Allocator
$ in thousands* Allocation %*
* Rounding may affect totals and allocation percentages
Total Insurance Services
Non-insurance Operations
Non-insurance Costs Allocator BasicInsurance
Non-insurance
OptionalInsurance Total Basic
InsuranceNon-
insuranceOptional
Insurance Total
Administrative See Adminstrative 13,938 13,938 0.0% 100.0% 0.0% 100.0%
Insurance See Insurance 4,484 4,484 0.0% 100.0% 0.0% 100.0%
Non-insurance
Aministrative
Directly attributable
to Non-insurance15,034 15,034 0.0% 100.0% 0.0% 100.0%
Non-insurance Administrative 33,456 33,456 0.0% 100.0% 0.0% 100.0%
Driver LicensingDirectly attributable
to Non-insurance46,787 46,787 0.0% 100.0% 0.0% 100.0%
80,243 80,243 0.0% 100.0% 0.0% 100.0%
* Rounding may affect totals and allocation percentages
$ in thousands* Allocation %*
Total Non-insurance Costs
****
ICBC’s Information Request Response
Insurance Corporation of British Columbia
December 23, 2013
2013.2 RR IBC.46.5 – Attachment E – 2010 Streamlined Revenue Requirements Application, Chapter 7, Appendix 7 E, pages
7E-3 to 7E-7, Figure 7E.2 – 2009 Approved Allocators Using 2009 Actual Cost Detail
ICBC’s Information Request Response
Insurance Corporation of British Columbia
December 23, 2013
2013.2 RR IBC.46.5 – Attachment F – Revenue Requirements Application for the 2012 Policy Year, Chapter 7, Figure 7.A.2 –
2010 Approved Allocators Using 2010 Actual Cost Detail
ICBC’s Information Request Response
Insurance Corporation of British Columbia
December 23, 2013
2013.2 RR IBC.46.5 – Attachment G – 2011 Approved Allocators Using 2011 Actual Cost Detail
2011 Approved Allocators Using 2011 Actual Cost Detail
Page 1 of 5
Claims Services
Basicinsurance
Non-insurance
Optionalinsurance Total
Basicinsurance
Non-insurance
Optionalinsurance Total
Customer and Injury Services
Operations 1
Work Effort 82,712 - 55,583 138,296 59.8% 0.0% 40.2% 100.0%
Call Centre Department Newly Opened Exposures - TCD 9,829 - 13,573 23,403 42.0% 0.0% 58.0% 100.0%
Claims General Support Claims Division Average 12,892 8,780 21,672 59.5% 0.0% 40.5% 100.0%
Claims System Support Claims Division Average 10,984 7,480 18,464 59.5% 0.0% 40.5% 100.0%
In-House Counsel (Provincial
Litigation Services)
Work Effort - Provincial Litigation 10,786 - 568 11,354 95.0% 0.0% 5.0% 100.0%
Centralized Estimating Facilities Net Claims Cost - MD 3,181 - 3,888 7,069 45.0% 0.0% 55.0% 100.0%
Claims Building Support Square Footage 3,176 - 3,374 6,549 48.5% 0.0% 51.5% 100.0%
Material Damage Support Net Claims Cost - MD 2,503 - 3,059 5,562 45.0% 0.0% 55.0% 100.0%
Centralized Claims Injury Centre Directly attributable to Basic 4,965 - - 4,965 100.0% 0.0% 0.0% 100.0%
Heavy Equipment Net Claims Cost - HE 1,952 - 2,695 4,647 42.0% 0.0% 58.0% 100.0%
Claims Administrative Support Weighted Average - Cost Centres 2,049 1,946 3,996 51.3% 0.0% 48.7% 100.0%
Salvage Net Claims Cost - MD 1,740 - 2,127 3,868 45.0% 0.0% 55.0% 100.0%
Rehabilitation Directly attributable to Basic 3,739 - - 3,739 100.0% 0.0% 0.0% 100.0%
Claims Litigation Support Work Effort - Provincial Litigation 1,979 - 104 2,083 95.0% 0.0% 5.0% 100.0%
BI Support Work Effort 1,765 - 93 1,858 95.0% 0.0% 5.0% 100.0%
Call Centre Support Weighted Average - Cost Centres 832 - 805 1,637 50.8% 0.0% 49.2% 100.0%
Optional Coverage (Claims) Directly attributable to Optional - - 791 791 0.0% 0.0% 100.0% 100.0%
Out of Province Aligned Claims Net Claims Cost - OOP AC 155 - 358 512 30.2% 0.0% 69.8% 100.0%
Claims Dispute Resolution - MD Collision / Property Damage Split 157 - 321 478 32.9% 0.0% 67.1% 100.0%
Claims Basic Projects Directly attributable to Basic 413 - - 413 100.0% 0.0% 0.0% 100.0%
Customer Advocacy Claims Division Average 236 161 397 59.5% 0.0% 40.5% 100.0%
Claims Dispute Resolution - BI Work Effort 276 - 45 321 86.0% 0.0% 14.0% 100.0%
Rehabilitation and Out of Province
Claims
Weighted Average - Cost Centres 143 - 32 175 81.5% 0.0% 18.5% 100.0%
156,463 105,784 262,247 59.7% 0.0% 40.3% 100.0%
156,463 105,784 262,247 59.7% 40.3% 100.0%
1 During 2011, in a reorganization, Regional Claims merged with Head Office Claims, Ongoing Claims Services, and Out of Province BI and Claims Building Support was centralized.
2 Used to calculate Basic % in describing Year to Year Basic Insurance Allocation Percentages.
3 Rounding may affect totals and allocation percentages.
$ in thousands 3 Allocation % 3
Total Claims Services Excluding TP
Operating Costs - Claims Services Allocator
Claims Services Excluding Olympics and TP Using Financial Statement
View 2
2011 Approved Allocators Using 2011 Actual Cost Detail
Page 2 of 5
Road Safety and Loss Management Services
Allocator Basicinsurance
Non-insurance
Optionalinsurance Total Basic
insuranceNon-
insuranceOptional
insurance Total
Road Safety Initiatives Directly attributable to Basic 46,445 - - 46,445 100.0% 0.0% 0.0% 100.0%
Fraud Management Weighted Average - Cost Centres 4,821 - 3,156 7,977 60.4% 0.0% 39.6% 100.0%
Regional Loss Prevention 100% Basic with Exceptions 1,780 - 242 2,022 88.0% 0.0% 12.0% 100.0%
Road Safety Project Ops Road Safety Division Average 1,536 - 91 1,627 94.4% 0.0% 5.6% 100.0%
Auto Crime Expenditures Comprehensive Coverage -
Market Share
132 - 355 487 27.1% 0.0% 72.9% 100.0%
Optional Coverage (Road Safety) 1 Directly attributable to Optional - - 20 20 0.0% 0.0% 100.0% 100.0%
54,714 - 3,864 58,578 93.4% 0.0% 6.6% 100.0%
1 Optional Coverage (Road Safety) relates to claims mitigation programs for optional coverages.
2 Used to calculate Basic % in figure describing Year to Year Basic Insurance Allocation Percentages.
3 Rounding may affect totals and allocation percentages.
$ in thousands 3 Allocation % 3
Total Road Safety and Loss Management Excluding TP2
Operating Costs - Road Safety and Loss Management
2011 Approved Allocators Using 2011 Actual Cost Detail
Page 3 of 5
Administrative - Insurance
Basicinsurance
Non-insurance
Optionalinsurance Total
Basicinsurance
Non-insurance
Optionalinsurance Total
ISD Shared Services: Insurance, Claims,
Non-insurance
Corporate Shared Services Ratio 15,350 5,751 15,350 36,450 42.1% 15.8% 42.1% 100.0%
Human Resources Corporate Shared Services Ratio 5,751 2,155 5,751 13,656 42.1% 15.8% 42.1% 100.0%
Facilities Management Square Footage 4,098 1,075 4,098 9,270 44.2% 11.6% 44.2% 100.0%
Corporate Costs (Admin) 2 Finance Shared Services Ratio 5,270 (1,362) 5,270 9,177 57.4% -14.8% 57.4% 100.0%
Finance Shared Services - Insurance
Operations
Finance Shared Services Ratio 4,508 - 4,508 9,016 50.0% 0.0% 50.0% 100.0%
Infrastructure Expenditure Finance Shared Services Ratio 3,916 - 3,916 7,833 50.0% 0.0% 50.0% 100.0%
Executive Office Finance Shared Services Ratio 2,623 - 2,623 5,247 50.0% 0.0% 50.0% 100.0%
Business Transformation Shared Services Corporate Shared Services Ratio 2,150 806 2,150 5,107 42.1% 15.8% 42.1% 100.0%
Customer Collections Weighted Average - Transactions 2,164 590 2,164 4,918 44.0% 12.0% 44.0% 100.0%
Supply Management Department Work Effort 2,008 723 2,008 4,739 42.4% 15.3% 42.4% 100.0%
Business Intelligence Work Effort and Weighted
Average - Cost Centres
2,006 577 2,006 4,590 43.7% 12.6% 43.7% 100.0%
Finance Division Banking Operations Work Effort 2,240 - 2,240 4,480 50.0% 0.0% 50.0% 100.0%
Document Services Square Footage 1,657 435 1,657 3,748 44.2% 11.6% 44.2% 100.0%
General Counsel Work Effort 1,539 630 1,539 3,709 41.5% 17.0% 41.5% 100.0%
Technology Renewal Corporate Shared Services Ratio 1,525 571 1,525 3,621 42.1% 15.8% 42.1% 100.0%
Freedom of Information Department Work Effort 1,692 - 1,692 3,383 50.0% 0.0% 50.0% 100.0%
Customer Contact Call Centre Premiums Written 1,665 - 1,665 3,329 50.0% 0.0% 50.0% 100.0%
Facilities Management (Victoria) Square Footage 82 3,125 82 3,290 2.5% 95.0% 2.5% 100.0%
Investment Portfolio Management Investment Income Ratio 1,637 - 1,637 3,275 50.0% 0.0% 50.0% 100.0%
Regulator Costs Directly attributable to Basic 828 - 828 1,656 50.0% 0.0% 50.0% 100.0%
Corporate Strategic Services Corporate Shared Services Ratio 635 238 635 1,509 42.1% 15.8% 42.1% 100.0%
Insurance & Telephone Claims Training Insurance Division Average 746 - 746 1,492 50.0% 0.0% 50.0% 100.0%
External Corporate Communications Work Effort 539 161 539 1,239 43.5% 13.0% 43.5% 100.0%
Call Centres Support (Admin) Weighted Average - Cost Centres 510 201 510 1,222 41.8% 16.4% 41.8% 100.0%
Claims Support Claims Division Average 602 602 1,205 50.0% 0.0% 50.0% 100.0%
Communication - Government relations Work Effort 359 239 359 956 37.5% 25.0% 37.5% 100.0%
Project Management Service Costs Finance Shared Services Ratio 412 412 824 50.0% 0.0% 50.0% 100.0%
Facility Projects (Admin) Corporate Shared Services Ratio 144 54 144 342 42.1% 15.8% 42.1% 100.0%
Drivers Services Admin Directly attributable to Non-insurance 307 307 0.0% 100.0% 0.0% 100.0%
Fair Practices Review Work Effort - Provincial Litigation 39 39 77 50.0% 0.0% 50.0% 100.0%
Material Damage Fees Net Claims Costs - MD (1,965) (1,965) (3,930) 50.0% 0.0% 50.0% 100.0%
Interest on Receivables Weighted Average - Transactions (4,931) (4,931) (9,863) 50.0% 0.0% 50.0% 100.0%
59,799 16,276 59,799 135,874 44.0% 12.0% 44.0% 100.0%
59,799 59,799 119,598 50.0% 50.0% 100.0%
3 Used to calculate Basic % in describing Year to Year Basic Insurance Allocation Percentages.
4 Rounding may affect totals and allocation percentages.
Operating Costs - Administrative Allocator1
Administrative Excluding Olympics and TP Using Financial Statement View 3
2 Corporate Costs (Admin) includes miscellaneous revenue allocated to Non-insurance.
$ in thousands 4
1 Using the allocator indicated, a portion of the costs is allocated to Non-insurance . The remainder of the costs are allocated equally between Basic insurance and Optional insurance (see
page 42 of the January 2005 Decision).
Allocation % 4
Total Administrative Excluding TP
2011 Approved Allocators Using 2011 Actual Cost Detail
Page 4 of 5
Insurance Services
Basicinsurance
Non-insurance
Optionalinsurance Total
Basicinsurance
Non-insurance
Optionalinsurance Total
Insurance System Support Premiums Written 4,673 - 4,013 8,686 53.8% 0.0% 46.2% 100.0%
Field Broker Support Work Effort 2,038 679 4,075 6,792 30.0% 10.0% 60.0% 100.0%
General Broker Support & Direct
Sales
Premiums Written 2,336 - 2,006 4,341 53.8% 0.0% 46.2% 100.0%
Chief Underwriter Premiums Written - With Exception 2,196 - 2,061 4,256 51.6% 0.0% 48.4% 100.0%
Marketing Communication Corporate Shared Services Ratio -
With Exception
1,927 623 1,665 4,214 45.7% 14.8% 39.5% 100.0%
Insurance Project Expense Insurance Division Average 1,654 - 1,230 2,884 57.3% 0.0% 42.7% 100.0%
Bad Debts & Allowances Weighted Average - Transactions 1,906 56 837 2,800 68.1% 2.0% 29.9% 100.0%
Actuarial Weighted Average - FTE 1,745 - 857 2,602 67.1% 0.0% 32.9% 100.0%
Insurance Corporate Cost Finance Shared Services Ratio,
modified by Commission Decision
1,237 - 1,237 2,474 50.0% 0.0% 50.0% 100.0%
Market Research Weighted Average - Projects 1,039 - 1,124 2,164 48.0% 0.0% 52.0% 100.0%
Garage & Fleet Weighted Average - FTE 1,132 72 804 2,008 56.3% 3.6% 40.1% 100.0%
Insurance Services Applications
Support
Insurance Division Average 1,112 - 828 1,941 57.3% 0.0% 42.7% 100.0%
Product Development Premiums Written 1,032 - 887 1,919 53.8% 0.0% 46.2% 100.0%
Driver Accountability Premiums Written 910 - 781 1,691 53.8% 0.0% 46.2% 100.0%
Internet Services Premiums Written 871 - 748 1,620 53.8% 0.0% 46.2% 100.0%
Customer Accounting Weighted Average - Transactions 573 532 259 1,363 42.0% 39.0% 19.0% 100.0%
Insurance Business Support Weighted Average - Cost Centres 461 275 554 1,289 35.7% 21.3% 42.9% 100.0%
ADP Technical Premiums Written 659 - 566 1,225 53.8% 0.0% 46.2% 100.0%
Regional Marketing Work Effort 582 58 524 1,164 50.0% 5.0% 45.0% 100.0%
Corporate Web-Site Corporate Shared Services Ratio 557 178 390 1,125 49.5% 15.8% 34.7% 100.0%
Specialty Lic & Ins Weighted Average - Special
Coverages
48 690 288 1,025 4.6% 67.3% 28.1% 100.0%
Insurance Planning Work Effort 297 297 297 892 33.3% 33.3% 33.3% 100.0%
Product Research Premiums Written 430 - 369 800 53.8% 0.0% 46.2% 100.0%
Optional Coverage (Autoplan) Directly attributable to Optional - - 720 720 0.0% 0.0% 100.0% 100.0%
Mgr. Of Comm. Lines Commercial Vehicle Premiums
Written
290 - 219 509 57.0% 0.0% 43.0% 100.0%
29,705 3,460 27,340 60,505 49.1% 5.7% 45.2% 100.0%
29,705 27,340 57,045 52.1% 47.9% 100.0%
1 Used to calculate Basic % in describing Year to Year Basic Insurance Allocation Percentages.
2 Rounding may affect totals and allocation percentages.
Total Insurance Services Excluding TP
Operating Costs - Insurance Services Allocator
$ in thousands 2 Allocation % 2
Insurance Services Excluding Olympics and TP Using Financial
Statement View 1
2011 Approved Allocators Using 2011 Actual Cost Detail
Page 5 of 5
Administrative – Non-insurance
Basicinsurance
Non-insurance
Optionalinsurance Total
Basicinsurance
Non-insurance
Optionalinsurance Total
Registration and Licensing Directly attributable to Non-insurance - 7,400 - 7,400 0.0% 100.0% 0.0% 100.0%
Non-insurance Corporate Cost Directly attributable to Non-insurance - 1,752 - 1,752 0.0% 100.0% 0.0% 100.0%
ISD Non-insurance Vehicle Application Directly attributable to Non-insurance - 1,154 - 1,154 0.0% 100.0% 0.0% 100.0%
Government Revenue Administration Directly attributable to Non-insurance - 904 - 904 0.0% 100.0% 0.0% 100.0%
Vehicle Records Directly attributable to Non-insurance - 670 - 670 0.0% 100.0% 0.0% 100.0%
Non-insurance (Victoria) Telephone
Education
Directly attributable to Non-insurance - 216 - 216 0.0% 100.0% 0.0% 100.0%
Non-insurance Project Expense Directly attributable to Non-insurance - 62 - 62 0.0% 100.0% 0.0% 100.0%
- 12,160 - 12,160 0.0% 100.0% 0.0% 100.0%
1 Rounding may affect totals and allocation percentages.
$ in thousands 1 Allocation % 1
Total Non-insurance Excluding TP
Operating Costs Administrative - Non-insurance Allocator
Summary of Total Corporate Operating Expenses Excluding TP
Basicinsurance
Non-insurance
Optionalinsurance Total Basic
insuranceNon-
insuranceOptional
insurance Total
Claims Services see Claims Services 156,463 105,784 262,247 59.7% 0.0% 40.3% 100.0%
Road Safety and Loss
Management
see Road Safety and Loss
Management54,714 3,864 58,578 93.4% 0.0% 6.6% 100.0%
Administrative - Insurance see Administrative - Insurance 59,799 16,276 59,799 135,874 44.0% 12.0% 44.0% 100.0%
Insurance Services see Insurance Services 29,705 3,460 27,340 60,505 49.1% 5.7% 45.2% 100.0%
Administrative - Non-insurance see Administrative - Non-insurance 12,160 12,160 100.0% 100.0%
Driver Licensing 54,505 54,505 100.0% 100.0%
300,681 86,401 196,787 583,868 51.5% 14.8% 33.7% 100.0%
$ in thousands 1 Allocation % 1
Total Corporate Operating Expenses Excluding TP
Corporate Operating Expenses Excluding Olympics and TP
ICBC’s Information Request Response
Insurance Corporation of British Columbia
December 23, 2013
2013.2 RR IBC.46.5 – Attachment H – The Application, Chapter 7, Appendix 7 D, pages 7D-3 to 7D7, Figure 7D.2 – 2012 Approved
Allocators Using 2012 Actual Cost Detail
Insurance Bureau of Canada Information Request No. 2013.2 RR IBC.47.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR IBC.47.1 Reference: Response to 2013.1 RR IBC.38.1-2 In response to the initial question, ICBC states that there are two different views of operating expenses: (1) a line of business view operating expenses used for financial reporting in ICBC’s financial statements and in actuarial rate indication and (2) a divisional view of base operating expenses. Please explain the rationale for two views and how the two views are reconciled, particularly in the context of the allocation methodology. Response:
In the response to information request 2013.1 RR IBC.38.1, as filed in the response to
information request 2013.1 RR IBC.38.1-2, ICBC discussed the reconciliation of total corporate
operating expenses, for 2012 actual of $591 million, between the two views (line of business
view used for financial reporting in ICBC’s financial statements and in the actuarial rate
indication, and the divisional view of base operating expenses which excludes unique items and
government initiatives accounted for at the corporate level).
In the response to information request 2013.1 RR IBC.38.2, as filed in the response to
information request 2013.1 RR IBC.38.1-2, ICBC had provided the reconciliation of 2012 actual
for the Claims Division, as presented in the Application, Chapter 7, Figure 7.10 (the divisional
view) and for the Claims Services line of business as presented in Chapter 7, Appendix 7 D,
Figure 7D.2 (the line of business view).
The common element between the two views is the cost centre. Whereas a cost centre may be
positioned within a divisional organizational structure, the cost centre’s work activities/functions
must be aligned by line of business in order to facilitate a structure suitable for financial
reporting and actuarial rate indication. As discussed in Chapter 7, page 7-62, paragraph 243,
ICBC firstly applies the Commission-approved financial allocation methodology at the cost
centre level, and then secondly aggregates all of the cost centres that are included in the
specified operating expense components as shown in Chapter 7, Figure 7.22. Those specified
operating expense components are then used in the actuarial rate indication analysis as regards
to the Basic insurance revenue requirement.
Insurance Bureau of Canada Information Request No. 2013.2 RR IBC.48.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 5
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR IBC.48.1 Reference: Response to 2013.1 RR IBC.29.1 The original request sought a list of programs that make up the $16 million expenditure on Programs with a brief explanation of each program if its intent is not clear from its title. For $9 million of that expense, ICBC did not provide a list and simply stated “other projects less than $0.5 million individually”. Please answer the original question and provide a breakdown of the $9 million. Response:
The $16 million expenditure anticipated for projects in 2013 forecast operating expenses was
determined during ICBC’s normal budgeting cycle, in the fall of 2012, based on the best
information available at that time. In the response to information request 2013.1 RR IBC.29.1,
ICBC provided a breakdown of individual projects which are forecast to be greater than
$500,000, and an aggregate amount ($9 million) for projects which are less than $500,000
individually.
The $9 million forecast amount for projects which are less than $500,000 individually includes:
1. Projects forecast to be between $250,000 and $500,000 (Group 1). The estimated
expense for this group is approximately $3 million.
2. Projects forecast to be under $250,000 (Group 2). The estimated expense for this group
is approximately $3 million.
3. An allowance of $3 million was made in the 2013 forecast for projects not specifically
identified at the time the budget was prepared. During the 2013 fiscal year, as projects
are initiated, the project costs are then designated and funded from this allowance
amount. In the list below, ICBC provides the project details in regards to the funds
drawn from the allowance amount (Group 3) as those projects are now known.
Included in Group 3 are two projects with 2013 forecast expense greater than $0.5 million
which were not but should have been separately identified in the response to information
request 2013.1 RR IBC.29.1. The two projects are Future Claims Learning, with a 2013
forecast expense of $1 million, and Business Information Program, with a 2013 forecast
expense of $1 million.
Insurance Bureau of Canada Information Request No. 2013.2 RR IBC.48.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 5
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Group 1 – Projects between $250,000 and $500,000 in the 2013 Forecast
Project Name Project Description
Multi-Channel Mass Personalization Scoping technology framework to support outbound communications
Billing Project Billing system, in event that the Commission orders a rate change higher than an interim rate change
Enterprise Content Management 2013 Secure licensing required to allow enterprise access to data
Minor Enhancement Fund Implement minor business changes Business Insights - Master Data Management Planning installation of customer
database software Digital Photo Identification Hardware Hardware renewal of card production
technology Security Suite Revitalization (Desktop) Desktop security software
Group 2 – Projects under $250,000 in the 2013 Forecast
Project Name Project Description
AION Business Rules Engine Replacement Rules engine for driver contraventions
Dunsmuir Sub-Lease Sublet lease, Vancouver NX Powerlite Desktop File compression software Space Consolidation Minor facilities alterations, various
offices Unified Communication Component Enhancement Communication technology
enhancement Head Office 6th Floor Minor facilities alterations, offices,
North Vancouver Customer Master Strategic Planning Strategic plan for implementing a
customer data management solution Driver Licensing Number Project Stakeholder engagement, expand
capacity for greater number of driver licensing clients and driver licence numbers
Citrix Infrastructure Expansion Provide Citrix remote access SAN Annual Storage Capacity Storage area network renewal
Insurance Bureau of Canada Information Request No. 2013.2 RR IBC.48.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 3 of 5
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Project Name Project Description
Richmond Drivers Licensing Office Relocation Planning facilities alterations, driver service centre, Richmond
Head Office Minor facilities alterations, offices, North Vancouver
Collective Agreement Changes System changes to support ratified collective agreement
Centera Evergreening Storage backup units Server Evergreening Computer hardware renewal Anti-Virus Software Anti-virus software for servers Web Application Firewall Event and Log Management Software Data indexing and searching tool Head Office - Plaza Rehab Minor facilities alterations, offices,
North Vancouver Disaster Recovery Second Site Planning for disaster recovery site System Centre Configuration Manager Configuration software Minor Facilities Alterations, Warehouse, Burnaby Minor Facilities Alterations, Offices, Nanaimo Minor Facilities Alterations, Offices, Surrey Minor Facilities Alterations, Offices, Victoria Minor Facilities Alterations, Salvage Centre, Nanaimo Minor Facilities Alterations, Driver Service Centre, Surrey
Minor Facilities Alterations, Litigation Centre, Burnaby Minor Facilities Alterations, Estimating Facility, Coquitlam
Minor Facilities Alterations, Claim Centre, Abbotsford Minor Facilities Alterations, Claim Centre, Burnaby Minor Facilities Alterations, Claim Centre, Coquitlam Minor Facilities Alterations, Claim Centre, North Vancouver
Minor Facilities Alterations, Claim Centre, Kamloops Minor Facilities Alterations, Claim Centre, Kelowna Minor Facilities Alterations, Claim Centre, Vancouver Minor Facilities Alterations, Claim Centre, Maple Ridge Minor Facilities Alterations, Claim Centre, Surrey
Insurance Bureau of Canada Information Request No. 2013.2 RR IBC.48.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 4 of 5
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Project Name Project Description
Minor Facilities Alterations, Claim Centre, New Westminster
Minor Facilities Alterations, Claim Centre, Penticton Minor Facilities Alterations, Claim Centre, Prince George
Minor Facilities Alterations, Claim Centre, Richmond Minor Facilities Alterations, Claim Centre, Smithers Minor Facilities Alterations, Claim Centre, Surrey Minor Facilities Alterations, Claim Centre, Nanaimo Minor Facilities Alterations, Claim Centre, Victoria Minor Facilities Alterations, Claim Centre, Trail Minor Facilities Alterations, Claim and Salvage Centre, Vernon
Backup Systems Renewal Data Network Renewal Document Handling Upgrade and Migration Document capture software System Management Automation Tools Wireless Network Services Enterprise Access Workflow & Analytics Replace a data access request
tracking system and streamline user access provisioning
Identity & Access Capability - Analytics/Audit & Comp Implement enhanced reporting to allow for review and approval of individual users system access
Insurance Bureau of Canada Information Request No. 2013.2 RR IBC.48.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 5 of 5
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Group 3 – Projects Funded from the Allowance Amount in the 2013 Forecast
Project Name Project Description
Future Claims Learning Develop future state claims learning program
Business Information Program Upgrading business information reporting
BI Legal Representation Empirically validate the influence of claimant attitudes on representation
Macintosh Refresh Standardize Macintosh computer hardware and software managed through the network
Purchase of Additional Mainframe Power Purchase additional processing power for the mainframe
HIPS 8 and ePO GA Merge Updates to network firewall system WebMethods Decommissioning Decommission and convert
integration services software CLM Upgrade Software upgrade for lifecycle
management tool set Telecom Billing Reporting System Rewrite Replace current end-of-life system Card Production Facility Network Security Enhancement
Risk planning for identity card production facility
Driver License Knowledge Test Replace current end-of-life system Operational Excellence Prototype - Advisor Selection Select advisor to assist in enhancing
continuous improvement Desktop Test Lab Virtualization Virtualization of test lab machines
onto pre-existing servers
The above project summary excludes projects which are either allocated 100% to Optional
insurance, or considered to contain competitive information. There are five such projects which
total to approximately $768,000 (out of the aggregate $9 million amount for projects individually
less than $500,000) in the 2013 forecast.
Insurance Bureau of Canada Information Request No. 2013.2 RR IBC.49.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR IBC.49.1 Reference: Response to 2013.1 RR BCUC.122.1
ICBC states that it is a reasonable approximation to say that 67% of a reduction in compensation costs would benefit Basic.
If according to Figure 7D.2 Claims Services are allocated 59.9% to Basic and Administrative-Insurance is allocated 50% to Basic and Insurance Services is allocated 53.3% to Basic (while Road Safety is allocated 93.4%, and Administrative-Noninsurance 100%) and given that the majority of employees are in Claims Services, Administrative-Insurance and Insurance Services, is it not more likely that the reasonable approximation of a reduction in compensation is less than 67%? Please provide a calculation referencing Figure 7D.2 Response:
In the response to information request 2013.1 RR BCUC.122.1, ICBC addressed the
Commission’s query as to whether it is “a fair assumption that 67 percent, or $5.4 million, of the
$8 million reduction in net compensation costs from 2012 actual to 2013 forecast will be to the
benefit of Basic insurance policy holders.” ICBC maintains that 67% is a reasonable
approximation of the reduction. By referencing the Application, Chapter 7, Appendix 7 D, Figure
7D.2, page 7D-7, “Total Corporate Operating Expenses Excluding TP” are allocated 51.1% to
Basic insurance and 15.7% to Non-insurance. In compliance with Special Direction IC2, Non-
insurance is fully funded from Basic insurance premium. The total of Basic insurance and Non-
insurance is therefore 51.1% + 15.7% = 66.8%. Rounded to the nearest percentage, this total is
67%.
The majority of ICBC’s employees are in Claims Services, Administrative – Insurance,
Insurance Services, as well as Driver Licensing. Driver Licensing is allocated 100% to Non-
insurance. The other lines of business are allocated to Basic insurance and Optional insurance
using the Commission-approved financial allocation methodology.
In Chapter 7, Figure 7.23, ICBC illustrated that the Basic insurance allocation percentage is
fairly consistent from year to year and is indicative that allocation does not have a material
impact on Basic insurance costs used in the actuarial rate indication analysis. As compensation
costs are a significant component of overall base operating expenses, and the Basic insurance
allocation for 2012 actual and 2013 forecast remain level at 67%, it is indeed a fair assumption
that 67%, or $5.4 million, of the $8 million reduction in compensation costs would be to the
benefit of Basic insurance policy holders.
Richard Landale Information Request No. 2013.2 RR RL.2.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR RL.2.1 Reference: 2013.1 RR RL.2.1.1 Reference: Minimum Capital Target (MCT) 2.1 Based on the Workshop presentation Slide 83 - Proposed New Capital Management Target. Please explain the steps taken to establish the 130% MCT Solvency Target and under who’s direction / orders ICBC is requested in this Second IR to answer completely as asked. Response:
It appears from the explanatory discourse associated with this information request that the
intervenor is actually satisfied with ICBC’s response to information request 2013.1 RR RL.2.1.1.
However dissatisfaction is expressed regarding ICBC’s use of the terminology “solvency target”
and “rate smoothing”.
The original question was: “Please explain the steps taken to establish the 130% MCT solvency
target and under who’s direction/orders.” ICBC believes it has responded in full to this original
question and the intervenor has acknowledged understanding ICBC’s response by stating: “It is
understood the Commission’s approval for the high 130% MCT ceiling level.”
ICBC has used the terminology “solvency target” and “rate smoothing” in its proposed new
Capital Management Plan with:
A full definition of what is meant by “solvency target”.
The use of the term “rate smoothing” in line with the name of the Government directive
of March 19, 2013 with respect to Rate Smoothing approved by Order in Council 153/13,
March 18, 2013 (the 2013 Government Directive regarding Rate Smoothing).
The intervenor’s dissatisfaction appears to be a matter of semantics. ICBC has been directed to
bring forward to the Commission for approval by May 31, 2014 a revised Basic Capital
Management Plan pursuant to the 2013 Government Directive regarding Rate Smoothing.
ICBC has complied with this directive in the Application, Chapter 4 and believes that its proposal
is in accordance with Special Direction IC2 and the 2013 Government Directive regarding Rate
Smoothing.
Richard Landale Information Request No. 2013.2 RR RL.2.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 5
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR RL.2.2 Reference: Exhibit G.1 RTL
2.2.1 Please explain sources of these figures. And are these figures for 9 months or 12 months. (Lines (a) and (b)) 2.2.2 Please explain sources of these figures. And are these figures for 9 months or 12 months. (Lines (e), (f), and (g)) 2.2.3 Please explain reasons for a 4.5% discount. Why not more or less. Is this discount for 9 months or 11. (Line (j))
Richard Landale Information Request No. 2013.2 RR RL.2.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 5
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Exhibit G.2 RTL
2.2.4 Please explain sources of these figures. And are these figures for 9 months or 12 months. (Lines (a) or (b)) 2.2.5 Please explain "transient target". Why is the 2012 transient target relevant to formula in Line H. (Lines (g) and (h)) 2.2.6 Please explain sources and reasons for the divisor 20 in this formula. Why not 30, 40, 50 etc. (Line (h)) 2.2.7 Please explain why "growth in capital required" is at 4.6%. Is it by "OIC" and or "BCUC" order. And why on Exhibit G.1 4.5% is used verses 4.6% or visa - versa or in line with the Bank of Canada prime rate. (Line (j))
Richard Landale Information Request No. 2013.2 RR RL.2.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 3 of 5
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Response:
In general the figures presented in the Application, Chapter 3, Exhibit G represent values at a
point in time; they do not reflect 9 months or 12 months of data. For the information that is
labeled “PY 2013 …”, these represent 12 month figures. In addition please see the Application,
Chapter 3, Exhibits G.1 and G.2 for ease of reading.
2.2.1
The purpose of this section of Exhibit G.1 is to develop an allocation base used to distribute the
adjusted equity (lines (e) through (l)) and capital maintenance (lines (m) through (o)) between
coverages. The unpaid claims in line (a) are calculated by subtracting the amount of claims
payments from the total ultimate value on a per coverage basis for all accidents that have
occurred prior to 2013. The unearned premium in line (b) is the amount of premium that has
been written in the 2012 calendar year, but has yet to be earned. As indicated in notes (a) and
(b) of Exhibit G.1, the allocation of both of these items to the various coverages shown is based
on internal calculations.
2.2.2
The amount of Basic equity at December 31, 2013 (line (e) of Exhibit G.1) is based on ICBC’s
internal quarterly forecast analysis. This amount represents the estimated Basic equity as at
December 31, 2013 based on the information known as of June 30, 2013 (see note (e) of
Exhibit G.1).
The amount of discount (line (f)) represents the difference between the present value and future
value of future claim payments. The Provision for Adverse Deviation (PfAD) (line (g))
represents deviations of actual from expected experience to reflect the degree of uncertainty of
best estimate assumptions. Each of these estimates in line (f) and (g) follow actuarial standards
of practices and the assumptions used have been approved by ICBC’s external appointed
actuary. As indicated in note (f) & (g) of Exhibit G.1, lines (f) and (g) are calculated using a
comprehensive internal analysis.
Richard Landale Information Request No. 2013.2 RR RL.2.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 4 of 5
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2.2.3
The reference to “4.5%” (line (j)) in the information request is incorrect. The Yield on Basic
Equity that is used and summarized in line (j) is 4.25%.
Please refer to Chapter 5, Figure 5.7 which summarizes the calculation of the Yield on Basic
Equity for the 2013 policy year based on the information known as of June 30, 2013.
2.2.4
The amount for Basic capital available (line (a) of Exhibit G.2) is the same as line (e) of Exhibit
G.1 labeled “Basic Equity”. This is discussed in the response to information request 2013.2 RR
RL.2.2.2. The minimum capital required (line (b)) is the amount of Basic capital that ICBC must
have in order to meet the requirement for the 100% MCT regulatory minimum. As indication in
note (a) & (b) of Exhibit G.2, the amounts of Basic capital available and minimum capital
required as at December 31, 2013 are based on ICBC’s internal quarterly forecast analysis as
of June 30, 2013.
Richard Landale Information Request No. 2013.2 RR RL.2.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 5 of 5
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2.2.5 and 2.2.6
From 2007, when the current Capital Management Plan was implemented, ICBC was
transitioning from a capital management target of 100% MCT to a capital management target of
130% MCT. ICBC was doing this transition over a period of 20 years to ease the impact of the
transition on rates by not increasing the capital management provision all at once in the rates of
a single year. In order to do this it used the term “transient MCT target” as a construct during
the transition period to the full maintenance provision.
In order to transition from 100% to 130% MCT ratio over a 20 year span, the transient target
must increase by 1.5 percentage points a year [ (130% -100%) / 20 ]. Since each year’s
transient target increases by 1.5 percentage points of MCT, the 2013 transient target (line (h)) is
equal to the 2012 transient target (line (g)) plus 1.5 percentage points.
2.2.7
The 4.6% growth in capital required (line (j) of Exhibit G.2) is the long-term growth rate in claims
costs which is used as a proxy for the long-term growth rate in required capital. Please see the
following excerpt from the response to information request 2013.1 RR BCUC.9.2 on this topic:
The 4.6% growth rate represents the growth in capital required, which is based on the combined impacts of long-term exposure growth and loss cost trends… The long term exposure growth is assumed to be 1.4 percentage points and the long term loss cost trend is assumed to be 3.2 percentage points.
Richard Landale Information Request No. 2013.2 RR RL.2.3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 3
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR RL.2.3 Reference: RTL - EXHIBIT 01 Will ICBC please translate RTL EXHIBIT 01 into real dollars, and fill in the blanks as best they can.
Richard Landale Information Request No. 2013.2 RR RL.2.3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 3
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Response:
The MCT ratios shown in RTL – EXHIBIT 01 are a combination of corporate MCT ratios and
Basic MCT ratios. The “Actual” MCT ratios reflected in the Exhibit are ICBC’s actual corporate
MCT ratios as provided in ICBC’s Annual Report. The “Plan” MCT ratios reflected in the Exhibit
represent ICBC’s capital management target for ICBC’s combined Basic insurance and Optional
insurance lines of business. The “Basic MCT” ratios shown in the Exhibit are the same as those
provided in the response to information request 2013.1 RR BCUC.60.2. The “Diff” line in the
Exhibit is the mathematical difference between the corporate MCT ratio and the Basic MCT ratio
and has no meaningful application. ICBC does not view that the actual or planned corporate
MCT ratios nor the difference between the corporate MCT and the Basic MCT ratios as being
relevant to this Application.
In the table below for 2007 to 2012, ICBC provides the Basic MCT ratio, including the related
capital available and capital required components, as derived from the actual results of ICBC’s
Basic insurance line of business in accordance with the MCT guidelines of the Office of the
Superintendent of Financial Institutions.
For the 2013 and 2014 forecast, ICBC presents the same figures as those in the response to
information request 2013.1 RR BCUC.81.1. These figures are based on ICBC’s current
forecast assumptions at the time of the Application, which represent one possible outcome that
does not account for any future volatility.
($ Thousands) 2007 2008 2009 2010 2011 2012 2013 *
(forecast) 2014 *
(forecast)
Capital Available 1,171,200 1,216,003 1,579,312 1,514,458 1,129,681 1,427,495 1,371,437 1,315,132
Capital Required 862,519 863,113 972,339 987,220 983,805 1,039,682 1,113,041 1,135,798
Basic MCT Ratio 136% 141% 162% 153% 115% 137% 123% 116%
* Figures were provided in the response to information request 2013.1 RR BCUC.81.1.
Richard Landale Information Request No. 2013.2 RR RL.2.3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 3 of 3
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
ICBC’s financial forecast is contained in its Service Plan 2014 – 2016, which is anticipated to be
tabled in the Legislature on February 18, 2014.
Richard Landale Information Request No. 2013.2 RR RL.2.4 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR RL.2.4 Reference: ICBC has chosen to use words rather than arithmetically or graphically demonstrating their model to support their case of a negative -1.1 percentage point impact (paragraph 18 page 3-6). Please translate your case into real figures, rather than vague actuarial model words to support ICBC’s argument. Response:
The -1.1 percentage point impact from investment income reflects the change in investment
income to be received for policy year 2013 compared to policy year 2012. Comparing to policy
year 2012, there is an expected increase in investment income which has enabled ICBC to
reduce the rate indication. ICBC has prepared two attachments that provide arithmetical
support to the -1.1 percentage point impact on the PY 2013 rate change.
1) Please see Attachment A – Indicated Rate Change Calculation by Components which
provides the high level calculation of the Investment Income component of the rate
change in line item (3). This attachment was originally provided in the response to
information request 2013.1 RR BCUC.8.1.
2) The following table summarizes the individual components of the -1.1 percentage point
impact as discussed in the Application, Chapter 3, paragraph 18.
Investment Income Components Impact On Rates
New Money Rate 0.0%
Policyholder Premium (payment pattern cash flow) -1.1%
Yield on Basic Equity 0.2%
Change in Basic Equity -0.2%
Premium Financing Fees 0.0%
Investment Income Impact on Rates -1.1%
Please see Attachment B – Investment Income Breakdown for a detailed calculation of
each of these components of investment income. This attachment was originally
provided in the response to information request 2013.1 RR BCUC.89.2.
ICBC’s Information Request Response
Insurance Corporation of British Columbia
December 23, 2013
2013.2 RR RL.2.4 – Attachment A – Indicated Rate Change Calculation by Components
Indicated Rate Change Calculation by Components ($ 000's)
Line #
Components in Figure 3.2
(a)
Rate Impact
for PY 2013
(Figure 3.2)
(b)
Components in
Exhibit A.0.1
(c)
PY 2013
(d)
PY 2012
(Adjusted for
Policy Growth)
(e)
Change from
Previous PY
exp: (f) = (d) - (e)
rev: (f) = (e) - (d)
Projected Premium at
Current Rate Level (Net
Premium Tax)
(g)3
Percentage Points
Indicated
Rate Change
(h) = (f)÷(g)
Reference
(i)
0 Total Claims Cost 11.0% Loss and ALAE Payments 2,293,395 2,048,542 244,852 2,226,410 11.0% Exhibit A.0.1, Line (a)
1 PY 2012 Loss Cost Variance 6.6%n/a
see Notes1 2,195,182
4 2,048,542 146,640 2,226,410 6.6%
For PY 2013, please see the response to
information request 2013.1 RR BCUC.25.2,
Attachment A - Loss Cost Variance 6.6%
Breakdown.
2 Loss Trend to PY 2012 4.4%n/a
see Notes1 2,293,395 2,195,182 98,213 2,226,410 4.4% Exhibit A.0.1, Line (a)
3 Investment Income -1.1%Investment Income on Policyholder
Supplied Funds336,173 312,491 (23,682) 2,226,410 -1.1% Exhibit A.0.1, Line [(p) + (t) + (u)]
4Impact of IAS 19R and
Assumption Changes0.2% 4,573 n/a 4,573 2,226,410 0.2%
IAS 19R costs allocated based on calendar
year projections from Accounting.
5Operating Expense
(Excluding Line 4)-0.6%
ULAE + Road Safety and Loss
Management + Total General
Expense
(excluding Line 4)2
399,372 413,637 (14,265) 2,226,410 -0.6%Exhibit A.0.1, Line [(b)+(c)+(h)] - Line 4 Col
(d)
6Capital Maintenance
Provision0.9% Capital Maintenance Provision 56,621 37,243 19,378 2,226,410 0.9% Exhibit A.0.1, Line (n)
7 Change in Average Premium 1.0%Projected Premium at Current Rate
Level2,328,881 2,351,227 22,346 2,226,410 1.0% Exhibit A.0.1, Line (x)
8 Other 0.1%Broker Fees + Merchant fee - Other
Misc Revenue63,586 60,842 2,744 2,226,410 0.1% Exhibit A.0.1, Line [(i) + (j) - (q) - (r) - (s)]
9PY 2013 Indicated Rate Level
Change11.5% Required and Projected Premium 2,595,578 2,328,881 266,697 2,226,410 11.5% Exhibit A.0.1, Line (w)
Notes:
3 (g) = 2,328,881 × ( 1 - 4.4% )
4 Current Application update of PY 2012 losses.
1 Claims Cost is broken down by the Lost Cost Variance and Loss Trend.
2 Policy year 2013 operating expense excludes IAS 19R Pension adjustment.
ICBC’s Information Request Response
Insurance Corporation of British Columbia
December 23, 2013
2013.2 RR RL.2.4 – Attachment B – Investment Income Breakdown
2013.2 RR RL.2.4 Attachment B - Investment Income Breakdown
(1) (2) (3) (4) (5) (6) (7) (8) (9)
Underwriting
Profit1
Operating
Profit2
Investment
Income on
PHSF
(2) - (1)
Underwriting
Profit1
Operating
Profit2
Investment
Income on
PHSF
(2) - (1)
Underwriting
Profit1
Operating
Profit2
Investment
Income on
PHSF
(2) - (1)
Year 1 - Q1 24.4% 25.2% 0.8% 24.4% 25.2% 0.8% 26.5% 27.4% 0.9%
Year 1 - Q2 22.7% 23.2% 0.5% 22.7% 23.2% 0.5% 24.8% 25.4% 0.6%
Year 1 - Q3 20.5% 20.8% 0.3% 20.5% 20.8% 0.3% 22.8% 23.1% 0.3%
Year 1 - Q4 17.8% 17.9% 0.1% 17.8% 17.9% 0.1% 20.1% 20.2% 0.1%
Year 2 - Q1 -9.7% -9.6% 0.0% -9.7% -9.6% 0.0% -9.3% -9.3% 0.0%
Year 2 - Q2 -8.6% -8.5% 0.1% -8.6% -8.5% 0.1% -8.3% -8.2% 0.1%
Year 2 - Q3 -6.6% -6.5% 0.2% -6.6% -6.5% 0.2% -6.6% -6.5% 0.2%
Year 2 - Q4 -5.6% -5.4% 0.2% -5.6% -5.4% 0.2% -5.8% -5.6% 0.2%
Year 3 -14.1% -13.4% 0.8% -14.1% -13.4% 0.8% -15.9% -15.0% 0.9%
Year 4 -15.2% -13.8% 1.3% -15.2% -13.8% 1.3% -18.0% -16.4% 1.6%
Year 5 -14.2% -12.5% 1.7% -14.2% -12.5% 1.7% -16.9% -14.9% 2.0%
Year 6 -9.1% -7.7% 1.4% -9.1% -7.7% 1.4% -10.8% -9.2% 1.7%
Year 7 -4.6% -3.7% 0.8% -4.6% -3.7% 0.8% -5.1% -4.2% 0.9%
Year 8 -2.4% -1.9% 0.5% -2.4% -1.9% 0.5% -2.6% -2.0% 0.5%
Year 9 -0.5% -0.4% 0.1% -0.5% -0.4% 0.1% -1.1% -0.9% 0.3%
Year 10 -0.5% -0.4% 0.1% -0.5% -0.4% 0.1% -0.7% -0.5% 0.2%
Year 11 -0.5% -0.4% 0.2% -0.5% -0.4% 0.2% -0.4% -0.3% 0.1%
Year 12 -0.5% -0.4% 0.2% -0.5% -0.4% 0.2% -0.3% -0.2% 0.1%
Year 13 -0.5% -0.3% 0.2% -0.5% -0.3% 0.2% -0.2% -0.1% 0.1%
Year 14 -0.2% -0.1% 0.1% -0.2% -0.1% 0.1% -0.1% -0.1% 0.1%
Year 15 -0.2% -0.1% 0.1% -0.2% -0.1% 0.1% -0.1% -0.1% 0.1%
Year 16 -0.2% -0.1% 0.1% -0.2% -0.1% 0.1% -0.1% -0.1% 0.0%
Year 17 -0.2% -0.1% 0.1% -0.2% -0.1% 0.1% -0.1% 0.0% 0.0%
Year 18 -0.2% -0.1% 0.1% -0.2% -0.1% 0.1% -0.1% -0.1% 0.1%
Year 19 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Year 20+ -0.1% -0.1% 0.1% -0.1% -0.1% 0.1% -0.2% -0.1% 0.1%
(a) Total -8.3% 1.7% 9.9% -8.3% 1.7% 9.9% -8.5% 2.5% 11.0%
Impact of Investment Income
(b) Impact on Investment Income on New Money Rate 0.0% = Row (a), Col [(3) - (6)]
(c) Impact on Investment Income on Policyholder Premium -1.1% = Row (a), Col [(6) - (9)]
(d) Impact on Investment Income on Yield on Basic Equity5
0.2%
(e) Impact on Investment Income on Change in Basic Equity5
-0.2%
(f) Impact on Investment Income on Change in Premium Financing Fees5
0.0%
Investment Income Impact on rates -1.1% = (b) + (c) + (d) + (e) + (f)
1Underwriting Income = total cash flow (% of projected premium at current rate level net premium tax)
2Operating Income = discounted cash flow (i.e. underwriting income + investment income on Policyholder Supplied Funds)
3Policy Year 2012 accounts for premium trend.
4Shift in premium dollar to cost components with longer investment horizon. This means a higher allowable underwriting loss (as discussed in Chapter 3, Section A.2).
5Impact on updating the change in these cost components. Quantified by incremental change in Current Application Exhibit A.0.1, Line (p) + (t) + (u)
Policy Year 20123
PY 2012: NMR Update PY 2013: Policyholder Premium4
Richard Landale Information Request No. 2013.2 RR RL.2.5 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR RL.2.5 Reference: RTL - EXHIBIT 03 ICBC has excluded the 6.6 percentage point “PY2012 Loss Costs Forecast Variance” rate indicator for the 2013 year, as directed by IOC and BCUC orders. ICBC will attempt to recover this exclusion in the coming 2014 application and beyond. Will ICBC deny this claim, if not, will ICBC please clarify it’s position so that exhibit RTL - Exhibit 03 can be updated for the benefit of the Commission’s deliberations and inclusion in their 2013 decision.
Richard Landale Information Request No. 2013.2 RR RL.2.5 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Response:
Yes, the 6.6 percentage point rate exclusion from PY 2013 will be accounted for in PY 2014 as
highlighted in the Application, Chapter 4, Figure 4.8.
Richard Landale Information Request No. 2013.2 RR RL.2.6 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 4
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR RL.2.6 Reference: RTL - EXHIBIT 04 Between 2007 and 2014 the projected CPP has risen steadily at an averaged rate of 4.5 percentage points year over year. With 2010 being a high point and 2013 appearing to be a flat point. The obvious question is Why ? Since this averaged rate has no correlation to the Basic Rate Increase (BPI) which seems modest during the years 2007 and 2011. What is going to stop ICBC from expanding the gap between the Cost Per Policy (CPP) and the Basic Rate Increase (BPI).
Richard Landale Information Request No. 2013.2 RR RL.2.6 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 4
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Richard Landale Information Request No. 2013.2 RR RL.2.6 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 3 of 4
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Response:
ICBC respectfully submits that the information in regards to “Cost Per Policy (CPP)” in RTL –
Exhibit 04 is not correct. In the Application, Chapter 9, Figure 9.3, ICBC presents a table
showing Cost Per Policy In Force for 2010 actual to 2013 forecast. ICBC has expanded that
table to include the additional data requested for the historical period 2007 to 2009, as follows:
Figure 9.3 – Cost Per Policy In Force (Revised to include 2007 to 2009 actual results)
Cost Per Policy In Force1
2007 Actual
2008 Actual
2009 Actual
2010 Actual
2011 Actual
2012 Actual3
2013 Forecast4
Internal Operating Costs
$140 $140 $145 $147 $146 $145 $143
External Expenses 64 68 70 66 59 58 58
Premium Taxes and Commissions
126 131 131 132 134 137 139
Deferred Premium Acquisition Costs (DPAC) Adjustments2
(8) (5) 1 9 17 (3) (9)
Total $322 $334 $347 $354 $356 $337 $331
1 The results for 2007 to 2010 are presented in accordance with pre-International Financial Reporting Standards (IFRS) changeover Canadian Generally Accepted Accounting Principles, while the 2011 to 2013 financial information is presented under IFRS.
2 DPAC are commissions and premium taxes that are deferred and charged against income when the related premiums are earned over the course of the year.
3 During 2012, ICBC incurred a one-time, non-recurring expense associated with restructuring the organization and reducing staff positions. The total amount ($25 million) is included in ICBC’s internal operating costs. The impact of this amount is an approximate $7 per policy increase in internal operating costs. Also, in 2012 ICBC benefited from one-off, non-recurring recoveries totaling $9 million, a decrease of approximately $2 per policy. Both of these amounts are presented in the 2012 actual result of $145 per policy. Please see Chapter 7, Figure 7.20.
4 In the 2013 forecast, ICBC is impacted by a net increase of $12 million in pension and post-retirement benefit expenses as a result of the amendment to the IFRS accounting standard on employee benefits. The impact of this amount is an approximate $3 per policy increase in internal operating costs as presented in the 2013 forecast of $143 per policy. Please see Chapter 7, Figure 7.20.
Richard Landale Information Request No. 2013.2 RR RL.2.6 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 4 of 4
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
ICBC understands the information request to be asking for a correlation between the Basic
insurance rates requested in ICBC’s revenue requirement applications (past and current) and
ICBC’s costs. The problem with the use of the Cost Per Policy in Force is that this measure
does not reflect the largest component of ICBC’s costs (i.e., claims incurred).
As discussed in Chapter 9, Section B.3, paragraph 71, page 9-14, the Cost Per Policy in Force
is a standard insurance industry measure used by ICBC for assessing the costs of its
operations, inclusive of internal operating costs, external expense payments incurred to
investigate and settle claims, and premium taxes and commissions incurred to acquire
premiums. Claims incurred, which is the largest portion of ICBC’s total costs at approximately
73% (see Chapter 7, Section A, page 7-1), is not included in the Cost Per Policy in Force
calculation.
Of the various cost components within the Cost Per Policy in Force calculation, ICBC has the
ability to influence internal operating costs, commissions, and to some extent, external expense
payments. Premium taxes at 4.4% are collected and paid to the provincial government. Please
refer to Chapter 9 for further details in regards to the Cost Per Policy in Force measure.
ICBC has been successful in managing and controlling the increase in operating expenses so
as to minimize its impact on Basic insurance rates. In fact, operating expenses have a
favourable impact on the rate indication in this Application. For a detailed discussion of ICBC’s
operating expenses, please refer to Chapter 7.
ICBC determines its Basic insurance rate requirements using detailed actuarial rate indication
analysis, as shown in Chapter 3. In recent years, ICBC has experienced increasing bodily injury
claims costs, which is the primary driver of Basic insurance rate increases in both 2012 and
2013 policy years.
Richard Landale Information Request No. 2013.2 RR RL.2.7 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 3
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR RL.2.7 Reference: RTL - EXHIBIT 05 On one hand ICBC reports savings of $50 million dollars, and claims they are working to keep expenses under control, yet this graph indicates otherwise, expenses continue to climb. It would be most helpful to see a “Comprehensive Table” inclusive of all expenses as applicable to Basic Insurance.
Richard Landale Information Request No. 2013.2 RR RL.2.7 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 3
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Response:
ICBC confirms that the information shown in RTL – Exhibit 05 is correct regarding to corporate
financial information contained in ICBC’s 2011 and 2012 Annual Reports. Specifically:
Total Revenue is comprised of:
o Premiums earned.
o Service fees.
o Investment income.
Total Expenses are comprised of:
o Claims incurred (current and prior years) at approximately 73% of ICBC’s total
costs.
o Acquisition costs (premium taxes, commissions and deferred premium
acquisition cost adjustments) at approximately 12% of ICBC’s total costs.
o Transformation Program expenses, which are 100% funded from Optional,
therefore excluded from the Basic insurance rate indication as it has no impact
on Basic insurance rates.
o Operating expenses at approximately 15% of ICBC’s total costs:
Claims services, road safety and loss management services, and insurance
operating costs.
Non-insurance expenses.
Restructuring costs (one-time, non-recurring $25 million in 2012 actual).
Pension and post-retirement benefits costs related to changes in International
Accounting Standard on Employee Benefits (IAS 19R), assumptions changes
for accounting purposes and discount rate changes (beginning in 2013
forecast in the amount of $19 million, and thereafter).
Richard Landale Information Request No. 2013.2 RR RL.2.7 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 3 of 3
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
As indicated in the Application, Chapter 7, page 7-1, paragraph 1, claims incurred accounts for
the largest portion of ICBC’s total costs at approximately 73%. It is this component which has
been increasing in recent years due to the higher number of bodily injury claims which put
pressure on Basic insurance rates.
Operating expenses represent only a small percentage of ICBC’s total costs (approximately
15%). However, ICBC does have the ability to manage and control these costs and it did so by
meeting the commitment made in response to the 2012 Government Review of ICBC to reduce
2013 budgeted costs by more than $50 million as compared to its 2011 original plan. For
further information on the $50 million operating cost savings, please refer to Chapter 7, Section
B.3.
In Chapter 7, page 7-3, paragraph 10, ICBC explains that it operates and manages the
company on an integrated basis, providing both Basic insurance and Optional insurance
products and services. This model provides benefits to ICBC’s customers in terms of ease of
service and economies of scale, which in turn leads to cost efficiencies and lower Basic
insurance rates.
From a regulatory perspective, ICBC identifies and allocates costs as either Basic insurance or
Optional insurance, pursuant to a Commission-approved financial allocation methodology. For
the 2013 forecast, ICBC’s operating expenses for the Basic insurance line of business is
presented in Chapter 7, Figure 7.22, page 7-62.
For the actual results, ICBC presents its Corporate, Basic insurance, and Optional insurance
financial information (inclusive of revenue, expenses, and equity) in the notes to its financial
statements. For example, in ICBC’s 2012 Annual Report (see Chapter 10, Appendix 10 C),
page 85, note 22 “Regulation over Basic Insurance” shows ICBC’s 2012 Basic insurance
revenues of $2.2 billion, investment income of $281 million, and claims and operating costs of
$2.5 billion.
Richard Landale Information Request No. 2013.2 RR RL.2.8 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR RL.2.8 Reference: RTL - EXHIBIT 06 ICBC should re-evaluate their +1.0 percentage point indictor using “Real” Basic Policy Premium Rates paid by British Columbians, by bringing the Indicated Rate Change down to a horizontal line that does meet the criteria of Stable and Predictable Rates. Response:
The preamble of this information request seems to suggest that ICBC should determine its
indicated rate change from historical trends observed in premium. But this thinking does not
take into consideration that ICBC must set rates to cover its costs, and that claims costs are the
predominant factor in the setting of the rate level. (Note that the graph in the preamble uses
number of claims as opposed to claims costs).
To a much lesser degree, the trend in average premium is a factor in the indicated rate change,
and in this regard ICBC does use “Real Basic Policy Premium Rates paid by British
Columbians” in determining its indicated rate change.
The rate change component, change in average premium, captures the drift in average
premium, which is the amount of change in premium due to movement of policyholders between
different business segments that are defined by rate classes, territories, and/or discount levels.
The average premium analysis isolates the overall drift in average premium by re-stating
premiums at current rate level. In this way, any year over year change in average premium at
current rate level must be due to drift. This analysis is important to the overall rate indication
since over time ICBC will collect less premium as policyholders move into business segments
with lower average premium (e.g., seniors). As a result, there is an additional component of the
rate change to cover costs (change in average premium) to capture this loss in average
premium over time.
The following provides a simple example using three policyholders to illustrate how average
premium can decline over time from policyholder movement between business segments.
The tables below describe the policy characteristics for each of the three policyholders within
BC for year 1 and 2 along with the fictional premium for each policyholder after discount.
Richard Landale Information Request No. 2013.2 RR RL.2.8 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Year 1
Policy holder Rate Class Territory Claim-Rated
Scale Discount Premium
1 Senior D (Lower Mainland) 43% $750
2 Pleasure Use D (Lower Mainland) 43% $1,000
3 Pleasure Use D (Lower Mainland) 43% $1,000
Average $917
Year 2
Policy holder Rate Class Territory Claim-Rated
Scale Discount Premium
1 Senior D (Lower Mainland) 43% $750
2 Senior D (Lower Mainland) 43% $750
3 Pleasure Use D (Lower Mainland) 43% $1,000
Average $833
In Year 2, the second policyholder moves into the seniors rate class, thus creating a decline in
the overall average premium. This is similar to what ICBC is currently experiencing as the
proportion of seniors continues to increase in BC as described in the Application, Chapter 3,
page 3-7, paragraph 24.
The data used in this Application does in fact reflect the entire Basic insurance policy premium
(including applicable discounts) from all of ICBC’s policyholders.
Richard Landale Information Request No. 2013.2 RR RL.2.9 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR RL.2.9 Reference: RTL - EXHIBIT 07 Will ICBC please re-align itself, and the various models and actuarial formulas to BC Stats. After all this is the Province in which you do business. Response:
ICBC is using BC’s data in its analysis as the following paragraphs highlight:
1) Please refer to the Application, Chapter 3, Exhibits B.2.1 and B.2.2, which summarizes
the economic and demographic variables used in selecting the exposure (i.e., the
number of insured vehicles on the road) models. As shown in these tables, the majority
of the models are based on BC’s actual demographic data. This includes how many
people are in the various age groupings: above 15 years old, 15 to 64 years, seniors
(above 65 years), and which territories within BC that they live.
2) Please refer to the Application, Chapter 3, Exhibit B.1.2, which summarizes the historical
year over year change in written exposure (the number of insured vehicles on the road)
that is in line with the overall population growth of BC.
3) As discussed in the response to information request 2013.2 RR RL.2.8, average
premium is directly impacted by the change in the policyholder distribution between rate
class, territory, and discount levels.
Richard Landale Information Request No. 2013.2 RR RL.2.10 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 3
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR RL.2.10 Reference: RTL - EXHIBIT 08 In the first round of IR’s ICBC submitted upon request an updated Organizational Chart. Will ICBC please populate staffing levels, so a comparison can be drawn to the apparent data indicated in the application and in the RTL – Exhibit 08.
Richard Landale Information Request No. 2013.2 RR RL.2.10 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 3
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Response:
ICBC understands the information request to be asking for:
Autoplan policies earned for years 2013, 2014, and 2015.
Staffing forecast for years 2013, 2014, and 2015.
The “Policies Earned x 6” in RTL – Exhibit 08 for 2009 actual to 2013 forecast is correct and
reconciles to the Application, Chapter 7, Figure 7.7, page 7-22. ICBC had forecast 2013
Autoplan policies to increase at 1.4% over 2012 actual results to equal 3,419,000. The forecast
for ICBC’s policy growth for 2014 and 2015 is not currently available.
ICBC respectfully submits that the information in regards to “Mngr / 1000 Policies” and “Exec /
Manager x 8” in RTL – Exhibit 08 is not correct.
As discussed in the response to information request 2013.2 RR RL.2.11, and as indicated on
page 27 of ICBC’s Revised Service Plan 2013 – 2015 (Chapter 10, Appendix 10 B), ICBC does
not plan in detail its operating cost targets beyond the current year. This is also true of its
staffing resources, i.e., full-time equivalents (FTEs) by employee group. As a result, the
forecast for 2015 ICBC FTEs is not currently available.
ICBC is currently undergoing its normal budgeting cycle for the 2014 fiscal year. The 2014
forecast staffing levels will impact compensation, which is the largest component of ICBC’s
overall operating expenses. ICBC’s 2014 forecast operating costs by expense category are
presented in its Service Plan 2014 – 2016, which is anticipated to be tabled in the Legislature on
February 18, 2014. ICBC is unable to publicly disclose contents of its Service Plan prior to this
date and as a result, the forecast for 2014 ICBC FTEs is not currently available.
ICBC has presented 2009 actual to 2013 forecast staffing levels in the Application, Chapter 7,
as follows:
Figure 7.5, page 7-16 showing ICBC’s FTEs by employee group.
Appendix 7 C, Figure 7C.5, page 7C-9 showing ICBC’s FTEs by division by employee
group.
Richard Landale Information Request No. 2013.2 RR RL.2.10 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 3 of 3
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Figure 7.7, page 7-22 showing ICBC’s Autoplan policies earned as compared to its
staffing resources.
Figure 7.8, page 7-23 and Appendix 7 C, Figure 7C.6, page 7C-12 showing ICBC’s ratio
of managers with staff to total employees by division.
Richard Landale Information Request No. 2013.2 RR RL.2.11 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 3
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR RL.2.11 Reference: RTL - EXHIBIT 09 Will ICBC please correct the data for the forecast years 2013, 014, 2015, and update remunerations for all Bonus, Incentives and approved expenses.
Richard Landale Information Request No. 2013.2 RR RL.2.11 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 3
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Response:
ICBC respectfully submits that the information in regards to “Exec / Manager x 8” and “Total
Workforce” in RTL – Exhibit 09 is not correct. “Total Workforce” is higher by approximately 230
in each of the respective years as compared to the Application, Chapter 7, Figure 7.5, wherein
ICBC presents a table showing ICBC’s full-time equivalents (FTEs) by employee group for 2009
actual to 2013 forecast. In Chapter 7, Appendix C, Figure 7C.6, ICBC presents a table showing
ICBC’s span of control by division. ICBC has expanded Chapter 7, Figure 7.5 to include the
additional data regarding “Managers with Staff” included as part of the Management and
Confidential employee group. “Managers with Staff” represent managers who have staff
reporting to them, and therefore include managers, directors, and senior management.
ICBC understands the information request to be asking for:
Staffing forecast for years 2013, 2014 and 2015.
Remuneration including compensation (salaries and benefits) as well as performance-
based incentive pay.
2009
Actual
2010
Actual
2011
Actual
2012
Actual
2013
Forecast
Bargaining Unit 4,009 3,961 3,936 3,822 3,808
Management and Confidential
Managers with staff 566 572 618 617 533
Managers without staff and Confidential 406 396 432 437 393
Management and Confidential 972 968 1,050 1,054 926
4,981 4,929 4,986 4,876 4,734
Figure 7.5 - FTEs by Employee Group (Revised to show breakdown of managers with
staff for Management and Confidential employee group)
Total ICBC FTEs 11
Employee Group
11 Total ICBC FTEs exclude contractors as well as employees seconded to support TP and Olympics (both funded 100% by Optional insurance) and FTEs working on cost recoverable government initiatives. Total ICBC FTEs reflect labour resources in support of ICBC’s core operations, including operations and non-TP projects.
Richard Landale Information Request No. 2013.2 RR RL.2.11 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 3 of 3
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
As indicated in Chapter 10, Appendix 10 B, page 27 of ICBC’s Revised Service Plan 2013 –
2015, ICBC does not plan in detail its operating cost targets beyond the current year. This is
also true of its staffing resources, i.e., FTEs by employee group. As a result, the forecast for
2015 is not currently available.
ICBC is currently undergoing its normal budgeting cycle for the 2014 fiscal year. ICBC’s
Service Plan 2014 – 2016, including detailed operating costs by expense category, must comply
with its accountability framework meaning that the Board of Directors must firstly review and
approve the multi-year plan and then government must table this document in the Legislature.
ICBC’s Service Plan 2014 – 2016 is anticipated to be tabled on February 18, 2014. ICBC is
unable to publicly disclose contents of its Service Plan prior to this date and as a result, the
forecast for 2014 is not currently available.
ICBC has provided in this Application the forecast for 2013 regarding to both operating
expenses and staffing FTEs. In addition to ICBC’s FTE information shown in Chapter 7, Figure
7.5, ICBC also provided detailed information in Chapter 7, Appendix 7 C regarding:
Operating Expenses by Expense Category.
Compensation costs by employee group, and by division.
Compensation details by employee group, including FTE numbers, salary, performance-
based incentive pay, pension, post-retirement, and other benefits.
FTE numbers by employee group, and by division.
Span of control by division.
For example, in Chapter 7, Appendix 7 C, Figure 7C.4, ICBC has provided remuneration details
regarding both Bargaining Unit and Management and Confidential employee groups for 2009 to
2012 actual and 2013 forecast. The breakdown includes FTEs, salary, performance-based
incentive pay, pension, post-retirement, and other benefits, and reconciles to the FTE
information as shown in Chapter 7, Figure 7.5 as well as the compensation information as
shown in Chapter 7, Figure 7.4.
Richard Landale Information Request No. 2013.2 RR RL.2.12 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR RL.2.12 Reference: What are the projected Basic ICBC Average Premiums from 2013 to 2025 using CAGR calculations, based on the premise of the “New Basic Capital Management Plan” Response:
Basic insurance average premium is impacted by two items:
1) The indicated Basic insurance rate change.
2) Average premium drift.
The indicated Basic insurance rate change is based on ICBC’s best estimate of the costs of
Basic insurance and a capital provision set in accordance with accepted actuarial practice.
Based on the requirements of Special Direction IC2, for policy years after 2013, these Basic
insurance rate changes will be subject to a +/- 1.5 percentage point rate change band. This
means that if the Basic insurance rate change to cover costs is more than 1.5 percentage points
of the prior policy year’s rate change, the indicated Basic insurance rate change will be capped
at the prior year’s rate change plus 1.5 percentage points. Basic insurance rate changes also
cannot be less than the prior year’s rate change minus 1.5 percentage points.
ICBC does not estimate future Basic insurance rate changes for years beyond the rate
application, although ICBC does examine a range of scenarios. As discussed in the response
to information request 2013.1 RR PI.1.1, these scenarios are illustrative paths of future Basic
insurance rate changes based on favourable assumptions, unfavourable assumptions, and a
base scenario which assumes no change to the current forecast assumptions used in the
Application. These calculations extend through PY 2016 only. Please see below for a summary
of Basic insurance rate changes for policy years 2013 through 2016 under each of these
scenarios.
Richard Landale Information Request No. 2013.2 RR RL.2.12 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 2 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Indicated Basic Insurance Rate Changes
Scenario PY 2013 PY 2014 PY 2015 PY 2016
Base 4.9% 6.4% 7.3% 5.8%
Favourable* 4.9% 6.4% 1.9% 0.8%
Unfavourable 4.9% 6.4% 7.9% 9.4%
Please note that under the favourable scenario in PY 2015, ICBC has assumed that given the
circumstances of this scenario, ICBC would propose to remove the rate change floor (-1.5
percentage points) and the indicated Basic insurance rate change was set equal to 1.9%
(please refer to information request 2013.1 RR PI.1.1 for additional details).
The second item that impacts Basic insurance average premium is overall premium drift. This
concept was discussed in detail in the response to information request 2013.2 RR RL.2.8 and
explains that over time the Basic insurance average premium can change due to movement of
policyholders between different business segments that are defined by rate classes, territories,
and/or discount levels. Over the past few years’ average premium is declining about 0.3% a
year.
Combining the 3 scenarios of Basic insurance rate changes along with the expected average
premium drift, the following table provides the cumulative average annual growth rate in
average premium for policy years 2013 through 2016.
Scenario Cumulative Average Annual Growth Rate for PY’s 2013 to 2016
Base 6.7%
Favourable 3.7%
Unfavourable 7.9%
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.1.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.1.1 Reference: ICBC Response to TREAD IR No. 1 1.1 Exhibit B-4 TREAD’s originally requested ICBC to provide a table comparing the fines, charges, premiums, penalty points, administrative sanctions and other punitive consequences resulting from contravention of hand-held phone bans in British Columbia, Alberta, Washington, Saskatchewan and Manitoba. ICBC’s Response stated: “Fines, penalty points, or other punitive consequences resulting from contravention of hand-held phone bans in BC are set by the government of BC through legislation, not by ICBC. Any inter-jurisdictional agreement with respect to recognition of convictions in other jurisdictions would have to be made by government, not by ICBC, and is outside the scope of this Application.” Does ICBC agree that Special Direction IC2 was set by the government of BC through legislation, not by ICBC? Please explain. Response:
ICBC agrees that Special Direction IC2 was set by the government through regulation and not
by ICBC. Provisions in the Insurance Corporation Act authorize the Lieutenant Governor in
Council to issue directions, by regulation, to the Commission respecting the regulation and fixing
of Basic insurance rates.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.1.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.1.2 Reference: ICBC Response to TREAD IR No. 1 1.1 Exhibit B-4 TREAD’s originally requested ICBC to provide a table comparing the fines, charges, premiums, penalty points, administrative sanctions and other punitive consequences resulting from contravention of hand-held phone bans in British Columbia, Alberta, Washington, Saskatchewan and Manitoba. ICBC’s Response stated: “Fines, penalty points, or other punitive consequences resulting from contravention of hand-held phone bans in BC are set by the government of BC through legislation, not by ICBC. Any inter-jurisdictional agreement with respect to recognition of convictions in other jurisdictions would have to be made by government, not by ICBC, and is outside the scope of this Application.” Does ICBC agree that government of BC legislation that would affect fines, charges, premiums, penalty points, administrative sanctions and other punitive consequences for specific driving behaviors, could lead to improved driving behaviors and road safety, which in turn could lead to reduced claims costs? Please explain. Response:
ICBC believes legislation that links an individual’s driving behaviours and how much they pay for
insurance and for driving related offences could help to reduce crashes by providing an
incentive for high-risk drivers to improve their driving behaviour. If customers have fewer
crashes, this could help reduce claim costs. However, other factors are contributing to rising
claims costs in addition to the frequency of crashes.
ICBC views changes to the Driver Risk Premium and Driver Penalty Point premium programs as
relating to rate design and therefore these topics are not consistent with this Application for a
general rate change order. The Commission has already determined in its Order G-193-13 that
rate design matters are out of scope for the purpose of this proceeding. Additionally, ICBC
would not expect that changes to legislation that would provide further incentives for high risk
drivers to improve their driving behaviour, would have an impact on Basic insurance rates for
PY 2013 or PY 2014 in any event.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.2.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.2.1 Reference: ICBC Response to TREAD IR No. 1 1.2 Exhibit B-4 TREAD’s originally requested ICBC to consider whether the punitive consequences resulting from contravention of hand-held phone bans in Alberta and Washington to be more pertinent, due to the greater likelihood of ICBC policyholders operating vehicles in those jurisdictions due to the shared borders and road connections? ICBC’s bare reference to the Response to TREAD IR No. 1 1.1 was unresponsive. Please provide an adequate response to TREAD’s original Information Request, recognizing that initiatives that may lead to improved driving behaviors and road safety, and thereby lead to lower claims costs, are within the scope of this Application. Response:
ICBC confirms that punitive consequences resulting from contraventions of hand-held phone
bans in Alberta and Washington would be pertinent to ICBC policyholders, due to cross-border
travel that happens between neighbouring jurisdictions. Consequences such as traffic fines,
driver premiums, and sanctions are a strong deterrent to unsafe driving behaviour.
ICBC respectfully disagrees with TREAD’s characterization of the scope of the Application to
the extent that TREAD is implying that the potential for new legislation in BC is in scope.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.3.1-4 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.3.1-4 Reference: ICBC Response to TREAD IR No. 1 1.3 Exhibit B-4 TREAD’s original request asked: Does ICBC have a reciprocal agreement with Alberta and Washington, or any other jurisdiction, under which violations in the other jurisdiction affect Driver Penalty Points or other punitive consequences within the home jurisdiction? For example, if an ICBC policyholder is convicted of a hand-held phone violation in Alberta, will that individual be given Driver Penalty Points in British Columbia? If so, please provide copies of those reciprocal agreements. If not, please explain why not. ICBC avoided answering the questions by referring to the Response to TREAD IR No. 1 1.1. 3.1 Please provide an adequate response to TREAD’s original Information Request, recognizing that initiatives that may lead to improved driving behaviors and road safety, and thereby lead to lower claims costs, are within the scope of this Application. 3.2 Has ICBC done any studies and analysis of the amount of incremental revenue that might be realized through the implementation of reciprocal agreements with bordering jurisdictions? If not, please explain why not. 3.3 Will ICBC commit to explore these incremental revenue opportunities and address them in its 2014 Revenue Requirements Application? If not, please explain. 3.4 Will ICBC commit to lobby the government of BC to pursue reciprocal agreements with Alberta and Washington, and fully cooperate to negotiate and implement such agreements? If not, please explain. Response:
3.1
ICBC respectfully disagrees with TREAD’s characterization of the scope of the Application to
the extent that TREAD is implying that the potential for new legislation in BC, or changes to
Driver Penalty Point (DPP) premiums, is in scope.
ICBC can advise that it does not currently have reciprocal agreements with any other
jurisdiction, under which violations occurring in the other jurisdiction would have punitive
consequences in the home jurisdiction. Such a framework doesn’t currently exist for provincial
violations in Canada or the US, but is being examined by agencies in both countries. As such,
ICBC and the provincial government are involved in discussions being led by the Canadian
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.3.1-4 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Council of Motor Transport Administrators (CCMTA) on the Canadian Driver Licence Agreement
(CDLA). For more information on the CDLA scope and timelines, please see the response to
2013.2 RR BCUC.222.1-2.
3.2
ICBC has not done any studies and analysis on the amount of incremental revenue that might
be realized through this type of reciprocal agreement. Before entering any such agreement,
ICBC would likely undertake an analysis of revenue impacts and costs.
3.3
ICBC would not expect that changes to legislation or reciprocal agreements with other
jurisdictions would have an impact on Basic insurance rates for PY 2013 or PY 2014.
Additionally, looking at changes to ICBC’s Driver Risk Premium or DPP programs are
considered rate design matters, and ICBC is not considering addressing these matters in this
Application or the 2014 Revenue Requirements Application.
3.4
ICBC is supportive of both national and local efforts to reduce distracted driving and will
continue to work collaboratively with the provincial government and jurisdictional partners
through the CCMTA and CDLA.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.4.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.4.1 Reference: ICBC Response to TREAD IR No. 1 3.1 Exhibit B-4 TREAD’s original request asked: Given the new requirement of Special Direction IC2 that subsequent rates must fall within a 1.5% plus/minus band of the previous year’s rates, please confirm that if the Commission approves the requested 4.9% rate increase then rates in subsequent years will be subject to mandatory increases as follows: 3.1.1 a minimum rate increase of 3.4% and a maximum rate increase of 6.4% effective August 1, 2014; 3.1.2 a minimum rate increase of 1.9% and a maximum rate increase of 7.9% effective August 1, 2015; and 3.1.3 a minimum rate increase of 0.4% and a maximum rate increase of 9.4% effective August 1, 2016; and 3.1.4 a minimum rate increase of 0.1% and a maximum rate increase of 10.9% effective August 1, 2017. ICBC’s Response did not address requests 3.1.3 and 3.1.4 above. ICBC’s Response stated in part: “However, ongoing consecutive rate increases at the top end of each year’s allowable rate change band could result in unsustainably high Basic insurance rates. As discussed in response to information request 2013.1 RR BCUC.59.1-2 in the event of such a shift in ICBC’s cost structure, ICBC would consider seeking an additional rate increase beyond the annual rate change addressed in Special Direction IC2.” Please provide adequate Responses to 3.1.3 and 3.1.4 above in respect of minimum and maximum rate increases in 2016 and 2017. Response:
ICBC provided an appropriate response to the referenced information request, and elaborates
below. ICBC responded to the information request 2013.1 RR TREAD.3.1-4 by explaining that
the driver for annual rate changes in the rate smoothing framework is the rate change to cover
costs. Because Special Direction IC2 requires rates to be set according to accepted actuarial
practice, the rate change to cover costs reflects the current cost environment, including the
recent cost pressures associated with bodily injury claims which is currently the main driver of
the rate increase for 2013. The rate smoothing framework introduced through Special Direction
IC2 smooths out 1-year rate changes using the +/- 1.5 percentage point rate change band.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.4.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
As explained in response to the information request 2013.1 RR TREAD.3.1-4 it is speculative to
merely expand the rate change band arithmetically by 1.5 percentage points for every year that
goes by without considering the rate change to cover costs. Nevertheless, ICBC is willing to
accommodate the intervenor’s requirement for this theoretical portrayal.
In the response to the information request 2013.1 RR TREAD.3.1-4 ICBC said that it “confirms
that the rate change band for 2014 is a minimum rate increase of 3.4% and a maximum of
6.4%. For 2015 the rate change band depends on the rate change approved in 2014 which will
be between 3.4% and 6.4%. If the rate change in 2014 is 3.4% then the minimum rate increase
will be 1.9% and the maximum 4.9% and similarly if the rate change in 2014 is 6.4% then the
minimum rate increase will be 4.9% and the maximum 7.9%. And one can repeat this year after
year.”
ICBC assumes that the information request requires that the last sentence be spelled out in
respect of minimum and maximum rate increases in 2016 and 2017.
For 2016 the rate change band depends on the rate change approved in 2015 which will be
between 1.9% and 7.9%. If the rate change in 2015 is 1.9% then the minimum rate increase will
be 0.4% and the maximum 3.4% and similarly if the rate change in 2015 is 7.9% then the
minimum rate increase will be 6.4% and the maximum 9.4%.
For 2017 the rate change band depends on the rate change approved in 2016 which will be
between 0.4% and 9.4%. If the rate change in 2016 is 0.4% then the minimum rate increase will
be 0% and the maximum 1.9% and similarly if the rate change in 2016 is 9.4% then the
minimum rate increase will be 7.9% and the maximum 10.9%. Special Direction IC2 precludes
a rate decrease.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.4.2-4 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.4.2-4 Reference: ICBC Response to TREAD IR No. 1 3.1 Exhibit B-4 TREAD’s original request asked: Given the new requirement of Special Direction IC2 that subsequent rates must fall within a 1.5% plus/minus band of the previous year’s rates, please confirm that if the Commission approves the requested 4.9% rate increase then rates in subsequent years will be subject to mandatory increases as follows: 3.1.1 a minimum rate increase of 3.4% and a maximum rate increase of 6.4% effective August 1, 2014; 3.1.2 a minimum rate increase of 1.9% and a maximum rate increase of 7.9% effective August 1, 2015; and 3.1.3 a minimum rate increase of 0.4% and a maximum rate increase of 9.4% effective August 1, 2016; and 3.1.4 a minimum rate increase of 0.1% and a maximum rate increase of 10.9% effective August 1, 2017. ICBC’s Response did not address requests 3.1.3 and 3.1.4 above. ICBC’s Response stated in part: “However, ongoing consecutive rate increases at the top end of each year’s allowable rate change band could result in unsustainably high Basic insurance rates. As discussed in response to information request 2013.1 RR BCUC.59.1-2 in the event of such a shift in ICBC’s cost structure, ICBC would consider seeking an additional rate increase beyond the annual rate change addressed in Special Direction IC2.” 4.2 Please specifically explain what ICBC contemplates as “…unsustainably high Basic insurance rates”. As that is ICBC’s own phrasing, it must be possible for ICBC to define what it means with sufficient precision to give policyholders a reasonable expectation of how fast and high Basic insurance rates may rise before ICBC recognized the need to address the issue of unsustainable increases. 4.3 By way of examples, please identify which of the following scenarios would constitute “…unsustainably high Basic insurance rates” and provide ICBC’s rationale for each determination: 4.3.1 rates rising by more than 10.0% in 1 policy period; 4.3.2 rates rising by more than 5% each year for 3 or more consecutive policy periods; 4.3.3 cumulative rate increases exceeding 20% over 3 consecutive policy periods;
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.4.2-4 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
4.3.4 average annual rate increases exceeding CPI by more than 100% over 3 consecutive policy periods; and 4.3.5 cumulative rate increases, exclusive of compounding, exceeding 39.5% over 5 consecutive policy periods; 4.4 For any of the above scenarios that ICBC would not consider to be “…unsustainably high Basic insurance rates”, please specify the % increase and/or period of years that ICBC would be characterize as meeting that threshold. Response:
4.2
What characterizes “unsustainable Basic insurance rates” depends on several factors and the
relationships between those factors. The factors include but are not limited to:
ICBC’s ability to quickly mitigate or reverse adverse cost pressures through claims cost
management, road safety, or other initiatives.
The amount by which Basic insurance rate increases exceed the general rate of inflation
and for how long.
Whether the adverse event is a one-time occurrence (e.g., legislative change affecting
Basic insurance claims costs) or an ongoing issue over several years (e.g., continued
flat injury frequency).
Whether ICBC has enough capital to absorb the rate exclusion when it is imposed by the
rate change ceiling.
Whether investment returns are expected to increase or decrease.
It is not possible to give a precise characterization of “unsustainable Basic insurance rates”. It
should be pointed out that the adverse cost pressures can happen regardless of whether rate
smoothing is in place or not. Rate smoothing allows ICBC time to address an adverse cost
trend, while holding Basic insurance rates below cost in the meantime, and if ICBC is successful
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.4.2-4 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
in mitigating or reversing the adverse cost trend, then some or all of the excluded portion of
Basic insurance rate change need not be adopted.
4.3 and 4.4 It is not possible to definitively characterize any of the scenarios listed in 4.3.1 through 4.3.5 as
unsustainably high Basic insurance rates. As discussed in response to information request
2013.2 RR TREAD.4.2, whether these scenarios would be judged as unsustainable Basic
insurance rates is dependent on the cost environment and the circumstances surrounding the
adverse event(s) that led to Basic insurance cost increases.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.4.5-8 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.4.5-8 Reference: ICBC Response to TREAD IR No. 1 3.1 Exhibit B-4 TREAD’s original request asked: Given the new requirement of Special Direction IC2 that subsequent rates must fall within a 1.5% plus/minus band of the previous year’s rates, please confirm that if the Commission approves the requested 4.9% rate increase then rates in subsequent years will be subject to mandatory increases as follows: 3.1.1 a minimum rate increase of 3.4% and a maximum rate increase of 6.4% effective August 1, 2014; 3.1.2 a minimum rate increase of 1.9% and a maximum rate increase of 7.9% effective August 1, 2015; and 3.1.3 a minimum rate increase of 0.4% and a maximum rate increase of 9.4% effective August 1, 2016; and 3.1.4 a minimum rate increase of 0.1% and a maximum rate increase of 10.9% effective August 1, 2017. ICBC’s Response did not address requests 3.1.3 and 3.1.4 above. ICBC’s Response stated in part: “However, ongoing consecutive rate increases at the top end of each year’s allowable rate change band could result in unsustainably high Basic insurance rates. As discussed in response to information request 2013.1 RR BCUC.59.1-2 in the event of such a shift in ICBC’s cost structure, ICBC would consider seeking an additional rate increase beyond the annual rate change addressed in Special Direction IC2.” 4.5 Does ICBC agree that “… seeking an additional rate increase beyond the annual rate change addressed in Special Direction IC2” would only exacerbate, rather than mitigate, “…unsustainably high Basic insurance rates”? Please explain. 4.6 Please explain why the Response included a reference to BCUC IR 59.1-2, which deals exclusively with the potential for additional rate increases, in the context of discussing how “… ongoing consecutive rate increases at the top end of each year’s allowable rate change band could result in unsustainably high Basic insurance rates”. 4.7 Does ICBC contemplate possible circumstances in which it may seek “…an additional rate increase beyond the annual rate change addressed in Special Direction IC2” notwithstanding that it may result in “…unsustainably high Basic insurance rates”? Please explain. 4.8 Does ICBC agree that “… seeking an additional rate increase beyond the annual rate change addressed in Special Direction IC2” and “…unsustainably high Basic insurance rates” must be mutually exclusive outcomes? Please explain.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.4.5-8 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Response:
All of these information requests are arising due to a misunderstanding when ICBC responded
to the first round information requests referenced in the preamble. ICBC has endeavoured to
clarify and address the issue below.
For starters, ICBC confirms that if ongoing consecutive rate increases result in high Basic
insurance rates then ICBC agrees that seeking an additional Basic insurance rate increase
beyond the annual rate changes specified in Special Direction IC2 would exacerbate the rate
increase for policyholders and not mitigate it. ICBC cannot usefully comment on whether Basic
insurance rates at a particular level are “unsustainably high” from the customers’ perspective, as
this term is capable of being interpreted differently and the ability of customers to pay Basic
insurance rates will vary.
The confusion in responding to the referenced information requests arose because ICBC must
view sustainability from the perspective that Basic insurance itself is not sustainable if Basic
insurance rates do not cover costs for an extended period of time. Notwithstanding the impact
on policyholders of successive Basic insurance rate increases at the maximum of the band, it
may be necessary for ICBC to seek a further increase to ensure that Basic insurance remains
on a stable financial footing.
By way of explanation, the overall intent of the rate smoothing framework is to permit ICBC to
use Basic capital to a greater extent than in the past to address adverse cost pressures, should
they arise, on the Basic insurance rates. Specifically, it allows Basic insurance rates to be held
below cost temporarily, allowing ICBC time to investigate the cause of the adverse cost
pressures and determine whether they can be mitigated or reversed, or whether there is a
permanent and significant shift in the cost structure. If ICBC is successful in mitigating or
reversing the adverse cost pressures, then some, or all, of the excluded portion of prior Basic
insurance rate changes need not be adopted, thereby potentially avoiding significant Basic
insurance rate increases. To determine whether the shift in the cost structure is permanent
would generally require a period of time more than a single year.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.4.5-8 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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If, as part of such an investigation, ICBC determines that the shift in the cost structure is
permanent, then this might pose challenges that could not be addressed within the rate
smoothing framework alone. It is in this context that ICBC referred to the response to
information request 2013.1 RR BCUC.59.1-2 in its response to the information request 2013.1
RR TREAD.3.1-4. The response to information request 2013.1 RR BCUC.59.1-2 explains the
actions that ICBC would take. Further information on this topic is provided in the response to
information request 2013.1 RR BCUC.65.3.
…if ICBC did experience a series of unexpected, unfavourable events, there would be a need for consecutive rate increases that are above and beyond the allowable rate ceiling. This would in turn create rate inadequacies and capital would be depleted likely taking MCT below the regulatory minimum of 100%. If MCT were to fall below the regulatory minimum of 100%, this would be considered an extraordinary circumstance where ICBC must report to the Treasury Board and file an appropriate plan to address capital levels to the Commission. The plan would be dependent on circumstances at that time but examples include: ICBC filing a rate change outside of rate smoothing or a one-time charge to policy holders to make up the deficiency in rates (i.e.: a rate rider). By application of this plan, the intent is to bring rates back to an acceptable level. Treasury Board also has the option of exploring legislative solutions, including capital transfers and amendments to the rate smoothing framework.
ICBC does not contemplate that such a situation will occur. However, if it does, then from a
financial sustainability perspective rates ultimately must cover costs and the two events cited in
the information request 2013.2 RR TREAD.4.8 (i.e., sustained high rates and a request for a
further increase) would not necessarily be mutually exclusive outcomes. Please see the
response to information request 2013.2 RR BCUC.184.2 for a discussion of actions that ICBC
would take to address adverse cost pressures before deciding whether it must impact
customers’ Basic insurance rates.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.5.1-3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.5.1-3 Reference: ICBC Response to BCUC IR No. 1 59.1 Exhibit B-3 ICBC’s Response stated in part: “That is, the rate smoothing framework and new Basic insurance Capital Management Plan implemented to permit rate smoothing may not be equipped to address extraordinary circumstances. ICBC retains the ability to seek, and the Commission retains the ability to grant, rate changes beyond the “annual rate changes” addressed in Special Direction IC2 to the BC Utilities Commission, BC Regulation 307/2004, as amended (Special Direction IC2). ICBC would consider seeking a Basic insurance rate increase in addition to “annual rate changes” if there were signs that ICBC’s rates and/or capital under rate smoothing was on an unsustainable path. If Basic capital is projected to fall below the regulatory minimum requirement of 100% MCT in the near-term, the 2013 Government Directive regarding Rate Smoothing contemplates that ICBC would have to develop its response in conjunction with Treasury Board before filing it with the Commission.” (emphasis added) 5.1 Does ICBC agree that the context of the referenced Response suggests that the “..extraordinary circumstances” and the “…signs that ICBC’s rates and/or capital under rate smoothing was on an unsustainable path” are limited to concerns that Basic capital is projected to fall below the regulatory minimum requirement? Please explain. 5.2 Please explain why the Response fails to include any apparent recognition that “..extraordinary circumstances” and the “…signs that ICBC’s rates and/or capital under rate smoothing was on an unsustainable path” might also arise in the context of rate increases that were unsustainable from a policyholder perspective. 5.3 Please explain why the Response fails to recognize that a Basic insurance rate decrease in addition to “annual rate changes” might have to be considered if rate increases became unsustainable from a policyholder perspective. Response:
5.1
The response to information request 2013.1 RR BCUC.59.1-2 is not solely limited to concerns
that Basic capital is projected to fall below the regulatory minimum requirement, although that
eventuality could have adverse implications for ICBC’s customers. Please see the response to
information request 2013.1 RR BCUC.66.5. It also considered ICBC’s actions in the event of a
permanent and significant shift in cost structure which may not be associated with Basic capital
falling below the regulatory minimum. The context of the question and response was the new
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.5.1-3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
proposed Basic insurance Capital Management Plan and rate smoothing and not the general
context of unsustainable rates which could occur in the absence of rate smoothing as further
discussed in response to the information request 2013.2 RR TREAD.4.2-4.
5.2
The response to information request 2013.1 RR BCUC.59.1-2 did not directly include a
discussion of unsustainable rates from a policyholder perspective because that was not the
focus of the question. It should be emphasized that, prior to rate smoothing, the full cost of
providing Basic insurance in a future policy year had to be covered in rates, and this could lead
to significant year over year increases. The last Basic insurance rate increase approved by the
Commission was 11.2%, which is significant. In general, the rate smoothing framework makes
Basic insurance rate changes more predictable for ICBC’s customers. The rate smoothing
framework involves deliberate use of capital in order to hold Basic insurance rates below cost
temporarily should adverse cost pressures arise, allowing ICBC time to address those
pressures before deciding whether it must impact customers’ Basic insurance rates.
5.3
Under the existing regulatory framework, Basic insurance rates are fundamentally based on
projected costs in a future policy year. While the requirement to cover these costs is tempered
by rate smoothing, Basic insurance rate setting is not otherwise grounded on an assessment of
ability to pay in the manner implied by the question. The term “unsustainable” in the context of
Basic insurance rates is generally associated with large increases in costs. In this case, ICBC
does not see how Basic insurance rate decreases would be possible unless there were a major
legislative change that would radically change ICBC’s future costs so much so that it would
more than offset the unsustainable cost increases.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.6.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.6.1 Reference: ICBC Response to TREAD IR No. 1 3.2 Exhibit B-4 TREAD’s original request asked: Please provide a graph beginning with PY 2011 and ending with PY 2017, showing cumulative rate increases relative to PY 2011 rates. For PY 2014 through PY 2017 please represent both the minimum and maximum allowable rate increases, and ICBC’s best estimate of applied-for rate increases. ICBC refused to provide a graph, stating: “A graph of the cumulative Basic insurance rate increases as requested would show that the Basic insurance rate increase for the 2012 policy year was 11.2% and that the Basic insurance rate increase for the 2013 policy year is 4.9%, instead of the rate increase of 11.5% it would otherwise have been in the absence of rate smoothing. Please see the responses to the information requests 2013.1 RR TREAD.3.6 and 2013.1 RR BCUC.80.1 for a discussion of the likelihood of the magnitude of the rate change for the 2014 policy year given Requirement (B). For future years beyond 2015, ICBC is not in a position to estimate the potential Basic insurance rate increases as this depends on many unknown factors such as the changes in claims costs, economic conditions, etc.” Please confirm that TREAD’s IR made no reference to the “…likelihood of the magnitude of the rate change for the 2014 policy year”. Response:
The information request 2013.1 RR TREAD.3.2, as part of information request 2013.1
TREAD.3.1-4, requested that ICBC provide a “best estimate of applied-for rate increases” and
did not make reference to the “likelihood of the magnitude of the rate change for the 2014 policy
year.” ICBC avoided using the term “best estimate” because the term has a technical meaning
in the context of actuarial determinations that is not completely aligned with the thrust of the
question. ICBC does not generally produce “best estimates” (in the technical sense) for
forecast years beyond the policy year of the current application, as this is generally speculative.
ICBC did confirm that, in the case of 2014 policy year, there is a high likelihood, due to the size
of the rate exclusion, that the 2014 rate change to cover costs will exceed the rate change
ceiling, in which case ICBC would be applying for a Basic insurance rate increase of 6.4%.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.6.2-3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.6.2-3 Reference: ICBC Response to TREAD IR No. 1 3.2 Exhibit B-4 TREAD’s original request asked: Please provide a graph beginning with PY 2011 and ending with PY 2017, showing cumulative rate increases relative to PY 2011 rates. For PY 2014 through PY 2017 please represent both the minimum and maximum allowable rate increases, and ICBC’s best estimate of applied-for rate increases. ICBC refused to provide a graph, stating: “A graph of the cumulative Basic insurance rate increases as requested would show that the Basic insurance rate increase for the 2012 policy year was 11.2% and that the Basic insurance rate increase for the 2013 policy year is 4.9%, instead of the rate increase of 11.5% it would otherwise have been in the absence of rate smoothing. Please see the responses to the information requests 2013.1 RR TREAD.3.6 and 2013.1 RR BCUC.80.1 for a discussion of the likelihood of the magnitude of the rate change for the 2014 policy year given Requirement (B). For future years beyond 2015, ICBC is not in a position to estimate the potential Basic insurance rate increases as this depends on many unknown factors such as the changes in claims costs, economic conditions, etc.” 6.2 The Response provides no grounds for ICBC’s refusal to provide a graph for PY 2011 through PY 2015, which the Response indicates is within ICBC’s knowledge or ability to estimate. What grounds, if any, does ICBC rely on to justify refusal to produce a graph limited to PY 2011 through PY 2015? Please provide such a graph. 6.3 Please confirm that ICBC recognizes and understands the plain meaning of “minimum and maximum allowable rate increases” and “best estimate of applied for rate increases”. If not, please explain why ICBC chose to refuse the request rather than seek clarification from TREAD. Response:
The primary grounds for not providing the request for maximum and minimum rate changes is
relevancy. The intervenor has requested maximum and minimum rate changes calculated in a
manner that is theoretical (or a priori, in that they hold true no matter what future rate changes
to cover costs are required) and potentially misleading. The method used does not consider
that the relevant maximum and minimum rate changes will depend on the rate change to cover
cost and the prior year’s rate change (or a posteriori). In what follows, ICBC will refer to the
latter maximum and minimum rate changes as “empirical”, meaning these are calculated from
rate changes derived within the given scenarios discussed.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.6.2-3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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ICBC has provided these scenarios in the response to information request 2013.1 RR PI.1.1
based on favourable assumptions, unfavourable assumptions, and the current forecast
assumptions (base scenario) used in the Application. The rate changes for these scenarios are
provided through PY 2016. There is a graph corresponding to each scenario, depicting the
cumulative rate change of the following:
1. The rate changes of the scenario.
2. The “empirical” minimum rate change; which is calculated by subtracting 1.5 percentage
points from the prior year’s rate change, subject to a minimum of 0%.
3. The “empirical” maximum rate change, which is calculated by adding +1.5 percentage
points to the prior year’s rate change.
4. The “theoretical” minimum rate change, which is calculated iteratively by subtracting 1.5
percentage points from the prior year’s theoretical minimum rate change, subject to a
minimum of 0%.
5. The “theoretical” maximum rate change, which is calculated by adding 1.5 percentage
points each year to the prior year’s theoretical maximum rate change.
Note all cumulative calculations include the impact of compounding.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.6.2-3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Figure 1: Base Scenario
PY 2011 PY 2012 PY 2013 PY 2014 PY 2015 PY 2016 PY 2017
Base Scenario 0.0% 11.2% 4.9% 6.4% 7.3% 5.8%
E. Min 0.0% 11.2% 4.9% 3.4% 4.9% 5.8% 4.3%
E. Max 0.0% 11.2% 4.9% 6.4% 7.9% 8.8% 7.3%
T. Min 0.0% 11.2% 4.9% 3.4% 1.9% 0.4% 0.0%
T. Max 0.0% 11.2% 4.9% 6.4% 7.9% 9.4% 10.9%
0%
25%
50%
75%
PY 2011 PY 2012 PY 2013 PY 2014 PY 2015 PY 2016 PY 2017
Cu
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Base Scenario E. Min E. Max T. Min T. Max
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.6.2-3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Figure 2: Unfavourable Scenario
PY 2011 PY 2012 PY 2013 PY 2014 PY 2015 PY 2016 PY 2017
Unfavourable 0.0% 11.2% 4.9% 6.4% 7.9% 9.4%
E. Min 0.0% 11.2% 4.9% 3.4% 4.9% 6.4% 7.9%
E. Max 0.0% 11.2% 4.9% 6.4% 7.9% 9.4% 10.9%
T. Min 0.0% 11.2% 4.9% 3.4% 1.9% 0.4% 0.0%
T. Max 0.0% 11.2% 4.9% 6.4% 7.9% 9.4% 10.9%
0%
25%
50%
75%
PY 2011 PY 2012 PY 2013 PY 2014 PY 2015 PY 2016 PY 2017
Cu
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Ch
ange
Unfavourable E. Min E. Max T. Min T. Max
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.6.2-3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Figure 3: Favourable Scenario
PY 2011 PY 2012 PY 2013 PY 2014 PY 2015 PY 2016 PY 2017
Favourable 0.0% 11.2% 4.9% 6.4% 1.9% 0.8%
E. Min 0.0% 11.2% 4.9% 3.4% 1.9% 0.4% 0.0%
E. Max 0.0% 11.2% 4.9% 6.4% 1.9% 3.4% 2.3%
T. Min 0.0% 11.2% 4.9% 3.4% 1.9% 0.4% 0.0%
T. Max 0.0% 11.2% 4.9% 6.4% 7.9% 9.4% 10.9%
Note that under the favourable scenario in PY 2015, ICBC has assumed that given the
circumstances of this scenario, ICBC would propose to remove the rate change floor and the
indicated rate change was set equal to 1.9% (please see the response to information request
2013.1 RR PI.1.1 for additional details).
As the tables show, the theoretical minimum and maximum stay the same for all scenarios. The
empirical minimum and maximum rate changes depend on the prior year’s rate change and the
current year’s rate change to cover costs.
0%
25%
50%
75%
PY 2011 PY 2012 PY 2013 PY 2014 PY 2015 PY 2016 PY 2017
Cu
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Favourable E. Min E. Max T. Min T. Max
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.6.4-7 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.6.4-7 Reference: ICBC Response to TREAD IR No. 1 3.2 Exhibit B-4 TREAD’s original request asked: Please provide a graph beginning with PY 2011 and ending with PY 2017, showing cumulative rate increases relative to PY 2011 rates. For PY 2014 through PY 2017 please represent both the minimum and maximum allowable rate increases, and ICBC’s best estimate of applied-for rate increases. ICBC refused to provide a graph, stating: “A graph of the cumulative Basic insurance rate increases as requested would show that the Basic insurance rate increase for the 2012 policy year was 11.2% and that the Basic insurance rate increase for the 2013 policy year is 4.9%, instead of the rate increase of 11.5% it would otherwise have been in the absence of rate smoothing. Please see the responses to the information requests 2013.1 RR TREAD.3.6 and 2013.1 RR BCUC.80.1 for a discussion of the likelihood of the magnitude of the rate change for the 2014 policy year given Requirement (B). For future years beyond 2015, ICBC is not in a position to estimate the potential Basic insurance rate increases as this depends on many unknown factors such as the changes in claims costs, economic conditions, etc.” 6.4 Please provide an explanation that reconciles ICBC’s statement that “For future years beyond 2015, ICBC is not in a position to estimate the potential Basic insurance rate increases…” with its preceding Response (to TREAD IR No. 1 3.1) that specified the minimum and maximum rate increases for 2015 and observed “one can repeat this year after year.” 6.5 Please provide an explanation that reconciles ICBC’s statement that “For future years beyond 2015, ICBC is not in a position to estimate the potential Basic insurance rate increases…” with its subsequent Response (to TREAD IR No. 1 3.3) asserting that “…the minimum Basic insurance rate increase for 2017 is 0%” and “For 2014 to 2017 policy years the cumulative Basic insurance rate increase would be 5.7% over four policy years or an average of 1.4% per annum.” 6.6 Does the statement that “For future years beyond 2015, ICBC is not in a position to estimate the potential Basic insurance rate increases as this depends on many unknown factors such as the changes in claims costs, economic conditions, etc.” indicate that ICBC has no idea whatsoever of the minimum and maximum allowable rate increases for PY2016 and PY2017? Please explain. 6.7 Why doesn’t ICBC consider it possible to reflect “… unknown factors such as the changes in claims costs, economic conditions, etc.” within TREAD’s request for “ICBC’s best estimate of applied-for rate increases”.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.6.4-7 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Response:
6.4 and 6.5
The minimum and maximum rate changes calculated as requested by the intervenor are
theoretical in that they hold true no matter what future rate changes to cover costs are required.
The response to information request 2013.2 TREAD.6.2-3 demonstrates this fact.
When ICBC referred to not being in a position to estimate potential Basic rate increases, it was
in the context of estimating the Basic insurance rate change to cover costs.
6.6
ICBC does not have a good idea at this point what the relevant minimum and maximum Basic
insurance rate changes will be in 2016 and 2017, as it depends on events far in the future that
are unknowable today. At best, ICBC can examine scenarios, such as those presented in the
response to information request 2013.1 PI.1.1.
6.7
ICBC produces best estimates of the indicated Basic insurance rate changes according to
accepted actuarial practice and for the purpose of revenue requirements applications. ICBC
does not produce best estimate Basic insurance rate indications for years beyond the policy
year of the application until such time as an application to the Commission is to be made. This
is because future Basic insurance rate changes will be driven by a number of factors where the
uncertainty grows exponentially the further out the forecast; calling into question the value and
usefulness of such rigour. For this reason, ICBC uses Basic insurance rate change scenarios,
as opposed to developing best estimates of the rate indication according to accepted actuarial
practice, in the outer years of its financial forecast.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.6.8 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.6.8 Reference: ICBC Response to TREAD IR No. 1 3.2 Exhibit B-4 TREAD’s original request asked: Please provide a graph beginning with PY 2011 and ending with PY 2017, showing cumulative rate increases relative to PY 2011 rates. For PY 2014 through PY 2017 please represent both the minimum and maximum allowable rate increases, and ICBC’s best estimate of applied-for rate increases. ICBC refused to provide a graph, stating: “A graph of the cumulative Basic insurance rate increases as requested would show that the Basic insurance rate increase for the 2012 policy year was 11.2% and that the Basic insurance rate increase for the 2013 policy year is 4.9%, instead of the rate increase of 11.5% it would otherwise have been in the absence of rate smoothing. Please see the responses to the information requests 2013.1 RR TREAD.3.6 and 2013.1 RR BCUC.80.1 for a discussion of the likelihood of the magnitude of the rate change for the 2014 policy year given Requirement (B). For future years beyond 2015, ICBC is not in a position to estimate the potential Basic insurance rate increases as this depends on many unknown factors such as the changes in claims costs, economic conditions, etc.” Please a graph for PY 2011 through PY 2017 reflecting the data requested by TREAD in the first instance. If not, provide a full explanation of the grounds for ICBC’s continuing refusal to provide the requested graph. Response:
Please see the response to information request 2013.2 RR TREAD.6.2-3 for the requested
graphs.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.7.1-3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.7.1-3 Reference: ICBC Response to TREAD IR No. 1 3.3 Exhibit B-4 ICBC’s Response states in part: “If the Commission approves the 4.9% Basic insurance rate increase, ICBC confirms that the worst case scenario is one where there are a number of years where Basic insurance rate increases at the rate change ceiling are required, amounting to 39.5% over five policy periods. This would be considered an extraordinary circumstance as discussed in the response to the information request 2013.1 RR TREAD.3.1.” (emphasis added) 7.1 Please confirm that the Response to TREAD IR No. 1 3.1 does not mention or discuss an “extraordinary circumstance”. 7.2 As the Response to BCUC IR No. 1 59.1 discusses only rate increases in addition to annual rate changes (i.e. over and above rate changes required by Special Direction IC2), please explain the significance and implications of ICBC characterizing a cumulative 39.5% rate increase over five policy periods as an “extraordinary circumstance”. Specifically, would such circumstances prompt ICBC to “develop its response in conjunction with Treasury Board before filing it with the Commission”? Would such a response potentially require a rate decrease below the level of rates required by Special Direction IC2? 7.3 If ICBC doesn’t contemplate that a response would require a rate decrease below the level of rates required by Special Direction IC2, what response would be required in the face of the extraordinary circumstance of a cumulative 39.5% rate increase over five policy periods? Response:
7.1
The response to information request 2013.1 RR TREAD.3.1, filed in the response to 2013.1 RR
TREAD.3.1-4, does discuss an “extraordinary circumstance”, although the response must be
read together with the response to the information request cited in that response in order to see
the words used.
7.2
It should be pointed out that the scenario of a cumulative 39.5% Basic insurance rate increase
over five policy period is hypothetical, and it is ICBC’s expectation that this will not occur. If it
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.7.1-3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
did occur, it may be a sign that there is a permanent and significant shift in the cost
environment, in which case ICBC might develop its response in conjunction with Treasury Board
before filing it with the Commission, depending on the circumstances at the time, which are
unknowable today.
On the question of whether a Basic insurance rate decrease could be a response to this
hypothetical scenario where cost pressures create cumulative rate increases that are deemed to
be an extraordinary circumstance, ICBC believes this could not occur without some sort of
legislative or regulatory intervention. Again, this is a hypothetical scenario that ICBC does not
expect to occur.
7.3
As stated in the response to information request 2013.2 RR TREAD.7.2 (above), ICBC’s
response would depend on the future circumstances, which are unknowable today, that were
causing the large cumulative increase.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.8.1-2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.8.1-2 Reference: ICBC Response to TREAD IR No. 1 3.4 Exhibit B-4 TREAD requested ICBC to confirm that given a minimum cumulative rate increase of 10.7% and a maximum cumulative rate increase of 39.5%, exclusive of compounding, policyholders must anticipate an average cumulative increase of 21.1% over the next five years. ICBC’s Response stated: “An average cumulative increase of the magnitude referred to in the information request within the rate smoothing framework is unlikely given the response to the information request 2013.1 RR TREAD.3.1.” 8.1 Please explain how the Response to the information request 2013.1 RR TREAD.3.1 has any bearing on the likelihood of an average cumulative increase of 21.1% over the period from PY2013 through PY2017. 8.2 If an average cumulative rate increase of 21.1% from PY2013 through PY2017 is unlikely, as ICBC asserts, what is the likely average cumulative rate increase for that period? Please explain the rationale for that determination. Response:
8.1
The initial response to information request 2013.1 RR TREAD.3.4, filed in the response to
information request 2013.1 RR TREAD.3.1-4, was fully responsive. That response indicated
that the scenario was unlikely, which was itself (i.e., irrespective of the cross reference with
which TREAD seems to be taking issue) a full answer to the question of whether policyholders
“must anticipate an average cumulative increase of 21.1% over the next five years.”
The response to information request 2013.1 RR TREAD.3.4, filed in the response to information
request 2013.1 RR TREAD.3.1-4, referred to the 2013.1 RR TREAD.3.1 response, also filed in
the response to information request 2013.1 RR TREAD.3.1-4, but the introductory passage that
had accompanied the 2013.1 RR TREAD.3.1 response was really the most relevant component.
It explained that any year’s rate change “is therefore dependent on the rate change to cover
costs limited by Requirement (B). It is therefore speculative to merely expand the rate change
band arithmetically by 1.5 percentage points for every year that goes by without considering the
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.8.1-2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
rate change to cover costs.” It follows logically from that passage that averaging the upper and
lower bounds derived by TREAD’s flawed methodology would also not be an appropriate way to
forecast rate changes.
8.2
As stated in response to information request 2013.2 RR TREAD.6.7, filed in the response to
information request 2013.2 RR TREAD.6.4-7, ICBC does not produce best estimate rate
changes for years beyond the policy year of the application. However the response to
information request 2013.2 RR TREAD.6.2-3 does provide a range of cumulative rate increases
based on three scenarios using the current assumptions in the Application (“base scenario”),
favourable assumptions, and unfavourable assumptions. Under these three scenarios, the four
year cumulative rate change for PY 2013 through PY 2016 (the PY 2017 rate change forecasts
are not available under these scenarios) are:
Base scenario: 26.7%.
Unfavourable scenario: 31.7%.
Favourable scenario: 14.6%.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.9.1-3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.9.1-3 Reference: ICBC Response to TREAD IR No. 1 3.5 Exhibit B-4 ICBC failed to calculate and provide the minimum and maximum compounded cumulative rate increases over the next five years (i.e. PY2013 through PY2017). 9.1 Please calculate and provide the minimum and maximum compounded cumulative rate increases over the period from PY2013 through PY2017, per TREAD’s original request. 9.2 Please provide the grounds for ICBC’s refusal to provide an adequate Response in the first instance. 9.3 Please explain why the Response acknowledged that “…ongoing consecutive Basic insurance rate increases at the top end of each year’s allowable rate change band could result in unsustainably high Basic insurance rates”, but then contemplates no response other than a further rate increase (in the Response to BCUC IR No. 1 59.1). Please explain how this discussion was in any way responsive to TREAD’s request. Response:
9.1
Please see the response to information request 2013.2 RR TREAD.6.2-3 for additional details
surrounding the theoretical minimum and maximum rate changes and how these values do not
represent the relevant minimum and maximum rate changes. The theoretical cumulative
minimum and maximum rate changes for PY 2013 through PY 2017 are as follows:
PY 2013 through PY 2017 cumulative minimum rate increase: 11.0%.
PY 2013 through PY 2017 cumulative maximum rate increase: 46.1%.
Please note that in the information request 2013.1 RR TREAD.3.1-4 the intervenor was referring
to cumulative rate increases, exclusive of compounding, resulting in different cumulative
minimum and maximum rate increases.
9.2
Please see the response to information request 2013.2 RR TREAD 6.2-3 as to why ICBC did
not provide a complete answer to the intervenor’s request.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.9.1-3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
9.3
ICBC acknowledges that its response to information request 2013.1 RR TREAD.3.5 was not as
comprehensive as it could have been. The given scenario, where there are ongoing rate
increases at the top end of each year’s allowable rate change band, is not one that ICBC
expects to occur. When a rate change is limited by the rate change ceiling, it is an instance
where costs have increased more than the rate smoothing framework will allow to be passed on
to customers; capital is then used in order to keep rates below cost temporarily, allowing ICBC
time to investigate the cause of the adverse cost pressures. Please see the response to
information request 2013.2 RR TREAD.4.5, filed in the response to 2013.2 RR TREAD.4.5-8 for
further discussion on this point. If rate changes are limited by the rate change ceiling year after
year, as in the given scenario, it is indicative of cost pressures that ICBC is unable to address
adequately. One option would be to apply for a one-time rate change to bring the rate level to a
financially sustainable level, so ICBC is not in a perpetual state of running rates below costs. To
the degree that the resulting rate level would not be acceptable, other action might be
necessary, such as a legislative or regulatory intervention. Again, ICBC does not expect this
given scenario to occur.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.10.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.10.1 Reference: ICBC Response to TREAD IR No. 1 8.3 Exhibit B-4 Please explain why ICBC has not consulted with the major network carriers to determine what other data pertinent to a claim investigation might be recorded on or through a PED. Identify all significant impediments to such consultation. Response:
Personal electronic device (PED) data is unattainable due to privacy laws, unless there is
customer consent or a legal procedure. Please see information requests 2013.2 RR
TREAD.11.1 and 2013.2 RR TREAD.12.2.
When PED information is relevant to an investigation, ICBC will request the appropriate
information such as location of vehicle, time and duration of transmission, type of transmission,
and identity of recipient(s) to the transmission.
There are otherwise no known impediments to consulting with network carriers to determine the
types of data recorded on or through a PED.
Please see the responses to information requests 2013.2 RR TREAD.10.3 and 2013.2 RR
TREAD.12.1-4.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.10.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.10.2 Reference: ICBC Response to TREAD IR No. 1 8.3 Exhibit B-4 Does ICBC possess greater expertise regarding the data collection capability of PEDs than the major network carriers or independent experts in PED communications? Please explain. Response:
ICBC does not take the position that it possesses greater expertise than the major network
carriers regarding the data collection capability of personal electronic devices.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.10.3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.10.3 Reference: ICBC Response to TREAD IR No. 1 8.3 Exhibit B-4 Please confirm that ICBC could pursue effective consultations with major network carriers and/or independent experts in PED communications without the need to access customer-specific confidential information, obtain customers’ consents or engage in any type of legal procedure. If not, please explain. Response:
ICBC confirms that it could pursue consultations with network carriers regarding general data
trends and types of data collected, without the need to access customer-specific confidential
information or obtaining customers’ consent. ICBC does not believe such consultations would
assist with the majority of claims investigations.
Please see the responses to information requests 2013.2 RR TREAD.10.1 and 2013.2 RR
TREAD.12.1-4.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.10.4 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.10.4 Reference: ICBC Response to TREAD IR No. 1 8.3 Exhibit B-4 Please explain the basis for ICBC’s confidence in its capability to “…thoroughly investigate a claim when there is evidence of distracted driving” despite being unaware of what data pertinent to a claim investigation might be recorded on or through a PED. Response: If, through the course of an investigation, ICBC determines that possible personal electronic
device (PED) usage could impact the liability determination, ICBC will take steps to obtain
further information about whether or not this was a factor in the collision. This will include
requests for PED records directly from the person registered to the device, and in litigated
matters ICBC may seek a court order compelling production.
When handling claims, ICBC can only request (or seek court orders) for information relevant to
the claim. Where liability clearly rests with one driver, then the cause of his/her negligence or
distraction is no longer relevant to the exposure and therefore not compellable by ICBC. ICBC
can only pursue this type of data when it could impact ICBC’s determination of fault, as opposed
to seeking this information solely to determine why a particular driver was distracted.
When PED data is collected in a claim investigation, ICBC does collect the pertinent
information, in conjunction with other sources of information available, which includes
canvassing drivers, passengers, and witnesses with questions specific to factors that may be
the cause of an accident.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.11.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.11.1 Reference: ICBC Response to TREAD IR No. 1 8.7 Exhibit B-4 ICBC’s Response stated: “Because a customer has no obligation to provide personal electronic device (PED) information to ICBC, and could not be held accountable for the accuracy of the information provided, it cannot be said that a standard PED disclosure policy would provide more consistent and reliable information than relying solely on Traffic Accident System data.” Please confirm that the assertion in the Response that a “…customer has no obligation to provide personal electronic device (PED) information to ICBC” is untrue as it contradicts the Response to BCPSO IR No. 1 9.1, which notes that access to phone records may be compelled by court order if relevance to the investigation is established. Response:
Not confirmed. The two responses are consistent and true.
ICBC’s statement that a “customer has no obligation to provide personal electronic device
(PED) information to ICBC” holds true when ICBC has no legal authority to compel such
records. As well, ICBC cannot ask for personal information unless there is reason to.
The relevance of PED information must be established before there could be any compulsion on
an ICBC customer to produce that information. There is no authority for ICBC to compel the
information then review it to determine whether or not it is relevant. Therefore, ICBC could only
compel these records through court order if all of the following conditions were met: (1) there is
some evidence that the customer was using a PED at the time of the collision; (2) that PED use
was denied by the customer; and, (3) the determination as to whether they were using a PED
could impact a decision on liability (fault) for the collision.
Due to privacy laws, network carriers will not provide PED records without the consent of the
customer or a court order. If ICBC can prove to the courts that the records are relevant to the
claim, only then may a court compel the customer or network carrier to release the necessary
records.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.11.2-3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.11.2-3 Reference: ICBC Response to TREAD IR No. 1 8.7 Exhibit B-4 ICBC’s Response stated: “Because a customer has no obligation to provide personal electronic device (PED) information to ICBC, and could not be held accountable for the accuracy of the information provided, it cannot be said that a standard PED disclosure policy would provide more consistent and reliable information than relying solely on Traffic Accident System data.” 11.2 Please explain why ICBC considers PED information provided by a driver to be less accurate than any other information the same driver may provide. 11.3 Please explain how a driver could be held more accountable for the accuracy of his/her witness statement, for example, than for the accuracy of his/her PED information. Response:
11.2
Information request 2013.1 RR TREAD.8.7 was in reference to Traffic Accident System data,
not information collected from the driver. If a driver were to voluntarily provide personal
electronic device data, this information would be regarded in the same manner as any other
information collected in a driver's statement.
11.3
Please see response to information request 2013.2 RR TREAD.11.2, above.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.12.1-4 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.12.1-4 Reference: ICBC Response to BCPSO IR No. 1 9.1 Exhibit B-4 ICBC’s Response stated in part: “For example, the use of a smartphone while driving would not be relevant to that person’s insurance coverage and would not be relevant to liability assessment if liability had already been admitted or assessed against one party.” 12.1 Is that view based on a specific legal opinion obtained by ICBC or case law? If so, please provide copies or references. 12.2 Please explain why an admission of liability would render evidence of the use of a smartphone while driving irrelevant to insurance coverage or liability assessment. For example, if a driver admitted 50% liability, why would that make evidence of his/her use of a smartphone while driving irrelevant? 12.3 Does the reference to liability “assessed against one party” refer to a liability assessment made by ICBC or by a court? 12.4 Does ICBC assert that its own assessment of liability is the exclusive factor in determining the relevance of evidence of smartphone use while driving? Please explain. Response:
12.1
The view expressed was meant to illustrate that personal electronic device (PED) use while
driving would not impact a person's coverage; therefore, ICBC’s position is that it could not
legally request access to their PED records. In order for ICBC to gain this access, it must be
proven that the data collected could alter the person's coverage.
ICBC declines to discuss or waive privilege over any legal advice that it might have obtained on
these matters.
12.2
Admission of liability precludes the ability to access personal information that was collected by
another entity. If liability has already been proven, ICBC has no viable reason to view personal
information. If, for example, a driver admitted to using a cell phone during the time of an
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.12.1-4 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
accident, ICBC has no viable need to view this data. More salient, though, in regards to ICBC's
ability to access personal information, is the principle of "no impact to coverage" explained in
response to information request 2013.2 RR TREAD.12.1, above.
ICBC privacy policies are aligned to privacy laws which require that individuals, companies, and
governments demonstrate viable need to access a third party's personal information without
consent.
More information regarding when ICBC uses PED is provided in the response to information
requests 2013.2 RR TREAD.10.4 and 2013.2 RR TREAD.11.1.
12.3
The reference to liability refers to assessments made by both ICBC and a court. Privacy
regulations don't distinguish between the two. It is assumed by the Privacy Commissioner that,
if a court orders access to personal information, it does so when liability cannot be determined
without those records. ICBC cannot request access to personal records without a court order.
12.4
ICBC has not made this assertion.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.13.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.13.1 Reference: ICBC Response to TREAD IR No. 1 8.8 Exhibit B-4 ICBC’s Response states in part: “ICBC expects it is possible that the publicizing of a personal electronic device (PED) disclosure/discovery policy if it existed may have a deterrent effect on PED use while driving. The degree of this deterrent effect is unknown.” Please describe ICBC’s efforts to date to determine whether other jurisdictions and/or insurers have publicized a PED disclosure/discovery policy, and if so, the degree of the deterrent effect on PED use while driving. Response:
To date, ICBC has not attempted to determine whether or not other jurisdictions and/or insurers
have publicized a personal electronic device disclosure/discovery policy.
As noted in the response to information request 2013.2 RR BCUC.203.2, ICBC is in the early
stages of developing a comprehensive response to the issue of driver distraction, which will
include reviewing all possible levers to effect behaviour change for distracted driving and
includes examining the experience in other jurisdictions.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.13.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.13.2 Reference: ICBC Response to TREAD IR No. 1 8.8 Exhibit B-4 ICBC’s Response states in part: “ICBC expects it is possible that the publicizing of a personal electronic device (PED) disclosure/discovery policy if it existed may have a deterrent effect on PED use while driving. The degree of this deterrent effect is unknown.” Does ICBC agree that information regarding other jurisdictions and/or insurers PED disclosure/discovery policies and the extent of the deterrent effects on PED use while driving might be useful for contributing to a reduction of BI frequency in BC? If not, please explain. Response:
ICBC agrees that information regarding other jurisdictions’ and/or insurers’ disclosure/discovery
policies, and the extent of any measurable deterrent effects arising from such policies, may be
useful to review.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.14.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.14.1 Reference: ICBC Response to TREAD IR No. 1 10.7, 10.8a, 108b, 10.9 and 10.10 Exhibit B-4 ICBC’s Response stated in part: “Any change to Schedule E that would impact the amount of DPP premium drivers are required to pay, ICBC views as a matter relating to rate design, and not the determination of the revenue requirements for Basic insurance.” Was the quoted passage meant to refer to Driver Risk Premium (DRP) as well as Driver Penalty Point (DPP)? Please explain. Response:
Yes, the passage was meant to refer to both Driver Risk Premium as well as Driver Penalty
Point premium.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.14.2-3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.14.2-3 Reference: ICBC Response to TREAD IR No. 1 10.7, 10.8a, 108b, 10.9 and 10.10 Exhibit B-4 ICBC’s Response stated in part: “Any change to Schedule E that would impact the amount of DPP premium drivers are required to pay, ICBC views as a matter relating to rate design, and not the determination of the revenue requirements for Basic insurance.” 14.2 Does ICBC agree that to the extent that DRP and/or DPP premiums may result in incremental revenue and/or improve driving behaviors they are related to the determination of the revenue requirements for Basic insurance, whereas increasing DRP and/or DPP premiums offset by equivalent decreasing premiums elsewhere (achieving no net change in total revenue) is related to rate design? Please explain. 14.3 If ICBC agrees with the above distinction between revenue requirements and rate design implications, please provide adequate Responses to TREAD’s IR No. 1 10.7, 10.8a, 108b, 10.9 and 10.10.
Response:
14.2
Driver Penalty Point (DPP) premiums and Driver Risk Premiums (DRP) are components of
miscellaneous revenues as discussed in Chapter 3, page 3-32, paragraph 102 and Chapter 3,
Exhibit H.2 of this Application. The revenue collected from these sources reduces the amount
of revenue which is required from Plate Owner Basic and the Manual Basic coverage premiums,
and therefore, this aspect is related to this Application. However, ICBC is not applying to
change either DRP or DPP in this Application and considers such changes to be a rate design
matter. Any change of rates beyond a general rate change which applies consistently to all
customers is considered rate design and as the Commission has already determined in its
Order G‐ 193‐ 13 rate design matters are out of scope in this proceeding.
14.3
As noted in the response to information request 2013.2 RR TREAD.14.2, to ICBC does not
agree that changes to existing DRP and DPP premiums are within the scope of a revenue
requirements application. As a result, ICBC believes the responses to the referenced
information requests are adequate since they deal with rate design, which is beyond the scope
of this Application.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.15.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Expense Category ($ Thousands)Net Compensation 10,143$
Building Operating Expenses 285
Computer Costs (488)
Projects 3,205
Professional Services 1,373
Road Improvements and Other Traffic Safety Programs 1,680
Printing Stationery and Supplies 571
Staff Related Expenses Including Training 1,191
Other Operating Expensees 8,070
Total Cost Savings 26,030$
2013.2 RR TREAD.15.1 Reference: ICBC Response to TREAD IR No. 1 12.3 Attachment A – ICBC Response to the Review of the Insurance Corporation of British Columbia – August, 2012 Exhibit B-4 In the discussion of Recommendation No. 2 (p. 1 of the Response) ICBC states: “The Corporation is undertaking steps to reduce operating budgets by $50-million. The Corporation has already reduced spending, achieving $26-million in savings last year, and expects to reduce budgeted costs by an additional $15-million in 2012 and a further $9-million in 2013.” Please provide a table setting out the $26 million of cost savings achieved in PY 2011 and identifying all cost categories of $100,000 or more. If ICBC requires any clarification of this or any other TREAD information request, please don’t hesitate to contact counsel for TREAD. Response:
During 2011, ICBC re-evaluated its planned expenditures and identified cost savings of $26
million from its 2011 original plan. These cost savings are presented in the following table, in
the same cost categories as used in the Application, Chapter 7, Figure 7.3.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.15.2-3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.15.2-3 Reference: ICBC Response to TREAD IR No. 1 12.3 Attachment A – ICBC Response to the Review of the Insurance Corporation of British Columbia – August, 2012 Exhibit B-4 In the discussion of Recommendation No. 2 (p. 1 of the Response) ICBC states: “The Corporation is undertaking steps to reduce operating budgets by $50-million. The Corporation has already reduced spending, achieving $26-million in savings last year, and expects to reduce budgeted costs by an additional $15-million in 2012 and a further $9-million in 2013.” 15.2 Please confirm whether the expected cost reductions in actual spending were achieved in PY2012, and provide a table setting out the $15 million of cost savings achieved and identifying all cost categories of $100,000 or more. 15.3 Please confirm whether the expected cost reductions in actual spending have been achieved in PY2013, and provide a table setting out the $9 million of cost savings achieved and identifying all cost categories of $100,000 or more. Response:
In response to the 2012 Government Review of ICBC recommendation, ICBC committed to
operating cost savings of $50 million between 2011 and 2013, comprised of $26 million in 2011,
$15 million in 2012, and $9 million in 2013. The anticipated cost savings by year was based on
the best information available at that time.
In actual fact, through ICBC’s cost containment program, begun in 2011 to look for ways to
decrease and then to maintain future operating expenses at lower levels, ICBC was successful
in meeting that commitment. However, actual results were different than that anticipated.
In the response to information request 2013.2 BCUC.204.1, ICBC discusses those differences
as they transpired from 2011 plan to 2011 actual, from 2011 actual to 2012 actual, and then
from 2012 actual to 2013 forecast. ICBC also presents a comparison of its 2013 budgeted
costs as compared to its original 2011 plan, showing the breakdown of the $51 million cost
savings by expense category.
Other changes in expense categories can be seen by comparing the year to year costs in the
Application, Chapter 7, Figure 7.2, page 7-8 and Figure 7.3, page 7-13.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.15.4 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.15.4 Reference: ICBC Response to TREAD IR No. 1 12.3 Attachment A – ICBC Response to the Review of the Insurance Corporation of British Columbia – August, 2012 Exhibit B-4 In the discussion of Recommendation No. 2 (p. 1 of the Response) ICBC states: “The Corporation is undertaking steps to reduce operating budgets by $50-million. The Corporation has already reduced spending, achieving $26-million in savings last year, and expects to reduce budgeted costs by an additional $15-million in 2012 and a further $9-million in 2013.” Please confirm that 1/3, or approximately $16.7 million, of the $50 million in total targeted cost savings is allocated to Optional insurance and has no bearing on Basic insurance rates and is therefore outside the scope of this revenue requirements Application. If not, please explain. Response:
As discussed in the response to information request 2013.1 RR BCUC.119.1.1, filed in the
response to information request 2013.1 RR BCUC.119.1, of the $50 million cost reduction, the
estimate of the benefit to the Basic insurance policyholders is $28 million. This estimate is
based on the difference between the Basic insurance portion of the 2011 original plan as
compared to the Basic insurance portion of the 2013 forecast. In both cases, the Basic
insurance portion is determined using the Commission-approved financial allocation
methodology in place at the time.
The remainder of the $50 million cost savings, i.e., $22 million, is therefore attributed to Optional
insurance.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.15.5 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.15.5 Reference: ICBC Response to TREAD IR No. 1 12.3 Attachment A – ICBC Response to the Review of the Insurance Corporation of British Columbia – August, 2012 Exhibit B-4 In the discussion of Recommendation No. 2 (p. 1 of the Response) ICBC states: “The Corporation is undertaking steps to reduce operating budgets by $50-million. The Corporation has already reduced spending, achieving $26-million in savings last year, and expects to reduce budgeted costs by an additional $15-million in 2012 and a further $9-million in 2013.” For Recommendations Nos. 3, 5, 6, 7, 9, 11, 12, 13, 15, 16, 17, 19, 20, 21 and 23 please provide a discussion of the corrective actions taken, in at least as much detail as provided in the balance of the Recommendations. Response:
The Commission’s decision in Order G‐ 193‐ 13 determined the actual implementation of the
2012 Government Review of ICBC recommendations is the purview of ICBC and the
Government and therefore outside the scope of this proceeding. While ICBC acknowledges the
Commission’s decision, in the spirit of transparency and being helpful, ICBC has provided
references and/or information related to those items that have an impact on the rate indication
for the 2013 Policy Year. Please see Attachment A – Actions Taken in Response to the 2012
Government Review of ICBC.
ICBC’s Information Request Response
Insurance Corporation of British Columbia
December 23, 2013
2013.2 RR TREAD.15.5 – Attachment A - Actions Taken in Response to the 2012 Government Review of ICBC
Actions Taken in Response to the 2012 Government Review of ICBC
Rec #
Recommendation Actions Taken
3 ICBC should develop and implement an overall strategy to more effectively manage bodily injury claims.
For information regarding ICBC’s overall strategy to manage bodily injury claims, please see the responses to the following information requests: 2013.1 RR TREAD.13.4 2013.1 RR TREAD.14.1 2013.2 RR TREAD.16.1 2013.2 RR TREAD.19.1
5 ICBC should reduce total management and confidential staffing to a level more consistent with 2008.
Please see the response to information request 2013.2 RR TREAD.15.6 (a) to (f) for updates on actions taken to maximize the span of control and to reduce the Management and Confidential staffing to a level more consistent with 2008. 6 ICBC should develop action plans, with
timelines, for maximizing span of control and reducing management layers across the organization.
7 ICBC should reduce total management and confidential compensation to a level more consistent with 2008.
As stated in the response to information request 2013.1 RR TREAD.21.11, ICBC is committed to reducing its overall compensation costs to a level more consistent with 2008 through the adoption of the Public Sector Employers’ Council Compensation Guidelines and by undertaking a number of initiatives. Please also see the responses to information request 2013.2 RR TREAD.15.6 g) and h) for ICBC’s amended compensation plan that has been implemented.
9 ICBC should regularly conduct detailed reviews of the budget to ensure costs are contained and aligned with the Province of British Columbia’s priorities.
With respect to specific actions taken to ensure costs are contained and aligned with the Province of British Columbia’s priorities please see the response to information request 2013.1 RR TREAD.22.8. The 2013 forecast was established with savings of $50 million as explained in the Application, Chapter 7, page 7-6. On an ongoing basis, actual results are analyzed against budget and reviewed as needed to ensure that expenditures are appropriate and consistent with corporate spending guidelines and which are aligned with government guidelines. In addition, on an as-required basis, deeper analysis of specific cost centres is conducted to look for further operational savings opportunities.
2
Rec #
Recommendation Actions Taken
11 ICBC should more clearly demonstrate value for money in procurement, using competitive processes whenever possible. (Corp Serv)
All competitive bids processes issued by ICBC have specific requirements for costs to be used in the evaluation and ranking processes. ICBC’s Corporate Acquisition Policy requires: A competitive bid process for the purchase of
goods valued in excess of $25,000 and no less than 3 bids are to be obtained for goods purchased with values between $5,000 and $25,000.
A competitive bid process for the purchase of services valued in excess of $100,000 and no less than 3 bids are to be obtained for services purchased with values between $25,000 and $100,000.
Managers responsible for purchases must be able to identify value ICBC receives from those purchases.
ICBC is also proactively involved in regular meetings with other Crown Corporations and Shared Services BC to determine opportunities for collaborative sourcing activities.
12 ICBC should develop relevant key performance indicators to ensure it can appropriately monitor its procurement process and performance.
ICBC has begun use of costs savings and cost avoidance as key performance indicators. In 2012 ICBC determined that cost savings and cost avoidances resulting from negotiations would be the start of monitoring procurement process and performance. During 2013, after every procurement process, the cost savings and cost avoidances are determined
13 ICBC should strengthen the procurement process through the implementation of a vendor complaint and dispute resolution mechanism and a post-contract evaluation process.
A vendor complaint and dispute resolution mechanism was created within the Corporate Acquisition Policy to support informal complaint and dispute resolution practices. Vendor complaint and dispute resolution mechanism is posted on ICBC.com
Formal supplier complaints are regularly monitored by Procurement and no complaints have been received thus far.
No major contract has expired since the Government review so no post contract evaluations on major agreements have been conducted. Procurement is proactively working with Divisional personnel in Human Resources, Claims and Information Technology for supplier discussions on performance and or value received.
3
Rec #
Recommendation Actions Taken
15 ICBC should ensure that IT policy and procedures are appropriately documented.
The IT policy and procedure work was completed in March 2013. An inventory of existing IT Policy & Procedure documents was developed. Documents were categorized against a standards based framework and placed into a searchable repository. Metrics related to the use, number of changes
and development status are monitored and reported on regularly.
Two checkpoints were conducted with the
Ministry of Finance auditor and the approach was endorsed.
16 ICBC should ensure that new disaster recovery plans are developed and tested before the new Transformation Program systems are implemented.
The Disaster Recovery Second Site project insourced ICBC’s disaster recovery capability and built the infrastructure foundation as well as the processes to enroll critical business systems. In 2012 two disaster recovery tests were
successfully completed (June and December). These tests included new critical systems such as the rating and underwriting engine.
In 2013 new systems were enrolled and tested
including those supporting Claims processing and technology that support the Claims Call Centre.
In 2014, this work continues with the enrollment
and testing of new critical systems delivered by the Transformation Program and other corporate initiatives.
17 ICBC should ensure the IT Security function has the appropriate reporting relationship and authority in the organization.
A dotted line reporting relationship has been formalized between the Manager of Information Risk Management and the Chief Information Officer (CIO). A quarterly meeting has been established to
review the strategic direction of the information security program, status, risk levels, and issues.
The Manager of Information Risk Management
has been provided the authority to escalate at any time any serious security incident or concern to the CIO or to the Director, Risk Management and Corporate Audit.
This arrangement was confirmed as satisfactory
with the Government technical auditors.
4
Rec #
Recommendation Actions Taken
The Information Security and Privacy Committee, which is co-chaired by the Manager of Information Risk Management and the Manager of Privacy and FOI, also provides an important channel to raise security concerns and awareness throughout ICBC and sponsors working groups.
19 ICBC should provide interim progress reports to the Province of British Columbia on the costs, scope, benefits and schedule of each Transformation Program phase, along with any variance explanation.
As per Order G‐193‐13 outside scope of this proceeding.
20 ICBC should formally involve the Province of British Columbia with significant IT projects to leverage public sector experience and lessons learned from other large-scale initiatives.
ICBC has been working closely with the provincial government Office of the CIO on a number of initiatives and has leveraged agreements that the government has entered into for goods and services.
21 ICBC should ensure that key areas identified in the Transformation Program risk assessment are promptly addressed.
As per Order G‐193‐13 outside scope of this proceeding.
23 ICBC should ensure that comprehensive audits of the Driver Licensing systems are performed regularly, given the sensitivity of information within the Driver Licensing systems.
ICBC is committed to ensuring the integrity of its systems and the security of the personal information with which it is entrusted on behalf of its customers. Procedures to test the effectiveness of ICBC’s processes to protect sensitive information are incorporated into each audit project as part of ICBC’s internal audit approach. Audits specific to information within the Driver Licensing systems are included in the annual audit plan approved by the Audit Committee of the Board for the period 2012 to 2015.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.15.6 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 7
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.15.6 Reference: ICBC Response to TREAD IR No. 1 12.3 Attachment A – ICBC Response to the Review of the Insurance Corporation of British Columbia – August, 2012 Exhibit B-4 With respect to Recommendation No. 8 please: a) Provide the number and names of the management layers that have been removed; b) Confirm whether or not ICBC reached its commitment of a further reduction of 65 positions by the end of 2013; c) If further reductions of 65 have not or will not be achieved by the end of 2013, please explain why not and state when ICBC commits to reach the further reduction total of 65 positions; d) Agree to include a status update regarding the further 30 to 40 management positions that will be eliminated by June of 2014 in the 2014 Revenue Requirements Application; e) Provide the number of reductions in management positions to date and commit to a date by which the total reduction of 135 management positions will be achieved; f) Confirm that all of the above Responses relate only to net reductions in positions (i.e. not reductions that have been or will be offset by creating new positions); g) Confirm that ICBC submitted a plan to fully implement a new compensation philosophy was submitted to the PSEC by December 31, 2012, and provide a copy. If the plan was not submitted by that date, please explain why not. h) Advise when ICBC’s own deadline “to fully implement the new [compensation] philosophy within 18 months” will expire, describe the implementation steps, and advise of the current progress of implementation; i) Since the implementation of the hiring freeze for all vacancies, how many exceptions have been approved by the president and CEO? Please provide the titles and brief job descriptions for all such exceptions; j) Please identify the effective date at which compensation for all management positions, including current ICBC Executives, was frozen and provide a table showing the frozen level of compensation for each position. Confirm that compensation for all management positions remains frozen; k) Please provide an update of ICBC’s progress in replacing short-term incentives for existing Executives with a built-in salary holdback of up to 20%, tied to financial and business results. Provide a copy of that plan and advise when it will be fully implemented;
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.15.6 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
l) Please provide an update of ICBC’s progress in transitioning to a compensation program which results in short-term incentive pay not being pensionable. Provide a copy of that plan and advise when it will be fully implemented; m) Identify and explain the significant changes made to overall corporate performance and the Short-Term Incentive Plan (STIP) in 2012. Response:
The Commission’s decision in Order G-193-13 determined the actual implementation of the
2012 Government Review of ICBC (the Government Review of ICBC) recommendations is the
purview of ICBC and the government and therefore outside the scope of this proceeding. While
ICBC acknowledges the Commission’s decision, in the spirit of transparency and being helpful,
ICBC is providing the following information on matters that directly impact the Basic insurance
rate indication for PY 2013.
a) to e)
The nature of the commitment stated in ICBC’s Response to the 2012 Government Review was
to increase the span of control and to reduce its senior management. The intent was not to
remove any of the management layers completely (e.g., remove the entire Director level).
During the reorganization ICBC determined that its primary objectives for this recommendation
were to bring Management and Confidential complement to level more consistent with 2008
levels and increase span of control and these objectives were met.
As a result of the reduction of managerial positions through reorganization and consolidating
key staffing functions through restructuring in 2012, ICBC’s span of control in the 2013 forecast
period is expected to increase back to historical 2009 levels, with approximately nine employees
being supported by one manager as outlined in the Application, Chapter 7, Figure 7.8.
As stated in the response to information request 2013.1 RR TREAD.21.11, since ICBC’s
Response to the 2012 Government Review, ICBC has reduced workforce by over 260 positions,
of which more than 80% were Management and Confidential positions, including the reduction
of executive vice president positions from ten to eight, and the elimination of four vice president
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.15.6 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 3 of 7
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
positions. This is significantly ahead of the schedule committed to in ICBC’s Response to the
2012 Government Review. On page 3 of that document, the commitment stated that ICBC
would “bring its Management and Confidential complement to a level more consistent with 2008
levels” through three phases to reach total reductions of between 165 and 195 positions by
June 2014. ICBC has met the commitment to reduce its staffing level ahead of the June 2014
date. By the end of 2012, ICBC had reduced its workforce by over 260 positions.
Please also see the response to information request 2013.2 RR BCUC.205.1 for a further
explanation with respect to the reduction of total Management and Confidential staffing levels to
a level more consistent with 2008.
f) Yes, the above response relate only to net reductions in positions.
g)
Yes, ICBC submitted a draft amended ICBC management compensation plan including a new
compensation philosophy to the Public Sector Employers’ Council (PSEC) on December 28,
2012. Since the submission, ongoing discussion has occurred between ICBC’s Board of
Directors and PSEC to finalize the compensation plan. The amended ICBC management
compensation plan was finalized and approved on October 31, 2013. Please see Attachment A
– ICBC Amended Management Compensation Plan Final for details.
h) ICBC has met its deadline (set in August 2012) to fully implement the new compensation
philosophy and program within 18 months.
As stated in the response to information request 2013.1 RR TREAD.21.11, ICBC, upon the
Board of Directors’ approval, has implemented the new compensation programs including the
following:
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.15.6 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Salary freeze (implemented as of August 2012) – Compensation for all Management and
Confidential employees, including senior management, continues to be frozen.
Perquisite allowance – Effective August 2012, new hires or promotions into roles that
were previously eligible for the perquisite allowance have not been granted the
perquisite allowance.
The perquisite allowance will cease for all current eligible senior management as of
December 31, 2013.
A 10% salary reduction occurs on replacement of an executive when a position becomes
vacant. This aligns with the Crown Corporation Executive Compensation Policy
announced in July 2012. Four executives’ salaries have since been set 10% lower than
the previous incumbent per this policy.
A new Holdback Incentive Pay (HIP) plan, approved by ICBC’s Board of Directors and
PSEC, will be implemented January 1, 2014. This will reduce incentive rewards and
eliminate the ability to earn more than 100% of target incentive pay based on
outstanding corporate and/or individual performance for eligible Management and
Confidential employees.
A new compensation labour market comparator, more in line with the greater public
sector, will also be implemented in 2014.
i)
The President and CEO has approved 31 Management and Confidential vacancy
replacements.
Please see Attachment B – Brief Job Descriptions for these 31 hires by position that were
exceptions approved by ICBC’s President and CEO.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.15.6 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
j)
Yes, ICBC’s compensation for all Management and Confidential group employees, including
Executives reporting to the CEO has been frozen since April 2012 and remains frozen.
In addition, a 10% salary reduction occurs on replacement of an Executive when a position
becomes vacant. This has occurred in the case of the current CEO, Chief Information Officer,
Vice President Claims, Vice President Insurance (Acting), and Vice President Corporate
Services when they were appointed to their respective roles in late 2012. This will also occur
when the Vice President Human Resources vacancy is filled. The chart below shows the
currently frozen salary levels:
Position 2013 Salary 2013 Incentive Target
CEO $ 334,125 20%
Chief Financial Officer $ 294,800 35%
Vice President Claims $ 255,000 35%
Vice President Transformation $ 248,700 35%
Chief Information Officer $ 230,000 35%
Vice President Insurance (Acting) $ 240,000 35%
Vice President Communications and Marketing $ 215,300 35%
Vice President, Corporate Services $ 200,000 35%
Vice President HR is currently vacant and subject to 10% reduction in salary on new hire
In addition, ICBC’s compensation for Management and Confidential group employees was
frozen for 2012 and 2013 and is expected to remain unchanged in 2014 subject to government
policy. The table below outlines the Management and Confidential salary ranges by salary band
effective from 2012 to the present. Please note that the midpoint is the control point above
which salaries are frozen unless an employee is rated outstanding for a performance year and
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.15.6 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
there is a performance-based salary increase budget granted in that year (again, there were
none for 2012 and 2013):
Salary Band Minimum Midpoint Maximum
11 $ 141,600 $ 198,200 $ 254,700
10 $ 140,100 $ 175,300 $ 210,300
9 $ 124,100 $ 155,100 $ 186,300
8 $ 110,100 $ 137,600 $ 165,100
7 $ 97,400 $ 121,900 $ 146,200
6 $ 86,200 $ 107,800 $ 129,300
5 $ 77,300 $ 96,600 $ 116,000
4 $ 70,300 $ 87,700 $ 105,300
3 $ 57,700 $ 72,100 $ 86,500
2 $ 51,500 $ 64,500 $ 77,300
1 $ 45,200 $ 56,500 $ 67,700
k)
Please see above response stated in item h) for the update of ICBC’s progress in transitioning
staff eligible for the Short-Term Incentive Pay (STIP) plan, including existing Executives, to a
new HIP Plan. Please also see Attachment C – ICBC 2014 HIP Plan Document for a copy of
the new HIP Plan that will be effective January 1, 2014.
l)
As stated in the Attachment A – ICBC Amended Management Compensation Plan Final on
page 6, STIP and holdback payments for all employees hired after September 1, 2013 are
excluded from pensionable earnings.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.15.6 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
m)
In 2012, ICBC implemented a STIP Plan financial trigger effective from the 2011 STIP Plan year
forward. A financial trigger is built in within the STIP Plan to ensure a minimum level of
corporate financial performance occurs and that this funds ICBC’s ability to pay a performance-
based incentive. Please see the response to information request 2013.1 RR BCUC.123.1 for
more details on the application of financial trigger.
As outlined in the summary table in the response to information request 2013.1 RR
TREAD.21.12, Attachment A – ICBC Statement of Executive Compensation, on page 5, ICBC
did not meet the corporate targets for Customer Experience, Customer Advocacy, Employee
Engagement, Strategy Index, and the achievement of 2012 Goals of Transformation Program in
2012. ICBC’s Board of Directors exercised its discretion to reduce the corporate measures of
the 2012 STIP Plan by 40%. Therefore, the 2012 STIP Plan actual payment was lower than the
target payout amount.
Another amendment made in 2012 to further increase the rigour of the STIP plan included
restricting payment amounts due to less than fully successful individual performance. The STIP
Plan includes a provision on individual performance levels below target which impacts the
amount of actual incentive pay received as applied below:
Requires Improvement – not eligible for any portion of STIP payment.
Developing – beginning at 25% up to 50% reduction of all eligible STIP rewards at the
discretion of the manager.
Contributing – beginning at 50% up to 100% reduction of all eligible STIP rewards at the
discretion of the manager.
The opportunity to earn more than 100% of target incentive pay for all STIP performance
measures will be eliminated in the new HIP Plan effective January 1, 2014.
ICBC’s Information Request Response
Insurance Corporation of British Columbia
December 23, 2013
2013.2 RR TREAD.15.6 – Attachment A – ICBC Amended Management Compensation Plan Final
Former Compensation Policy Amended New Compensation Policy Commentary
1
Current Total Compensation Philosophy ICBC’s total compensation programs are designed to be market competitive and to reward performance, ensuring that there’s a clear link between what employees bring to their role, their contribution to results, and their total compensation. ICBC's total Compensation program for Management Group employees is designed to better differentiate performance and compete in the market for management and confidential employees. The program supports our move to becoming a more-performance driven organization. ICBC’s total compensation philosophy is based on the principles of:
Recognizing and rewarding performance.
Targeting total compensation to ICBC’s comparison group of companies.
Using a total compensation approach to establish compensation levels (base pay, short term incentive pay, benefits, pension and paid time off).
ICBC’s total compensation plan is designed to:
Attract and retain the talent required to meet ICBC’s goals and objectives.
Motivate individuals to perform at their highest levels.
Introduction ICBC is a British Columbia Crown Corporation and the largest automobile insurance company in Canada. The Corporation operates and administers plans of compulsory basic automobile insurance and optional automobile insurance. Under the Insurance Corporation Act and the Motor Vehicle Act, ICBC is also responsible for non-insurance services including driver licensing, vehicle registration and licensing, violation ticket administration and government fines collection. In order to attract, motivate and retain individuals with the skills and experience necessary to fulfill the Corporation’s mandate, ICBC strives to provide competitive overall total compensation that rewards performance. The Corporation’s total compensation policy for 2014 is set out herein. The Human Resources and Compensation Committee will review the policy annually, commencing in November, 2014 and subsequently provide any applicable recommendations to ICBC’s Board of Directors. The policy is and will remain in compliance with government policy. All compensation policy and program changes take effect January 1, 2014 unless otherwise stated.
Former Compensation Policy Amended New Compensation Policy Commentary
2
Reward performance when merited.
Reward and recognize those with strong leadership skills.
Current Market Position
Overall, ICBC targets total compensation to deliver at the market median (P50) for similar positions within the following three, equally weighted comparator groups:
1. Canadian general industry with revenue between $1 -$10 Billion;
2. Canadian public and casualty insurance companies with assets between $1 - $15 Billion; and,
3. Canadian government, quasi-government and Crown Corporations. This mix of market comparators most accurately reflects ICBC’s role as a Crown Corporation which competes with the private sector in the provision of optional insurance coverage. The design allows for individual pay to only exceed the market median in recognition of performance.
Market Comparison Organizations The market comparison organizations used for determining the total compensation for ICBC’s executive and management positions are set out below. ICBC is a crown corporation providing compulsory basic automobile insurance and optional insurance, as well as some non-insurance services assigned to ICBC under the Insurance Corporation Act and the Motor Vehicle Act. ICBC is the sole supplier of basic insurance which accounts for about 50% of its revenue. On the other hand, the service delivery aspects of ICBC’s operations are similar to that of other insurance companies. Recognizing the above fundamental considerations with respect to ICBC, the market comparison used for the purposes of determining management total compensation will consist of:
1. Canadian government, quasi-government and Crown Corporations, including MPI, SGI, and the BC Public Service.
2. Canadian general industry with revenue between $1 - $4 Billion; and,
3. Canadian public and casualty insurance companies with assets between $1 - $15 Billion.
ICBC will forego any market comparator for executive roles and make compensation decisions entirely based on PSEC policy.
In response to the government review report, ICBC’s board committed to review its compensation program to bring the compensation framework more in line with the greater public sector and ensure more consistent compliance with policies. As a result, the board has decided to change ICBC’s current market comparator to confine the general industry participants to those with revenue of $4B or less, and add Manitoba Public Insurance, Saskatchewan Government Insurance, and the BC Public Service. This approach will continue to mark ICBC salaries to the market from which it recruits and loses over 80% of its labour and will slow salary movement over time, with no readily discernable impact to incumbents.
Executive compensation is set by public policy, consequently market comparisons of any nature are only illustrative for guidance, not determinative.
Former Compensation Policy Amended New Compensation Policy Commentary
3
ICBC’s President & CEO will have the discretion to vary the total compensation paid to positions below the executive and vice president level if it is necessary to recruit specialized skills. If the CEO believes that a total compensation deviation is required for an executive or corporate officer in the event of labour market issues, direct approval is required from the Human Resources and Compensation Committee. In the case of any specialized or technical positions for which ICBC must recruit from outside of BC, the Corporation will utilize total compensation information from those recruitment markets in determining ICBC’s compensation levels. Relative Market Position ICBC targets its total compensation to be at the median (P50) relative to the compensation paid to similar positions by the applicable market comparison organizations.
Base Salaries Base salaries for executives and management are frozen for 2013. A new market comparison and relative market position of ICBC will be implemented for January 1, 2014. New maximum salaries will be established for existing executives and management group employees, effective January 1, 2014 by implementing a holdback system using the method in the STIP Section herein. If an executive position becomes vacant, the new maximum salary for the position shall be 90% of the presumed maximum salary applicable to the position.
Former Compensation Policy Amended New Compensation Policy Commentary
4
Short-Term Incentive Plan (“STIP”) Effective The week of October 28, 2013, executives and management personnel will be notified that the STIP program will be amended to become a salary holdback system. Executives and Management The STIP Program will be amended and a holdback system will be established effective January 1, 2014 by creating new maximum salaries which will be established by adding to the executive’s existing salary the employee’s current STIP target percentage. The executive’s new base salary will be defined as the maximum salary minus a 20% holdback or a percentage appropriate for that level. In the case of other levels of management below the vice president level, a lesser percentage will be treated as holdback. Payment of part or all of the holdback will be determined by annual measurement of performance relative to performance-based criteria.
Maximum Salary For employees hired on or before December 31, 2013 the Maximum Salary will be the employee’s Existing Base Salary plus an amount based on their target STIP percentage under the previous STIP plan (see Holdback Calculation below). For employees hired on or after January 1, 2014, the employee’s Maximum Salary will be set at the time of hire.
Former Compensation Policy Amended New Compensation Policy Commentary
5
Maximum Holdback Incentive Payment Calculation: For employees hired on or before December 31, 2013:
Maximum Salary = Existing Base Salary plus STIP target % dollar value under previous STIP Plan.
New Base Salary = Maximum Salary / (1+ New HIP %)
Maximum HIP Payment = Maximum Salary Minus New Base Salary
For employees hired on or after January 1, 2014, their New Base Salary, Maximum Holdback Payment and HIP % will be determined at the time of hire within the respective salary range in accordance with ICBC’s compensation policy.
Level Current
STIP Folded in
STIP Target %
for Holdback
Holdback
Executive Committee (excl. CEO) 35% 35% 20%
Chief Actuary & VP Investment 30% 30% 20%
Vice presidents 28% 28% 20% Pay Band 9-10 24% 24% 17% Pay Bands 7-8 18% 18% 15% Pay Bands 4-6 12% 12% 10% Pay Bands 1-3 10% 10% 5%
Former Compensation Policy Amended New Compensation Policy Commentary
6
Executive Perquisites The perquisite allowances provided for executive and non-executive positions will be discontinued as of December 31, 2013. Effective upon receipt of PSEC approval, those executives at the Corporation who require a vehicle to execute their position responsibilities will be provided with a leased vehicle or vehicle allowance consistent with Provincial Government’s Executive Vehicles policy.
Effective upon receipt of PSEC approval only those executives who require a business vehicle to perform their current job duties will be provided with a leased vehicle or a vehicle allowance to cover the cost of a leased vehicle. This lease arrangement or allowance will be aligned with the Provincial Government’s Executive Vehicles policy and is only intended for employees who are required to regularly work in the field.
The approval of the leased vehicle allowance shall be made at the discretion of the CEO and must be based on a real business need to have the use of a vehicle to perform the regular duties of a role in the field. A leased vehicle or allowance may only be considered for use when public transportation or a privately-owned vehicle is not available or cost-effective.
Pensionable Earnings STIP and holdback awards for all employees hired after September 1, 2013 will be excluded from pensionable earnings.
Aligns with PSEC new guideline that
variable pay can remain as pensionable earnings for existing employees and will be eliminated for new hires.
Former Compensation Policy Amended New Compensation Policy Commentary
7
Expense Reimbursement Effective October 1, 2012, executives have been subject to the same expense reimbursement policy and rates as those which apply to Provincial Government executives. ICBC has implemented for all remaining positions of the Corporation the expense reimbursement policy and rates used by the Provincial Government.
Aligns with the new government guideline.
Post-Retirement Benefits Employees who are hired from outside the company into management after September 1, 2013 will not be eligible for the management post-retirement benefits program.
Addition of these changes arose from the
new government guideline, ICBC proposed the elimination of PRB program for new hires with the intent to keep long-term operating costs as low as possible.
CEO Salary Compression Grandfathering will be applied compensation of any executive that encroaches within 15 % of the CEO’s compensation.
Aligns with the new government guideline.
ICBC’s Information Request Response
Insurance Corporation of British Columbia
December 23, 2013
2013.2 RR TREAD.15.6 – Attachment B – Brief Job Descriptions
Page 1 of 3
Brief Job Descriptions
Job Title General Accountability
Assistant Actuary To provide decision support that requires a mix of advance actuarial knowledge and business judgment. Prepares reports that draw attention to critical factors and required actions. Defines improvements to analytical processes. Documents assumptions and rationale. Communicates complex technical results in laymen terms.
Audit Services Advisor Assists in the provision of internal audit services related to corporate policies, initiatives and processes in support of corporate governance.
Claims Business Planning Advisor Provides support and direction to the division in the development and implementation of strategic, tactical and operational plans.
Claims Business Change Advisor Provides advice and support in the development and implementation of divisional initiatives and operational project plans with a focus on business process improvements.
Disability Management Specialist Provides consultation and advice to management, and other HR departments on disability management and duty to accommodate cases. Adjudicates sick leave claims, handles contentious return to work cases, and represents ICBC on WCB claims and appeals.
Information Protection Advisor Leads computer forensic activities and investigations of all internal and external fraud against, or abuses of, corporate information technology systems, data and resources.
Investment Analyst Participates as an integral member of an investment team by conducting research and analysis to identify risks and opportunities and generate critical information in support of investment strategies, planning and decisions.
Page 2 of 3
Job Title General Accountability
Information Services Capacity and Performance Management Engineer
Provides capacity planning and performance engineering expertise and solutions to project delivery teams and departmental functions.
Information Services Solutions Leader Identifies opportunities, proactively advocates change, and manages client relationships, while providing leadership and driving change initiatives forward at the tactical level.
Manager Employee Relations Manages the day-to-day activity of the department including grievance and dispute resolution processes as well as the on-going administration of collective agreements.
Manager Injury Technical and Program Support Provides technical direction and support to claims managers and adjusters, other corporate departments and external partners.
Manager Information Services Planning and Account Management
Plans and directs the short- and long-term technology portfolio for specific business function(s).
Manager Information Services QA and Test Services
Leads and manages the authoring and implementation of new and existing testing methodologies for all phases of IS product development/configuration, enhancement and sustainment. Ensures that IS products are tested using consistent, efficient, reliable and effective testing best practices.
Manager Information Services Solutions Services
Directs the delivery and sustainment activities of application systems and programs for specific business function(s).
Manager Master data and Metadata Participates in the development and execution of master data management and metadata management strategies. Directs the architecture, design, delivery and sustainment of end-to-end enterprise master data management and metadata applications.
Page 3 of 3
Job Title General Accountability
Manager Policy & Procedures Manages the development, maintenance and publishing of user-centric procedures, policies, standards, guidelines and other related information for the assigned division in accordance with established corporate editorial and documentation standards.
Organization Development Consultant Designs, develops and implements new and enhanced corporate-wide people programs, systems and tools, ensuring alignment to established corporate strategies and plans.
Recruitment Specialist Provides corporate-wide recruitment and selection services as part of the talent acquisition and general human resources consulting team.
Senior Communications Specialist Provides advice and technical services on communications strategies to designated client groups.
Senior Financial Information Advisor Provides analytical support and advice to senior management on the financial implications of corporate decisions related to a wide range of business issues.
Senior Regulatory Affairs Advisor Provides expert strategic regulatory policy advice to executives and senior managers on major complex regulatory issues with long-term corporate wide impacts. Plans and coordinates activities associated with regulatory filings.
ICBC’s Information Request Response
Insurance Corporation of British Columbia
December 23, 2013
2013.2 RR TREAD.15.6 – Attachment C – ICBC 2014 HIP Plan Document
{00097411;1}
INSURANCE CORPORATION OF BRITISH COLUMBIA
SHORT-TERM INCENTIVE PAY PLAN
AMENDED AND NOW RE-TITLED AS
HOLDBACK INCENTIVE PAY (HIP)
PLAN DOCUMENT
(THE “PLAN”)
PLAN YEAR - JANUARY 1, 2014
{00097411;1} 2
TABLE OF CONTENTS
A. Holdback Incentive Pay (HIP) Plan Overview 3
B. Determining Payments Under the Plan 5 Financial Trigger 5 Component Weightings 5 Performance Measures 5
C. Authority of Board 8 D. Authority of the CEO 8
E. Eligibility 8 General Eligibility 8 Joining the Management Group 9 Movement within the Management Group 9 Retirement 9 Voluntary Departure from the Management Group 9 Termination of Employment 9 Leaves of Absence during the Plan Year 10
F. Definitions 11
G. HIP Payment Options 13
APPENDIX A 14 2014 Holdback Incentive Pay Grids 14
APPENDIX B 16 2014 Holdback Illustration 16
{00097411;1} 3
A. Holdback Incentive Pay (HIP) Plan Overview ICBC’s Board of Directors has revised the company’s management compensation plan to comply with Government’s policy on management compensation and to meet its objectives arising from the 2012 Government Review. The Short-Term Incentive Pay (STIP) program for executives and management group employees is thereby amended and re-titled to the Holdback Incentive Pay (HIP) program effective January 1, 2014. Payment of part or all of the holdback will be determined by annual measurement of performance relative to performance-based criteria. The HIP Plan (the “Plan”) is an annual incentive program that provides eligible executive and management group employees with an opportunity to earn a one-time payment based on the achievement of strategically aligned corporate and individual goals within a Plan year. Under the Plan, eligible employees will have an annual Maximum Salary. An amount will be deducted from the employee’s Maximum Salary as a Holdback. Payment of the Holdback amount will be made in accordance with the terms of this Policy. The remaining amount after deducting the Holdback will become the employee’s Base Salary. The purpose of the Plan is to incent employees in eligible positions to accomplish Corporate and Individual objectives by:
Promoting an understanding of Corporate strategic plans; and,
Providing incentive rewards for the achievement of goals which support Corporate and Individual objectives.
The amount of the payment varies in direct proportion to success in meeting these goals. The maximum payment for each employee varies according to position level, and ranges from 5% to 20% of base salary. An eligible employee’s actual HIP payment will range from 0% to 100% of the HIP amount, depending on Corporate and/or Individual performance.
Success is determined through a range of Corporate and Individual performance measures, which are established on an annual basis as illustrated below.
Corporate
Corporate targets and measures
proposed by CEO and approved by
the Board
Individual Determined by the
employee’s manager
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Each year, corporate and individual performance goals, targets and measures are confirmed at the beginning of the fiscal year. Performance at the corporate and individual levels are reviewed on a quarterly basis and finalized in February of the following year as illustrated below:
January
Board of Directors sets corporate goals and targets
for new fiscal year.
Executives and managers approve performance plan
for new fiscal year.
Managers assign individual performance ratings for
previous year. February
Performance ratings for previous year confirmed by:
Corporate performance: Board of Directors
Individual performance: Manager responsible
March
Quarterly performance check-in
HIP payout for previous performance year
June
Mid-year performance review
September
Quarterly performance check-in
November
Board and Executive Committee members review performance
outlook for corporate targets and measures
{00097411;1} 5
B. Determining Payments Under the Plan Financial Trigger
A financial trigger is built in within the Plan to ensure a minimum level of corporate performance occurs and that this funds ICBC’s ability to pay a performance-based incentive. The financial trigger is determined by the outcome of net income for a Plan Year and will be reviewed on an annual basis to ensure its relativity to ICBC’s financial forecast in a given Plan Year.
The final HIP payment for all eligible management group employees is subject to the outcome of net income for a Plan Year. If net income is below target, different portions of the HIP components by employee group may be reduced or eliminated to better reflect the level of influence on corporate measures as well as to further support performance-based compensation program.
The HIP payment is re-earnable each Plan year and must first meet the pre-defined corporate financial trigger before any payment is made. The financial trigger and HIP payment at different net income levels will be set by the Board based on corporate financial health on an annual basis.
Component Weightings
An eligible employee’s HIP payment for a Plan Year will be determined on the basis of Corporate and/or Individual performance during the Plan Year. The relative weight of these two components varies according to the level of the employee’s position within the Corporation:
Component Weightings
Level Corporate Individual
CEO 75% 25%
Executive Committee 60% 40%
Vice Presidents Directors
50% 50%
Salary Bands 4 to 8 40% 60%
Salary Bands 1 to 3 0% 100%
See also APPENDIX A for details on the specific application of these weightings by salary band.
Performance Measures
Successful performance for Plan purposes is determined by pre-defined performance measures at the corporate and individual levels.
Performance measures are “indicators” used to evaluate progress made in achieving a performance goal. Examples of performance measures include survey scores, ratios, accuracy, or response rates, and statistics, but may also include qualitative means of evaluation.
While performance measures can be quantitative or qualitative, they must meet SMART criteria:
Specific
Measurable
Attainable
{00097411;1} 6
Relevant
Time-bound
Corporate Performance Measures
Corporate performance measures are determined by the Board of Directors.
2014 Corporate Measures and Targets will be communicated in early 2014. <Insert link in early 2014>
Individual Performance Measures
Individual performance measures are determined with reference to the employee’s core and key objectives and competencies, in accordance with ICBC’s performance management cycle. For more information on the performance management cycle, please click here.
Performance Levels
Corporate Performance Levels
Threshold and Target performance levels are established for each measure at the corporate level, using the same process which governs the development of corporate performance measures.
Threshold Performance: The minimum level of performance which must be achieved to receive payment in respect of a measure. This level of performance requires stretch to achieve. Threshold Performance levels are set based on a maximum 85% probability of achievement.
Target Performance: The target or planned level of performance for the Plan Year, requiring stretch to achieve. Target performance levels are set based on a maximum 75% probability of achievement. Generally, the target performance level will align with the target level identified in the relevant Corporate business plan.
Where possible, relevant historical performance data should be used to inform the setting of quantitative performance levels. For qualitative levels (and quantitative where historical data is not available) the probability levels set out above will be used as guidelines and performance levels will be established using discretion and the best available information.
After establishing the Threshold and Target Performance Levels, payments are determined by mapping the performance levels onto a calibrated scale ranging from 0% to 100%. Payment for performance below Threshold is 0%, at Threshold is 50%, between Threshold and Target is 51-99%, and at or above Target is capped at 100%. Beyond Threshold performance, escalation between payment levels is determined on a straight line progression:
{00097411;1} 7
Individual Performance Levels
Individual performance levels or ratings are evaluated on the basis of the employee’s achievements, measured against his/her individual performance plan. Payment percentages for individual performance ratings are as follows:
Outstanding – eligible for 100% of individual component of HIP.
Fully Successful – eligible for up to 100% of individual component of HIP.
Developing – beginning at 25% up to 50% reduction of all eligible HIP rewards at the discretion of the manager.
Contributing – beginning at 50% up to 100% reduction of all eligible HIP rewards at the discretion of the manager.
Requires Improvement – not eligible for any portion of HIP payment.
Maximum Holdback Incentive Payment Calculation:
For employees hired on or before December 31, 2013:
Maximum Salary = Existing Base Salary plus STIP target % dollar value under previous STIP Plan.
New Base Salary = Maximum Salary / (1+ New HIP %)
Maximum HIP Payment = Maximum Salary Minus New Base Salary For employees hired on or after January 1, 2014, their New Base Salary, Maximum Holdback Payment and HIP % will be determined at the time of hire within the respective salary range in accordance with ICBC’s compensation policy
0%
25%
50%
75%
100%
125%
150%
BelowThreshold
Threshold Target AboveTarget
Pay
ou
t Le
vel
Level of Performance
BelowThreshold
Threshold Target AboveTarget
{00097411;1} 8
C. Authority of the Board
Pursuant and subject to the terms of ICBC’s HIP Plan, employees may be eligible to earn an incentive payment each fiscal year. The amount of such payment, if any, shall be at the ICBC Board’s sole discretion. The provisions of this Plan may be amended by the Board at any time in its sole discretion in order to:
More closely align the Plan to the Corporation’s strategic objectives.
Enhance performance rewards and recognize success.
Align total cash compensation to changing market conditions.
Re-balance total compensation packages.
Align to economic circumstances and business conditions.
In exceptional circumstances, and notwithstanding any other provision of the Plan, where the Board considers that the payment level determined by a Corporate performance measure or group of measures does not appropriately reflect the actual performance of the Corporation, the Board may establish the payment level for that measure at any level between 0% and 100%.
In exceptional circumstances, and notwithstanding any other provision of the Plan, where the Board determines that Corporate performance measures or levels are, for any reason, no longer appropriate, the Board may require that the measures or performance levels be amended as deemed necessary. The terms of the HIP Plan may be amended by the Board of Directors from time to time in its sole discretion.
D. Authority of the CEO In Q1 of each year, the CEO will develop the individual performance objectives of each Executive Committee member. The CEO will consult with and consider the opinions of the Executive Committee member prior to finalizing the individual objectives. The CEO will then consult with the Human Resources and Compensation Committee of the Board (HRCC) who will provide their opinion of the sufficiency and appropriateness of each executive’s objectives. The CEO will finalize the objectives keeping in mind the opinion of the HRCC and will implement them following an explanation to the Executive Committee member. The CEO’s assessment of progress-to-plan will be provided quarterly to each Executive. A progress-to-plan will be provided by the CEO to the HRCC early in Q4. Once year-end results are in, the CEO and HRCC will review the CEO’s determination of the relative completion of performance objectives, the overall performance rating of the executive, and the resultant proposed HIP payout.
E. Eligibility
General Eligibility To be eligible to participate in the Plan, an employee must be actively employed in an eligible position throughout the Plan Year (subject to the exceptions described below), and must have an individual performance plan approved by his or her manager for the Plan Year. Participation is subject to the terms and conditions set out below. For questions of eligibility not specifically addressed in this Plan document, the Plan rules will be interpreted and applied on a case by case basis on behalf of the Corporation by the VP of Human Resources.
{00097411;1} 9
If an eligible employee is entitled to a prorated HIP for a Plan Year, the payment will be calculated and issued at or around the end of the first quarter of the following year in the normal course, once performance results are known.
Joining the Management Group
If an employee is hired, promoted or transferred into an eligible position between January 1st
and September 30th
of a Plan Year, his or her HIP for that Plan Year will be pro-rated from the date of hire, promotion or transfer into the eligible position.
If an employee is hired, promoted, or transferred into an eligible position (from a non-eligible position or hired externally) after September 30
th of a Plan Year, he or she is not eligible for any HIP for that Plan Year.
Movement within the Management Group
Employees who move from one eligible position to another within a Plan Year will receive a single performance rating for the Plan Year, which will apply to all eligible positions held within the Plan Year.
If an employee’s movement from one eligible position to another within a Plan Year results in a change in eligibility to a different HIP grid, the employee’s HIP will be pro-rated based on his or her earnings in each grid.
Retirement
An employee in an eligible position who takes regular retirement (at or above age 65) is eligible to participate in the Plan for the Plan Year in which he or she retires, provided that the retiree’s last day of active service is after March 31
st of the Plan Year. The retiree’s HIP will be pro-rated from January 1 of that Plan Year to his or her last
day of active service.
An employee in an eligible position who takes early retirement (before age 65) is eligible to participate in the Plan for the Plan Year in which he or she retires, provided that:
The retiree is at least age 55 and has at least 10 years of service with the Corporation; and
The retiree’s last day of active service is after March 31st of the Plan Year. The retiree’s HIP will be pro-rated to his or her last day of active service.
Banked vacation and paid time off days are not considered active service under the Plan.
In such cases, HIP will be paid out in accordance with the regular HIP cycle described herein.
Voluntary Departure from the Management Group
An employee who voluntarily departs from an eligible position on or before December 31st
of a Plan Year is not eligible for any HIP for that Plan Year. Voluntary departure includes voluntary resignation, transfer to the bargaining unit, and early retirement with less than 10 years of service.
An employee who is rehired into, or otherwise returns to, an eligible position following a voluntary departure, will be entitled to prorated HIP for the Plan Year in which he/she is rehired or returns, provided the employee is rehired or returns at least 90 days before the end of the Plan Year and has an individual performance plan for the Plan Year. The HIP payment will be prorated for the period following the date of the employee’s rehire or return; the employee will not be credited under the Plan for any service prior to his/her voluntary departure.
Termination of Employment
If an employee in an eligible position is dismissed for cause during a Plan Year, he/she is not eligible for any HIP for that Plan Year.
Subject to a contract of employment altering these terms, if an employee in an eligible position is dismissed without cause during a Plan Year, he/she may be eligible for HIP for that Plan Year if the applicable notice period ends on or after the end of the Plan Year. In such circumstances, the employee’s HIP will be calculated based on a “Fully Successful” individual performance rating for the portion of the Plan Year during which the employee was not in active service. If the applicable notice period ends before the end of the Plan Year, the employee is not eligible for any HIP for that Plan Year.
{00097411;1} 10
Leaves of Absence during the Plan Year
An employee in an eligible position who takes a paid or unpaid leave of absence during a Plan Year will be eligible for HIP for that Plan Year, prorated for the period when the employee was not in active service, provided the employee has at least 90 days of active service in the Plan Year and an individual performance plan for the Plan Year.
The first 150 continuous hours of absence on approved sick leave, or on an approved Workers’ Compensation claim, is considered to be active service for the purpose of determining an employee’s eligibility for HIP under the Plan.
{00097411;1} 11
F. Definitions Existing Base Salary (EBS)
For Eligible Employees hired before December 31, 2013, the EBS is the employees base salary as of December 31, 2013 and does not include STIP, HIP, overtime, pension, time off without pay, benefits, or banked vacation. Eligible Employee
An employee who occupies an eligible position and who meets the eligibility requirements of the Plan. Eligible Earnings
The amount of HIP which is paid to an employee is based on the applicable percentage of the employee’s eligible earnings in the Plan Year. An employee’s eligible earnings are equal to their Base Salary in an eligible position in the Plan Year with some exceptions as follows.
Eligible Earnings do not include:
Acting pay;
Banked vacation and time off days;
Earnings in a Bargaining Unit or temporary Management and Confidential position;
Retroactive pay based on employment in the Bargaining Unit but received while employed in a Management and Confidential position;
Extended sick leave beyond 150 continuous hours. The first 150 hours of continuous sick leave are eligible earnings. Where the sick leave bridges a calendar year-end, the count for 150 hours begins at the start of the sick leave not the start of the year;
WorkSafe BC earnings beyond 150 continuous hours. The first 150 hours on WorkSafe BC are eligible earnings. Where the WorkSafe leave bridges a calendar year-end, the count for 150 hours begins at the start of the WorkSafe leave not the start of the year.
Eligible Position
A full-time or part-time regular management or confidential position within the Corporation’s organization. HIP
Holdback Incentive Pay under the Plan. HIP Grid
A table showing the HIP percentages of base salary by salary band, and broken down to reflect the relevant contribution of the individual and corporate components. Maximum Holdback Payment
For employees hired on or before December 31, 2013: the Maximum Salary less the New Base Salary
For employees hired on or after January 1, 2014: the Maximum Salary set at the time of hire less the New Base Salary. Manager
The individual to whom an employee reports. In the case of an executive employee, the CEO as advised by the HRCC.
{00097411;1} 12
Management and Confidential Employee (AKA Management Group Employee)
An employee of the Corporation in either a management or confidential role and who is not a member of a bargaining unit.
Maximum Salary
For employees hired on or before December 31, 2013 the Maximum Salary will be the employee’s Existing Base Salary plus an amount based on their target STIP percentage under the previous STIP plan (see Holdback Calculation on page 7). For employees hired on or after January 1, 2014, the employee’s Maximum Salary will be set at the time of hire. New Base Salary (NBS)
The NBS for Eligible Employees is the employee’s Maximum Salary divided by (1+ the maximum HIP % as shown in the HIP Grid). Performance Goal
An intended result of the Corporation’s strategy. For example, one strategic performance goal of ICBC is improving our customers’ experiences and perceptions of the company. Performance Level
Performance levels are benchmarks or standards against which Corporate and Individual performance are evaluated under the HIP plan. Performance Measure
An “indicator” used to evaluate progress made in achieving an identified goal. Performance Measures must be aligned with our strategy, and must meet SMART criteria (Specific, Measurable, Attainable, Relevant and Time-bound). Plan Year
The fiscal year in which performance is measured for the purpose of the Plan. HIP for a Plan Year is paid when performance results for that year are known, which is typically at or around the end of the first quarter of the following fiscal year. Probability of Achievement
The chance that a specified Performance Level will occur. A methodology applied to Corporate measures under the HIP plan to ensure a consistent approach to establishing Threshold and Target Performance Levels. Qualitative Measure
Qualitative measures are measures where the assessment of performance requires an element of judgment or subjectivity. For example, a qualitative assessment of a marble collection would measure the desirability of the colour of the marbles, or their sentimental value of the marbles. Quantitative Measure
Quantitative measures are measures where performance can be directly observed and measured. For example, a quantitative assessment of a marble collection would measure the number of marbles, or their market value.
{00097411;1} 13
G. HIP Payment Options Amounts payable under the HIP Plan will be determined in March of the following year. Employees who have earned a HIP payment will have the following options:
1. Cash: Take the HIP as a cash payment, subject to required statutory deductions.
2. Time off: A portion or all of the HIP can be banked and used to purchase time off of up to 10 working days to supplement current year vacation eligibility only. Purchased time can only be accessed after current and carry over vacation has been exhausted. Any unused purchased time is paid out at the end of the calendar year.
3. Group RRSP: A portion or all of the HIP can be directed to the employee’s Group RRSP on a pre-tax basis, up to the maximum annual contribution limit.
{00097411;1} 14
APPENDIX A 2014 HOLDBACK INCENTIVE PAY GRIDS
The below tables show the HIP opportunities of base salary. Actual HIP payment will be based on the actual performance levels defined under the Plan.
CEO
Performance Levels
Weight of Objective Below Threshold Threshold Target or above
Corporate 75% 0.00% 7.5% up to 15%
Weight of Objective Require
Improvement Developing/ Contributing
Fully successful/ Outstanding
Individual* 25% 0.00% 2.5% up to 5%
Total 0.00% 10% up to 20%
Executive Committee
Performance Levels
Weight of Objective Below Threshold Threshold Target or above
Corporate 60% 0.00% 6% up to 12%
Weight of Objective Require
Improvement Developing/ Contributing
Fully successful/ Outstanding
Individual* 40% 0.00% 4% up to 8%
Total 0.00% 10% up to 20%
Vice Presidents (Band 11)
Performance Levels
Weight of Objective Below Threshold Threshold Target or above
Corporate 50% 0.00% 5% up to 10%
Weight of Objective Require
Improvement Developing/ Contributing
Fully successful/ Outstanding
Individual* 50% 0.00% 5% up to 10%
Total 0.00% 10% up to 20%
{00097411;1} 15
Director (Bands 9-10)
Performance Levels
Weight of Objective Below Threshold Threshold Target or above
Corporate 50% 0.00% 4.25% up to 8.5%
Weight of Objective Require
Improvement Developing/ Contributing
Fully successful/ Outstanding
Individual* 50% 0.00% 4.25% up to 8.5%
Total 0.00% 8.5% up to 17%
Bands 7 - 8
Performance Levels
Weight of Objective Below Threshold Threshold Target or above
Corporate 40% 0.00% 3% up to 6%
Weight of Objective Require
Improvement Developing/ Contributing
Fully successful/ Outstanding
Individual* 60% 0.00% 4.5% up to 9%
Total 0.00% 7.5% up to 15%
Bands 4 - 6
Performance Levels
Weight of Objective Below Threshold Threshold Target or above
Corporate 40% 0.00% 2% up to 4%
Weight of Objective Require
Improvement Developing/ Contributing
Fully successful/ Outstanding
Individual* 60% 0.00% 3% up to 6%
Total 0.00% 5% up to 10%
Bands 1 - 3
Performance Levels
Weight of Objective Below Threshold Threshold Target or above
Corporate 0% 0.00% 0% 0%
Weight of Objective Require
Improvement Developing/ Contributing
Fully successful/ Outstanding
Individual* 100% 0.00% 2.5% up to 5%
Total 0.00% 2.5% up to 5%
*HIP payment will be reduced if performance level achieved is below target. See Individual Performance Levels for more details.
{00097411;1} 16
APPENDIX B
HIP ILLUSTRATION (Band 6 Manager with Staff)
Base salary = $100,000 (A)
HIP opportunity = 10% of base salary, broken down as follows:
o Corporate = up to 4% of base salary
o Individual = up to 6% of base salary
STEP 1: Determine the HIP Payout % based on actual performance levels by component
Measure Weighting HIP
Target x
Performance Level
= HIP Payout
%
Corporate 40% 4% 95% 3.80%
Individual 60% 6% Fully Successful 6.00%
Total 10% 9.80%
STEP 2: Apply the HIP payout % to base salary (B x A)
HIP payout 9.8% x base salary $100,000 = $9,800
Note: The data is for illustrative purposes only.
(B)
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.15.7.a Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.15.7.a Reference: ICBC Response to TREAD IR No. 1 12.3 Attachment A – ICBC Response to the Review of the Insurance Corporation of British Columbia – August, 2012 Exhibit B-4
With respect to Recommendation No. 10 please:
Describe the extent to which zero-based budgeting has been implemented to date and any challenges to full implementation, and advise when full implementation will be achieved.
Response:
The Commission’s decision in Order G-193-13 determined the actual implementation of the
2012 Government Review of ICBC recommendations is the purview of ICBC and the
government and therefore outside the scope of this proceeding. While ICBC acknowledges the
Commission’s decision, which ICBC believes is inclusive of the extent to which zero-based
budgeting has been implemented, in the spirit of transparency and being helpful, ICBC is
providing the following information.
ICBC described the extent to which zero-based budgeting has been implemented in the
responses to information requests 2013.1 RR TREAD.22.1 to 22.8.
ICBC is currently impacted by significant change to its systems and processes. As such, there
is a need for ICBC to continuously review the impacts of these changes to facilitate zero-based
budgeting. For example, as discussed in the response to information request 2013.1 RR
TREAD.22.1, the Claims Division is in the midst of implementing a new claims system. As part
of the planning and implementation, ICBC thoroughly re-evaluated the job positions and the
appropriate staffing level to support the claims function. As a result, ICBC anticipates a
reduction of 341 full-time equivalents related to the completion of Claims Transformation, which
is discussed in the Application, Chapter 6, paragraph 56, page 6-14.
ICBC also confirmed in the response to information request 2013.1 RR TREAD.22.1 that in
order for budgeting to be optimal, a balance needs to be maintained between the efficiency of
the process, simplicity versus comprehensiveness, and the ultimate achievement of ICBC’s
corporate objectives. Implementing a full zero-based budgeting process is both resource and
time-intensive. To ensure the most efficient use of resources, ICBC applies zero-based
budgeting to areas where the most value can be derived.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.15.7.b Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.15.7.b Reference: ICBC Response to TREAD IR No. 1 12.3 Attachment A – ICBC Response to the Review of the Insurance Corporation of British Columbia – August, 2012 Exhibit B-4 With respect to Recommendation No. 10 please: Describe the reviews ICBC has conducted to ensure alignment to the Province of British Columbia’s priorities and provide copies of the resulting final reports or other documents. Response:
The Commission’s decision in Order G-193-13 determined the actual implementation of the
2012 Government Review of ICBC recommendations is the purview of ICBC and the
government and therefore outside the scope of this proceeding. While ICBC acknowledges the
Commission’s decision, which ICBC believes is inclusive of any reviews conducted and any
reports or documents prepared on ICBC’s progress and achievement of the recommendations,
in the spirit of transparency and being helpful, ICBC is providing the following information.
During the 2013 budgeting cycle, which commenced in the latter part of 2012, ICBC conducted
detailed budget reviews by division to evaluate staffing levels, compensation costs, and
operating expenses. ICBC compared operating cost spending to budgets, and also against the
discretionary spending policy which was updated in August 2012 to align with the government’s
policy. Although documentation was completed for these budget reviews, no formal reports
were produced or issued.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.15.7.c Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.15.7.c Reference: ICBC Response to TREAD IR No. 1 12.3 Attachment A – ICBC Response to the Review of the Insurance Corporation of British Columbia – August, 2012 Exhibit B-4 With respect to Recommendation No. 10 please: Does ICBC’s implementation of “… a stricter discretionary spending policy” include anything other than applying the same expense reimbursement policy and rates as Government? If so, please explain. Response:
The Commission’s decision in Order G-193-13 determined the actual implementation of the
2012 Government Review of ICBC recommendations is the purview of ICBC and the
government and therefore outside the scope of this proceeding. While ICBC acknowledges the
Commission’s decision, in the spirit of transparency and being helpful, ICBC is providing the
following information.
ICBC implemented a stricter discretionary spending policy in August 2012. In addition to
aligning more closely with government’s policy in terms of expense reimbursement and rates
(unless otherwise determined by ICBC’s Collective Agreement with the Canadian Office and
Professional Employees’ Union), ICBC’s policy was amended to provide clarity and guidance of
appropriate expenditures.
For example, ICBC’s updated discretionary policy provides detailed standards for spending on
discretionary items such as meeting costs, cell phone eligibility, computer equipment, dues and
memberships, as well as standards for reimbursement of expenses such as travel, meal
allowances, and business use of personal vehicles where standard rates for reimbursement are
set. Included with the policy is a series of frequently asked questions which reinforces the
standards and aligns to the policy statement of:
Discretionary spending needs to be minimized.
Employ low-cost alternatives wherever possible.
Consistently apply discretionary spending practices throughout the company with
minimal exceptions.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.16.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.16.1 Reference: ICBC Response to TREAD IR No. 1 12.3 Attachment B – Government Review Summary of Recommendation Status – November 4, 2013 Exhibit B-4 The Government Review Summary of Recommendation Status – November 4, 2013 characterizes Recommendation No. 3 “ICBC should develop and implement an overall strategy to more effectively manage bodily injury claims” and Recommendation No. 24 “ICBC should place a higher priority on replacing the legacy Driver Licensing systems” as currently “Partially Completed”. Please provide explanations of ICBC’s progress in completing these two Recommendations, describing changes and improvements already implemented, the remaining objectives, and the expected completion date(s). Response:
In Order G-193-13, the Commission determined that implementation of the 2012 Government
Review of ICBC recommendations is the purview of ICBC and the government and therefore is
outside the scope of this proceeding. However, ICBC can advise that it is in discussions with
government regarding replacing the legacy Driver Licensing systems. ICBC can also advise
that work on managing bodily injury claims is ongoing, and work on an overall strategy to more
effectively manage bodily injury claims is in progress. For more information on managing bodily
injury claims, please see the response to information request 2013.2 RR TREAD.19.1.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.17.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.17.1 Reference: ICBC Response to TREAD IR No. 1 12.5 Exhibit B-4 Did the one Senior Executive position that was eliminated as a result of combining the Insurance and Driver Licensing Divisions cause a net reduction in the total number of company employees, or was that individual given a position elsewhere in the Corporation? What net amount of cost savings resulted from the elimination of that position? Response:
The Senior Executive position was eliminated and represents a net reduction in ICBC’s
employees. The net cost savings is approximately $368,000 on an annual basis.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.17.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.17.2 Reference: ICBC Response to TREAD IR No. 1 12.5 Exhibit B-4 Please identify the specific cost savings that resulted from the merger of the Corporate Communications and Stakeholder Engagement Division and the Customer Strategy and Marketing Division. Response:
The merger of the two divisions, (i) the Corporate Communications and Stakeholder
Engagement Division, and (ii) the Customer Strategy and Marketing Division, resulted in
approximately $1.8 million in cost savings related to a reduction of 18 full-time equivalents.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.17.3 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.17.3 Reference: ICBC Response to TREAD IR No. 1 12.5 Exhibit B-4 Did the three Vice President positions that were eliminated in the Claims, Finance, and Information Services Divisions respectively cause a net reduction in the total number of company employees, or were those individuals given positions elsewhere in the Corporation? What net amount of cost savings resulted from the elimination of those three positions? Response:
Two of the three Vice President positions that were eliminated resulted in a net reduction in the
total number of company employees as follows:
1) The Vice President positions in Claims and Information Services were eliminated and
represent a net reduction in ICBC’s employees.
2) The Vice President position in Finance was eliminated and re-classified as a Director
position.
The cost savings resulting from the elimination of those three positions is $0.6 million on an
annual basis.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.17.4 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.17.4 Reference: ICBC Response to TREAD IR No. 1 12.5 Exhibit B-4 Does ICBC include the reclassification of the General Counsel role from a Vice President-equivalent to a Director-level position in the count of eliminated positions? If so, please explain. What net amount of cost savings resulted from the reclassification? Response:
The reclassification of the General Counsel job from a Vice President-equivalent position to a
Director-level position was included in the count of eliminated positions for the Vice President or
equivalent level. The cost savings resulting from the reclassification is $59,000 on an annual
basis.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.18.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 1
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.18.1 Reference: ICBC Response to TREAD IR No. 1 13.1 and Attachment A – Response to IR 2012.2 RR BCOAPO 24.2 Exhibit B-4 ICBC’s Response avoided the central purpose of TREAD’s request – to explain why BI claims severity has had average annual increases of 6% over the last decade. The focus of ICBC’s Response was on disputing any correlation with general inflation. What specific action has ICBC taken to mitigate the major factors that have contributed to this very significant increase in BI claims severity over the past decade? Response:
The focus of the referenced question was on the correlation, if any, with inflation, which was the
point to which ICBC responded. TREAD is now asking a different question.
Information request 2013.1 RR TREAD.13.1 asks, “Please explain ICBC’s understanding of why
BI claims severity has increased by average annual increases of 6% over the last decade,
rather than increasing roughly at the level of inflation”. ICBC’s response to information request
2013.1 RR TREAD.13.1 states that, “ICBC has no evidence to support the assertion that the
factors that drive the cost of bodily injury (BI) claims are correlated with general inflation as
measured by the Consumer Price Index (CPI)”. ICBC further explains that, “The CPI is based
on a market basket of goods and services, which have no meaningful relationship with the
“goods” in a BI claims “basket”. The BI claims basket contains, among others, several cost
components (often referred to as “heads of damage”) that include General Damages, Past
Wage Loss, Future Wage Loss, Future Care, and Third Party Costs and Disbursements.”
Further information on factors that drive BI claims costs was provided in the response to
information request 2013.1 RR TREAD.13.1, Attachment A – Response to Information Request
2012.2 RR BCOAPO.24.2.
In terms of the question now being asked, ICBC has implemented a number of initiatives to
address rising BI claims costs over the past several years. As noted in the Application, Chapter
6, it is believed that these initiatives helped reduce the rate of increase in BI severity which, prior
to 2005, was rising at about 8% per year but moderated to about 6% per year thereafter.
Please see the response to information request 2013.2 RR TREAD.19.1 for information
regarding ICBC’s actions to address rising BI claims costs.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.18.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
Page 1 of 2
30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.18.2 Reference: ICBC Response to TREAD IR No. 1 13.1 and Attachment A – Response to IR 2012.2 RR BCOAPO 24.2 Exhibit B-4 ICBC’s Response avoided the central purpose of TREAD’s request – to explain why BI claims severity has had average annual increases of 6% over the last decade. The focus of ICBC’s Response was on disputing any correlation with general inflation. ICBC’s attached Response to IR 2012.2 RR BCOAPO 24.2 notes that one of the three broad pressures driving up BI claims costs is the “…perception (and sometimes misperception) of ICBC’s role” in the process of applying the tort system to settling BI costs.
a) Please describe the referenced perception of ICBC’s role in the process of applying the tort system to settling BI costs, and if necessary, address to what extent different perspectives (e.g. plaintiff, defendant, counsel, general public, etc.) may alter that perception;
b) Please describe the misperceptions alluded to by ICBC; and
c) Please describe ICBC efforts to specifically identify such perceptions and
misperceptions, understand the causes that give rise to them, and implement a plan to address them.
Response:
As noted in the response to 2013.2 RR TREAD.18.1, the focus of the referenced question was
on the correlation, if any, with inflation, which was the point to which ICBC responded.
As discussed in the response to information request 2013.1 RR BCUC.154.4, Attachment A –
Legal Representation Rate, Section A, there are different “perspectives” depending on the role a
person may have in the tort (claim) system. For example, whether a person is an ICBC insured
for the purposes of collision coverage, accident benefits, or a claimant or a plaintiff for the
purposes of a tort claim, or some combination of these, will affect their perception of ICBC’s role
in the process. Section A further states that ICBC must balance the needs of both the injured
party and the management of the Basic insurance policyholder’s premiums which can also alter
the perception of ICBC’s role. An at-fault motorist who is indemnified for legal liability by ICBC
may perceive ICBC’s role as wholly appropriate while a plaintiff who must prove their injuries in
tort may have a different perspective. There are, of course, other factors that can affect the
perspectives of different parties, some of which are external to ICBC.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.18.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
There are many misperceptions of ICBC’s role in the process. The misperception, for example,
that ICBC is an “institutional defendant” with “unlimited resources” confuses the fact that the
Basic insurance policyholder contributes to payments on behalf of the liable defendant as
opposed to some faceless corporation. Please see the response to information request 2013.2
RR BCUC.202.1. Another common misperception is that injured parties believe they sue ICBC
when they are injured in a motor vehicle accident when in reality they are commencing a legal
action against another policyholder they allege has negligently operated a motor vehicle.
As discussed in the response to information request 2013.1 RR BCUC.154.2, ICBC is surveying
a large sample of ICBC policyholders to develop a deeper understanding of its customer’s
perceptions as they relate to legal representation. Information campaigns and improved
communications as outlined in the response to information request 2013.1 RR BCUC.154.4,
Attachment A – Legal Representation Rate, have been initiated to help the public understand
the claim process and dispel misconceptions. Despite these efforts, ICBC acknowledges that
there will always likely be some misperceptions and varying perceptions of ICBC’s role in
managing injury claims.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.19.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.19.1 Reference: ICBC Response to TREAD IR No. 1 13.3 Exhibit B-4 ICBC’s Response does not identify any development or implementation of an overall strategy to more effectively manage bodily injury claims. Does ICBC’s overall strategy amount to only minor adjustments to a number of existing strategies? If not, please clearly describe the overall strategy and provide copies of documents that best articulate it. Response:
ICBC’s response to information request 2013.1 RR TREAD.13.3 did not address development
and implementation of an overall strategy because that was not what was asked. ICBC did
respond to information request 2013.1 RR TREAD.13.4, which asked about actions taken and
progress made to develop and implement an overall strategy to manage bodily injury (BI)
claims.
Regarding the information request now being asked, ICBC does not characterize the overall
strategy to manage bodily injury claims as “only minor adjustments to existing strategies”.
The areas where ICBC can control or influence the factors affecting bodily injury claims remain
the foundation for the claims strategies outlined in the Application; however, significant changes
have been made by building on this foundation. These changes capitalize on new
opportunities, notably the opportunities afforded by ICBC’s Claims Transformation, which
represents a fundamental change in ICBC’s overall approach to claims handling.
Claims Costs - General
Claims costs are a function of exposures (the number of vehicles on the road), frequency (the
rate of claims on those exposures), and severity (the average cost of those claims). ICBC’s
initiatives can control or influence some, but not all, of the factors affecting bodily injury claims
and costs. These fundamental facts drive ICBC’s approaches and initiatives to managing bodily
injury claims costs, which fall into two major categories: loss prevention strategies focused
primarily on reducing the frequency of BI claims; and, claims strategies designed to reduce
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.19.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
average BI claims severities. At this high level, there is consistency in ICBC’s overall strategy,
but it would be oversimplifying to characterize the changes that have occurred within these
broad parameters as refinements.
More information on initiatives and an update on ICBC’s overall strategy are provided below.
Frequency
Frequency is affected by factors such as the amount of driving, driving behaviour, and weather
conditions. ICBC invests in loss prevention strategies such as driver licensing and road safety
programs to help prevent traffic-related deaths, injuries, and crashes. These investments help
keep people safe and help manage claims costs by contributing to the reduction in the number
of crashes and a reduction in the losses associated with those crashes that do occur.
Loss prevention strategies have been focused on traditional road safety programming (including
public awareness, driver licensing and testing, enforcement funding, and the Road Improvement
Program), as well as enhancements and expansion of the Intersection Safety Camera program,
and supporting the Province’s road safety policy agenda on issues such as impaired driving and
distracted driving. Consistent with development of the overall strategy for managing BI claims,
several existing programs and initiatives are being refocused to specifically address BI
frequencies.
Severity
BI claims severity is affected by factors such as the type and complexity of injury claims, the
costs of medical and rehabilitation services, payments for damages, and the costs of litigated
claims. As discussed in the response to 2013.1 RR TREAD.13.1, the drivers of BI claims
severity differ from typical inflationary cost drivers, and there is a constant upward pressure on
BI claims severity which ICBC must continue to manage.
As discussed in the Application, ICBC began seeing significant BI claims cost pressures in late
2005 and undertook analysis to determine the drivers of BI claim cost increases. Using this
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.19.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
analysis, ICBC identified three overarching claims cost management strategies as key elements
in managing BI claims costs. Because these three claims cost management strategies
encompass the factors affecting BI claims severity that are within ICBC’s control or influence,
they continue to remain relevant today. The claims cost management strategies are: claims
handling; management focus and accountability; and, business indicator reporting and data
analysis. The following provides information on initiatives implemented under these claims
costs management strategies.
Claims segmentation; i.e., classifying claims by type and complexity in order to better
match each claim with appropriate claims handling models and adjuster and manager
skill sets, is an industry best practice and is a cornerstone of ICBC’s claims handling
strategy. Since 2005, ICBC has improved its use of segmentation to improve claims
handling, including creation and subsequent expansions of ICBC’s Centralized Claims
Injury Centre (CCIC); creation of the Litigation Centre and subsequent expansion of the
Litigation Centre model; implementation of the new functional organizational model to
align the management of similar types of claims within the same reporting stream; the
new Claims hierarchy which aligns claims handling staff based on knowledge, skills and
abilities within the new reporting streams; and, in 2013, a new BI First Notice of Loss
process to improve the assignment and handling of BI claims.
Customer experience initiatives, including: improved standards for initial claim handling;
initiatives to build effective relationships with stakeholders to maximize the quality and
benefit of services that support an improved customer experience, with improved
standardization at fair market prices; improvements to training and tools for adjusters
which have been implemented and refined since 2006; service quality management;
initiatives to support timely treatment including previous improvements to the processes
for paying for chiropractic services and more recent changes to streamline processes for
determining coverage and payment of accident benefits; and, improving communications
with customers to build trust and deliver in areas that matter most to them, including
implementation and subsequent expansion of the Language Line and improved online
information and, in 2013, the information campaign and dedicated Punjabi claim line.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.19.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
Improving claims handling quality and oversight through initiatives such as: regular open
and closed file reviews; revised payment authorities; leveraging improved business
indicator reporting and data analytics, along with other reviews, to identify areas of
opportunity for coaching, training, and sharing of best practices; and, more recently, the
improved claims handling and management as a result of implementation of the
functional organizational model and Claims hierarchy.
Development and implementation of improved business indicator reports and analytics
over a number of years, including reports on opened, pending and closed BI exposures;
Claims leading indicator and key performance measures reports; the Claims “Health
Check” reports implemented in 2011 to provide business unit-specific reporting on key
metrics at the adjuster level; and, improvements to claims handling which leveraged
information provided by improved reporting and analytics, such as the Litigation Centres
and subsequent leveraging of the Litigation Centre model for other represented claims.
Other initiatives which target specific drivers of BI claims severity, notably the elimination
of the Low Velocity Impact program regarding minor damage claims; improved alignment
of taxable costs and disbursements with Supreme Court Civil Rules, BC Regulation
168/2009; and, greater in-house use of legal resources on newly litigated claims. The
Application includes prospective adjustments for these last two items which reduce the
rate indication for the 2013 policy year.
ICBC’s Transformation Program is a corporate priority with development and
implementation funded by ICBC’s Optional insurance business. Claims Transformation
is a key piece of ICBC’s Transformation Program and has been in development for the
last few years. Implementation of the new Claims systems and business processes
which are part of Claims Transformation began in late 2013 and continue into 2014.
Consistent with the development of the overall strategy for managing BI claims, recent claims
initiatives have included an increased emphasis and focus on the management of BI claims
costs, and improvements to claims handling designed to provide a more consistent customer
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.19.1 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
experience, ensure a more timely resolution of claims, reduce the need for legal representation,
and ultimately reduce BI severities and costs. Comprehensive research and analysis into the
specific drivers of BI claims cost increases are also underway.
Multi-year BI Strategy
A multi-year BI strategy and related set of initiatives is being finalized as part of the 2014
corporate planning process and as such there is no one document yet that articulates the
strategy. Details regarding this strategy will be included in the 2014 Revenue Requirements
Application. Broadly speaking, this strategy will focus on several key areas, as follows:
Successful implementation and stabilization of new claims business model and system
in 2014.
Ongoing improvements to the consistency, quality and timeliness of claims handling
processes.
Implementation of predictive analytics capabilities to further optimize BI claims
segmentation, assignment and handling, reduce fraud, and improve BI claims cost
management.
Partnerships with industry partners, government and other stakeholders to implement
programs designed to reduce BI frequency, including injury crashes caused by
distracted driving.
Toward Responsible Educated Attentive Driving Information Request No. 2013.2 RR TREAD.19.2 Dated 02 December 2013 Insurance Corporation of British Columbia Response Issued 23 December 2013
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30 August 2013 Insurance Corporation of British Columbia Revenue Requirements Application for the Policy Year Commencing November 1, 2013
2013.2 RR TREAD.19.2 Reference: ICBC Response to TREAD IR No. 1 13.3 Exhibit B-4 ICBC’s Response does not identify any development or implementation of an overall strategy to more effectively manage bodily injury claims. What position in the Corporation has the most direct responsibility for development or implementation of an overall strategy to more effectively manage bodily injury claims, as recommended in the Review? Response:
As noted in ICBC’s response to 2013.2 RR TREAD.19.1, ICBC’s response to information
request 2013.1 RR TREAD.13.3 did not address development and implementation of an overall
strategy because that was not what was asked.
Regarding the question currently being asked, ICBC’s strategy for managing bodily injury (BI)
claims is part of the overall corporate strategy, which is developed by ICBC Executive and
approved by ICBC’s Board of Directors. ICBC’s Executive Committee is accountable for the
implementation of the corporate strategy, including ICBC’s strategy for managing BI claims.
ICBC’s strategy for managing BI claims includes a comprehensive response to the factors
affecting BI claims costs and involves more than one area of ICBC. While the Vice President of
Claims is the lead Executive accountable for ICBC’s strategy for managing BI claims, other key
members of the Executive Committee also play key roles in the development and
implementation of this strategy.