Insurance Corporation of British Columbia
2023 Revenue Requirements Application |
Decision and Order G-266-23 |
October 11, 2023 |
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Before: E. B. Lockhart, Panel Chair B. A. Magnan, Commissioner
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TABLE OF CONTENTS
Page no.
1.2 Legislative and Regulatory Framework
1.4 Application Review Process and Participants
2.0 Decision Scope and Context
2.1 Accepted Actuarial Practice
2.3 Basic Insurance Product Reforms
3.0 The PY 2023 Actuarial Indicated and Proposed Rate Change
3.1.1 BVDC Claims Forecast Analysis
3.1.2 EAB Claims Forecast Analysis
3.2.2 Pension and Post-Retirement Benefit Expense
3.3.1 ICBC’s Investment Management Strategy
3.3.2 Proposed Changes to the New Money Rate and Yield on Basic Capital Available for Rate Setting Formulae
3.4 Panel Determination on the PY 2023 Proposed Rate Change
4.0 Considerations for Future Revenue Requirements Applications
5.1 Proposed Changes to the Dates for Fiscal Year 2023/24 Compliance Reporting
5.2 Proposed Change to Reporting on Legal Representation Conversion Rate
5.3 Requests for Confidentiality
6.1 Financial Statement View versus Policy Year View..
6.3 ICBC’s Response to Directions Related to Order G-96-22.
6.4 Issues Raised in Letter of Comment
COMMISSION ORDER G-266-23
APPENDIX A List of Acronyms
APPENDIX B List of Exhibits
On December 15, 2022, the Insurance Corporation of British Columbia (ICBC) filed its 2023 Revenue Requirements Application (Application) for Universal Compulsory Automobile Insurance (Basic insurance) with the British Columbia Utilities Commission (BCUC) seeking a Basic insurance rate change of zero percent for the 24-month period beginning on April 1, 2023 and ending on March 31, 2025 (Policy Year 2023 or PY 2023). ICBC also proposed changes to the New Money Rate and Yield on Capital Available for Rate Setting formulae, an amended compliance reporting schedule for the 2023/24 fiscal year, and to discontinue reporting on the Legal Representation Conversion Rate metric.
The Insurance Corporation Act sets out the BCUC’s role in regulating ICBC’s Basic insurance. In particular, ICBC must make Basic insurance available in a manner that the BCUC considers is adequate, efficient, just and reasonable. The BCUC must also follow government directives when regulating and fixing rates using the factors, criteria and guidelines as provided. The BCUC does not have the power to change a term or condition of any plan of Basic insurance. The BCUC also does not regulate or set rates for Optional automobile insurance. For PY 2023, Special Direction IC2 to the BCUC, BC Regulation 307/2004, as amended (Special Direction IC2) specifies that the BCUC must fix rates for Basic insurance so that the rates include a capital provision equal to 7 percent of the required premium and that the BCUC must not decrease rates.
The actuarial indicated rate change is an estimate of how much Basic insurance premiums need to change to pay for the net costs and expenses of providing Basic insurance for PY 2023, compared to existing premiums. The PY 2023 actuarial indicated rate is a decrease of 6.5 percentage points, due to a forecast revenue surplus of $421.4 million for PY 2023. The main drivers of this rate change are a lower capital provision as directed by Special Direction IC2 for the current policy year compared to the prior policy year and higher projected investment income on new premiums due to a higher New Money Rate. These changes are partially offset by forecast increases in claims costs, which are the largest component of ICBC’s Basic insurance cost, due to inflationary pressures.
Following a public review process, which included four interveners and one letter of comment from a member of the public, the Panel approves a permanent Basic insurance rate change of zero percent for all new or renewal policies with an effective date on or after April 1, 2023, as well as other changes in accordance with ICBC’s Application. The Panel makes the following key findings:
• The claims costs component of ICBC’s costs is reasonable and is in accordance with Canadian accepted actuarial practice for the purpose of determining the PY 2023 actuarial indicated rate change;
• ICBC’s forecast operating expenses for PY 2023 are reasonable for the purpose of determining the PY 2023 actuarial indicated rate change;
• The proposed changes to the New Money Rate and Yield on Capital Available for Rate Setting formulae are appropriate to reflect ICBC’s current investment strategy and expected investment returns; and
• There is no evidence in this proceeding to suggest a Basic insurance rate increase is warranted.
The Panel acknowledges the uncertainty inherent in actuarial estimates, compounded by the relative newness of Enhanced Care, which was implemented on May 1, 2021 and for which there is limited ICBC data. The difference between the actuarial indicated rate change of -6.5 percent and the approved rate change of zero percent will result in an increase in ICBC’s Basic capital, all else being equal.
The Panel also approves the requested changes to the New Money Rate and Yield on Capital Available for Rate Setting formulae, as well as the amended compliance reporting deadlines and request to discontinue reporting on the Legal Representation Conversion Rate metric.
1.0 Introduction
On December 15, 2022, the Insurance Corporation of British Columbia (ICBC) filed its 2023 Revenue Requirements Application (RRA) for Universal Compulsory Automobile Insurance (Basic insurance) with the British Columbia Utilities Commission (BCUC) seeking a Basic insurance rate change of zero percent for the 24-month period beginning on April 1, 2023 and ending on March 31, 2025 (Policy Year 2023 or PY 2023), among other requests (Application).
ICBC submitted the Application in accordance with Special Direction IC2 to the BCUC, BC Regulation 307/2004, as amended (Special Direction IC2), which sets out the regulatory framework and requirements for the regulation of Basic insurance. As required by Special Direction IC2, ICBC states that the proposed rate change is consistent with accepted actuarial practice (AAP), subject to legislative requirements, and it includes a capital provision equal to 7 percent of the required premium. ICBC submits that the proposed rate change will allow ICBC to continue building Basic insurance capital levels while also promoting rate stability in the long term.[1]
On January 10, 2023, the BCUC approved the proposed rate change on an interim basis pending the review of the Application.[2] This Decision is the Panel’s determination of the Basic insurance rate change on a permanent basis for PY 2023, in accordance with the legislative and regulatory framework outlined in Section 1.2, as well as the Panel’s consideration of other approvals sought and issues arising as set out in Section 5.0 and Section 6.0, respectively. The Panel addresses the following:
• Key components of the PY 2023 proposed rate change, including the Panel’s findings on the actuarial estimates of claims costs, operating expenses and investment income;
• The approvals sought regarding changes to filing deadlines for compliance reporting, the Legal Representation Conversion Rate metric, and requests for confidentiality in this proceeding; and
• Other matters raised by participants, members of the public or arising during the course of the proceeding.
1.1 Background
ICBC is a provincial Crown corporation mandated by the Insurance Corporation Act (ICA), Insurance (Vehicle) Act and the Motor Vehicle Act to provide Basic insurance to motorists in British Columbia (BC). Basic insurance is subject to BCUC regulation, and ICBC is required to apply to the BCUC for approval of the Basic insurance rate change every year, subject to legislative direction, in order to set rates for the upcoming policy year. Besides being the sole provider of the Basic insurance in BC, ICBC also competes with other insurance companies in an open Optional automobile insurance market (Optional insurance), which is not regulated by the BCUC.[3] ICBC states that it operates these two lines of business, along with its Non-insurance[4] business on a fully integrated basis so that economies of scope and scale of ICBC’s operations can benefit BC motorists.[5]
As discussed in Section 2.3 below, since 2018, ICBC has undertaken certain reforms of the Basic insurance product pursuant to government direction. Section 45(6) of the ICA specifies that the BCUC does not have the power to change a term or condition of any plan of Basic insurance, which is otherwise referred to in this Decision as the Basic insurance product. However, these product reforms impact the actuarial analysis including the proposed rate change, which is discussed in Section 3.0.
1.2 Legislative and Regulatory Framework
Part 2 of the ICA and specified sections of the Utilities Commission Act (UCA) provide the BCUC’s jurisdiction to regulate ICBC’s Basic insurance business, in that ICBC must make available Basic insurance in a manner, and in accordance with practices and procedures, that the BCUC “considers are in all respects adequate, efficient, just and reasonable.”[6]
Further, section 44(1) of the ICA provides that the UCA applies to ICBC as if it were a public utility, excluding specified sections of the UCA. Under the rate setting sections of the UCA, a public utility must not make, demand, or receive “an unjust, unreasonable, unduly discriminatory or unduly preferential rate for a service provided by it in British Columbia.” However, because ICBC is not a public utility, the reference to “rate” in the UCA is defined as “compensation of the Insurance Corporation of British Columbia, other than any fee or other remuneration to which that corporation is entitled for any activity it undertakes under section 7 (g), (h) or (i) of the Insurance Corporation Act.” Sections 7(g), (h), and (i) of the ICA generally refer to ICBC’s function related to government programs and highway safety.
ICBC’s regulatory framework is established by the legislature and the Lieutenant Governor in Council. Special Direction IC2 sets out the BCUC’s requirements with respect to setting ICBC’s Basic insurance rates for PY 2023. Under Special Direction IC2, the BCUC must:
• Fix Basic insurance rates based on a 24-month period beginning on April 1, 2023 and ending on March 31, 2025;[7]
• Fix Basic insurance rates based on accepted actuarial practice so that the rates allow ICBC to collect sufficient revenue to pay the costs related to Basic insurance;
• Set rates for Basic insurance rates in a way that will allow ICBC to achieve or maintain the capital available in relation to its Basic insurance business equal to at least 100 percent of the Minimum Capital Test (MCT) ratio. However, the MCT ratio requirement is suspended for PY 2023;[8]
• Fix Basic insurance rates such that no customer renewal credit for PY 2023 is approved;[9]
• Set rates in accordance with the capital management plan in existence on May 27, 2016, replacing the capital maintenance and build or release provisions with a capital provision equal to 7 percent of the required premium;[10] and
• Not decrease existing rates in any policy year, except in PY 2021.[11]
In the Application, ICBC refers to the requirement in Special Direction IC2 not to decrease rates for PY 2023 as the “rate change floor” (Rate Change Floor).[12]
In addition, Special Direction IC2 requires that the BCUC must regulate and fix Basic insurance rates in a manner that recognizes and accepts actions taken by ICBC in compliance with government directives issued to ICBC. The Lieutenant Governor in Council may provide government directives in the form of a special direction regarding the way ICBC’s Basic insurance business is regulated.[13]
The BCUC has no jurisdiction over ICBC’s Optional insurance business and does not set rates for Optional insurance.
1.3 Approvals Sought
On December 15, 2022, ICBC filed its Application with the BCUC, seeking the following approvals, as amended during the regulatory review process:[14]
• Approval of a zero percent rate change for PY 2023, as set out in Section 3.0 of the Decision.
• Approval to change the formulae for the New Money Rate (NMR) and Yield on Capital Available for Rate Setting (YCARS) to formally incorporate leverage in ICBC’s investment asset mix, as set out in Section 3.3.2 of the Decision.
• Approval of two changes to ICBC’s compliance reporting schedule for the 2023/2024 fiscal year, as set out in Section 5.1 of the Decision.
• Approval to discontinue reporting on the Legal Representation Conversion Rate metric in future RRAs, as set out in Section 5.2 of the Decision.
In addition, ICBC seeks BCUC approval to keep certain information filed in the Application and in its responses to information requests (IRs) confidential. This request is considered in Section 5.3 of the Decision.
1.4 Application Review Process and Participants
The regulatory timetable for the review of the Application included intervener registration, one round of BCUC and intervener IRs to ICBC, a workshop (Workshop), and ICBC’s responses to undertakings at the Workshop, followed by final and reply arguments.[15]
Four parties registered as interveners in this proceeding. The three registered interveners who filed final arguments are:
• Movement of United Professionals (MoveUP);
• Richard McCandless (McCandless); and
• British Columbia Old Age Pensioners’ Organization et al. (BCOAPO).
The Insurance Bureau of Canada also registered as an intervener and submitted IRs but did not file final argument.
The BCUC also received one letter of comment from Mr. Richard Landale (Landale) stating, among other matters, that the Application lacks specific consideration of Basic insurance policyholders who are seniors. This letter of comment is addressed in Section 6.4 of the Decision.
On January 10, 2023, the BCUC approved ICBC’s requested zero percent change to Basic insurance rates for implementation on an interim basis for all new or renewal policies with an effective date on or after April 1, 2023. The BCUC noted it will determine the manner by which any variance between approved interim rates and permanent rates, including interest if any, will be refunded to or collected from policyholders at the time the BCUC renders its final decision on the Application.[16]
Following the scheduled process and the submission of ICBC’s reply argument, on August 18, 2023, ICBC filed an errata (Errata) to its response to McCandless IR 3.9. The Panel reopened the evidentiary record of the proceeding to admit the Errata and registered interveners were provided the opportunity to file written submissions to the BCUC, outlining any concerns related to the Errata including whether any further regulatory process is warranted.[17] The BCUC did not receive any such submissions.
2.0 Decision Scope and Context
The regulatory framework discussed in Section 1.2 informs the scope and context of the Panel’s review of the PY 2023 Basic insurance rate change. The Panel must set a rate change for PY 2023 that is no less than zero and must allow ICBC to collect sufficient revenue to pay the costs related to Basic insurance including a capital provision equal to seven percent of the required premium.
In this section, the Panel identifies the following items outlining the scope and context of our review of the Application, which is consistent with the BCUC’s decision relating to ICBC’s most recent application for a rate change (PY 2021).
• The direction in Special Direction IC2 that rates must be determined using AAP, subject to applicable legislation;
• ICBC operates in a “closed system”, enabling variances resulting from forecast uncertainty to be absorbed in the subsequent policy year; and
• Basic insurance product reforms since 2018.
2.1 Accepted Actuarial Practice
Similar to other insurance companies, ICBC’s Basic insurance rates are set on a policy year basis.[18] The proposed rate change represents the adjustment to Basic insurance revenue that ICBC estimates based on accepted actuarial practice in Canada (AAP), modified to comply with applicable legislation. AAP is the actuary’s professional standard of practice for how their work is performed.[19] ICBC explains that AAP requires that Basic insurance rates provide for the “best estimate” of costs of Basic insurance and, in the case of ICBC, include a provision for capital instead of a provision for profit.[20]
ICBC outlines that the vast majority of ICBC’s Basic insurance costs are the costs of processing claims and the claims payments themselves. Depending on the claim, ICBC expects that these costs, including income replacement and medical costs for the injured parties, may be paid over the next 50 years. As such, estimating the ultimate loss amount or costs of a claim requires modelling assumptions based on historical patterns and expert judgement.[21] ICBC acknowledges that the actuarial judgement involved in the analysis can create some variability between one actuary’s best estimate and another’s but submits that AAP includes constraints on the actuary’s judgement. ICBC states the actuary relies on input from subject matter experts, their knowledge of the business, and relevant economic and social influences to develop the actuary’s best estimate.[22] Further, ICBC states that AAP requires the actuary’s best estimate to be an unbiased best estimate, meaning that the estimate considers both favourable and unfavourable information equally in the analysis.[23]
In this Application, ICBC states that the proposed rate change, which the Panel reviews in Section 3.0 of this Decision, is based on the combined effect of the actuarial analysis resulting in an actuarial indicated rate change of -6.5 percentage points and a legislative overlay from Special Direction IC2 that requires existing rates not decrease for PY 2023.[24] With consideration of the actuary’s judgment, ICBC notes that its actuaries examined several scenarios to evaluate the sensitivity of their actuarial analysis to changes in certain assumptions, with all other assumptions being held unchanged, in response to the BCUC’s comment in the 2019 RRA Decision that stakeholders find this type of analysis useful. ICBC states that, within the range of scenarios it considered (as well as those brought forward through the proceeding IR process), its actuaries cannot foresee any change in assumption or approach that would accord with AAP such that the actuarial indicated rate change is above zero.[25]
ICBC states that the actuarial analysis prepared for the Application has been certified by ICBC’s Chief filing actuary, Kelly Aimers, FCIA, and an external reviewing actuary, William Weiland, FCIA, as being prepared in accordance with AAP.[26]
AAP requires that the actuary set a standard for materiality, and provides that “…an omission, understatement, or overstatement is material if the actuary expects it to affect either the user’s decision-making or the user’s reasonable expectations.” The materiality standard selected by ICBC in the actuarial analysis for PY 2023 was an annual amount of $30.3 million, or $60.6 million for the 24-month policy year (equivalent to approximately 1 percent of the annualized required premium).[27]
2.2 Closed System
Basic insurance rates are set in the context of a “closed system” in which all variances between required and collected premiums remain in ICBC as Basic insurance capital (Basic capital) and are accounted for in future Basic insurance rate setting.[28] ICBC explains that Basic capital is beneficial to policyholders because it provides protection against unexpected unfavourable changes in costs or revenues.[29]
The closed system means that any surplus or deficit that may result from an understatement or overstatement of the revenue requirement will affect the retained earnings and therefore will be reflected in the level of capital available and ICBC’s Basic minimum capital test (MCT) ratio, which is a ratio that federally regulated property and casualty insurance companies are required to calculate and maintain. For instance, if there were a favourable variance of the Basic insurance operating expense of $2 million, that amount would flow into ICBC’s Basic capital to the benefit of future rate indications offsetting any capital provisions to meet minimum capital targets.[30] While ICBC is not a federally regulated property and casualty insurance company, it is required to calculate the MCT ratio using the same Office of the Superintendent of Financial Institutions Canada Guidelines for the MCT calculation as those federally regulated companies, as outlined in Special Direction IC2.[31]
In this regard, ICBC states that it is unique compared to private companies, where excess profits in the private company could be paid out to shareholders through dividends or used to grow other lines of business.[32] In contrast, ICBC does not earn a profit or any return for the Government on Basic insurance.[33] As a result, ICBC states that the closed system addresses the inherent uncertainty involved in forecasting ICBC’s costs and that Basic capital serves to mitigate the impact of unanticipated events.[34]
As set out in Section 1.2 of this Decision, ICBC’s BCUC-approved regulatory minimum Basic MCT ratio requirement is suspended for PY 2023 and therefore has no impact on the proposed rate change. Although ICBC’s MCT requirement is suspended, the actual and outlook or forecast Basic MCT ratios, prepared as of Q2 of fiscal year (FY) 2022/23 (September 30, 2022) available at the time of ICBC’s Application, are presented in the following table for information purposes:
Table 1: Actual and Outlook/Forecast Basic MCT Ratios as of Q2 of FY 2022/23[35]
The table above shows that, as of September 30, 2022, the forecast PY 2023 Basic insurance premiums, which consider a proposed rate change of zero percent for the next two years, result in a forecast Basic MCT of 100% by FY 2023/24 and 106% by FY 2024/25.[36]
ICBC explains that the difference between the proposed rate change and the actuarial indicated rate change, which the Panel reviews in Section 3.0, has an approximate +18 percentage point impact on the Basic MCT ratio if the PY 2023 losses, premiums, expenses and investment income emerge as forecast over the 24-month policy year.[37] The impact is calculated based on an annual factor of 1.4 percentage points comparing the FY 2022/23 Outlook capital required to ICBC’s annualized projected premium at the current rate level for PY 2023, multiplied by the percentage point difference between the proposed rate change and the actuarial indicated rate change (-6.5 percentage points) and the 24-month policy year.[38]
2.3 Basic Insurance Product Reforms
Since 2018, pursuant to government direction, ICBC has undertaken Basic insurance product reforms. Enhanced Care, or the Enhanced Care model, implemented on May 1, 2021, is the latest culmination of those efforts.
ICBC states that the purpose of the Basic insurance product reforms was to return ICBC to stable financial footing, as ICBC was challenged with claims costs increasing at rates much higher than inflation with the Basic insurance model that existed prior to reforms. Even with significant efforts to manage claims costs, ICBC states that successive annual net losses incurred under the prior “legal-based” or full-tort insurance model strained ICBC’s capital position, jeopardizing its ability to provide British Columbians with affordable Basic insurance coverage.[39]
As such, ICBC describes the two initiatives introducing reforms to the Basic insurance model:[40]
• The Rate Affordability Action Plan (RAAP) or modified-tort product reform, which came into effect on April 1, 2019 and was then superseded by Enhanced Care;[41] and
• The Enhanced Care product reform, which came into effect on May 1, 2021.
ICBC explains that Enhanced Care replaced both the full-tort and modified-tort legal-based insurance models that were in effect for crashes occurring prior to May 1, 2021.[42] ICBC outlines that Enhanced Care is focused on ensuring that customers receive the treatment and care required as they recover from their injuries as a result of their involvement in a motor vehicle crash regardless of fault, thus moving away from an adversarial legal-based model. In addition, material damage coverage that was previously a third-party coverage moved to first-party coverage under Enhanced Care, referred to as Basic Vehicle Damage Coverage (BVDC), meaning that, if a customer’s vehicle is damaged in a motor vehicle accident, Basic insurance will now cover the vehicle damage regardless of fault.[43]
Consequently, ICBC states that it is now servicing customers with injury claims under Enhanced Care as well as the full-tort and modified-tort products for claims that occurred prior to the implementation of Enhanced Care. However, the claims costs associated with the full-tort and modified-tort based claims that are still open or pending do not have any impact on the actuarial indicated rate change for PY 2023. Rather, these costs are reflected in ICBC financial statements through adjustments to prior year claims costs and the provision for unpaid claims.[44]
3.0 The PY 2023 Actuarial Indicated and Proposed Rate Change
In this section, the Panel reviews the issues related to the components of the PY 2023 actuarial indicated and proposed rate change, including the Panel’s findings on the actuarial estimates of claims costs, operating expenses and investment income compared to PY 2021 as set out in Table 2 below.
ICBC explains that the PY 2023 proposed zero percent rate change comprises two parts. The first is the actuarial indicated rate change that supports a rate decrease of -6.5 percent, and the second is the Rate Change Floor of zero percent that is directed by Special Direction IC2.[45]
At a high level, ICBC submits that the PY 2023 actuarial indicated rate change is the amount of premium that needs to be collected to cover the costs, including a capital provision, compared to the premiums customers would have paid in PY 2023 assuming no change to rates. As in prior years, the actuarial indicated rate change is calculated in two steps. ICBC explains that in the first step, its actuaries calculate the “PY 2023 Required Premium” (PY 2023 Required Premium) which is the present value of:
• all expected loss and loss adjustment expenses, general expenses, road safety and loss management costs, broker fees, premium taxes, and a capital provision; and
• all offsets from income attributable to miscellaneous revenue and investment income earned from policyholder supplied funds and Basic capital.[46]
In the second step, the actuaries calculate the total Basic insurance premium that ICBC would collect for PY 2023 if the current Basic insurance rates were charged in PY 2023 (PY 2023 Projected Premium at the Current Rate Level). This is the product of the expected number of policies to be written and the trended average premium in PY 2023, considering forecast shifts in ICBC’s mix of business by rate class, territory, and level of discount using historical data, actuarial models and professional judgment.[47] The difference between the two steps, the PY 2023 Projected Premium at the Current Rate Level and the PY 2023 Required Premium, is a surplus of $421.4 million; which indicates that PY 2023 rates should decrease by 6.5 percent.[48]
ICBC explains that the main drivers of the PY 2023 actuarial indicated rate decrease are a lower capital provision as directed by Special Direction IC2 for the current policy year compared to the prior policy year[49] and higher projected investment income on new premiums due to a higher new money rate.[50] These changes are partially offset by forecast increases in claims costs due to inflationary pressures.[51] Applying the Rate Change Floor of Special Direction IC2 leads to a zero percent proposed rate change. The resulting expected surplus between the PY 2023 Required Premium and the PY 2023 Projected Premium at the Current Rate Level, net of premium tax, flows into ICBC’s Basic capital over the policy year similar to how variances between the required premium and the actual collected premiums get accounted for in Basic capital.[52] Table 2 below provides a breakdown of the components that comprise the PY 2023 actuarial indicated rate change as well as the proposed rate change.
Table 2: Components of the PY 2023 Actuarial Indicated and Proposed Rate Change[53]
Per policy, ICBC states that the average required premium for PY 2023 is $808 before the Rate Change Floor and $864 including the Rate Change Floor compared to $879 for PY 2021 (a decrease of $71 and $15 per policy before and after the Rate Change Floor, respectively).[54] This is shown in Table 3 below.
Table 3: Components of the PY 2023 Actuarial Indicated and Proposed Premium per Policy[55]
Positions of the Parties
While interveners addressed various aspects of the proposed rate change, as noted in the following subsections, interveners generally do not oppose the BCUC’s approval of a zero percent rate change.
MoveUP submits that the proposed zero percent rate change should be granted.[56] BCOAPO states that Special Direction IC2 prohibits the BCUC from approving a rate decrease and there is nothing in the evidentiary record that would suggest that it would be appropriate to support or approve a rate increase. However, BCOAPO has concerns regarding ICBC’s claims forecast analyses, which the Panel addresses in its discussion on claims costs in Section 3.1.[57] McCandless submits the zero percent rate change should be accepted, although he does not agree with how ICBC has forecast investment income or its net operating position.[58] The Panel addresses McCandless’s concerns in Section 6.1.
In the subsections below, the Panel focuses first on the actuarial estimates of claims costs because this is the largest component of the PY 2023 proposed premium. The Panel then examines the operating expenses in order to address interveners’ requests for BCUC direction to ICBC. Finally, the Panel examines the investment income in order to address ICBC’s request for approval to add leverage to the NMR and YCARS formulae. The overall determination on PY 2023 rates is addressed in Section 3.4.
3.1 Claims Costs
Claims and related costs (Claims Costs) represent the largest component of the total projected costs for Basic insurance[59] and reflect the actuarial estimates of claims costs that may be paid several years into the future for a crash associated with a policy written in PY 2023. Claims Costs primarily fall into two categories:[60]
• Losses and Allocated Loss Adjustment Expenses (Loss Costs); and
• Unallocated Loss Adjustment Expenses (ULAE or Internal Claims Servicing Costs).
ICBC outlines that the majority (90 percent[61]) of Claims Costs are Loss Costs, which represent the overall costs to cover claims and the expenses that can be directly allocated to a specific claim (i.e. medical exams, police reports, towing or storage). For the most part, the remainder of the costs, ULAE, are expenses incurred in the servicing or management of claims, which cannot be directly allocated to a particular claim (i.e. internal claims staff salaries or claims specialist salaries).[62]
ICBC’s actuarial analysis shows that Loss Costs and ULAE have an unfavourable +10.0 and +1.4 percentage point impact, respectively, on the actuarial indicated rate change of -6.5 percent.[63] ICBC states that the increases in claims costs are primarily driven by inflationary impacts which affect costs across all coverages as well as forecast increases in compensation and other expenses for ULAE. The increases are partially offset by lower forecast injury claims count based on ICBC’s experience to date under Enhanced Care.[64]
Loss Costs have a large impact on the actuarial rate indication. Both the data and the methodologies used to forecast Loss Costs are reviewed below.
Loss Costs
ICBC states that Loss Costs are analyzed separately for each component or sub-coverage by the number of claim exposures per policy (frequency) and the average cost per claim exposure (severity).[65] The major coverages included in ICBC’s actuarial analysis are: [66]
• Enhanced Accident Benefits (EAB): enhanced medical rehabilitation, enhanced disability benefits,[67] permanent impairment and enhanced death benefits sub-coverages;
• Basic Vehicle Damage Coverage (BVDC); and
• Third Party Liability: third party liability property damage and third-party liability out-of-province bodily injury sub-coverages.
ICBC states that it uses historical data, external data, actuarial methods, assumptions and professional judgment to develop the forecast Loss Costs for PY 2023 for each sub-coverage. ICBC explains that it will not know with certainty the ultimate frequency and severity of claim exposures for many years, when all claims are settled and closed.[68]
Table 4 below provides a summary of each of the sub-coverages and the split between their frequency and severity components.
Table 4: Loss Costs per Policy by Sub-Coverage[69]
ICBC states that its actuaries have used an analytical framework to determine the actuarial indicated rate change which largely tracks the framework used in ICBC’s RRAs for many years. However, the key difference in this Application is in the data used to support the forecasted claims for the EAB coverage. ICBC explains that “[e]ven though Enhanced Care was implemented in May 2021, ICBC does not have enough [Loss Costs] data under the new product to produce a credible estimate of the actuarial rate indication if relied upon alone. Therefore, similar to the prior application, ICBC actuaries have continued to rely on both internal and external data in its actuarial analysis.”[70]
In the next sections, the Panel examines the issues arising related to the uncertainty in the BVDC and EAB claims forecast analysis.
3.1.1 BVDC Claims Forecast Analysis
BVDC provides Basic first party coverage (of up to $200,000) for damage to an ICBC customer’s vehicle when the damage is caused by another vehicle.[71] In order to support the application of actuarial methods, ICBC states that it used historical data from vehicle property damage claims that occurred in BC, excluding hit-and-run claims, under the prior legal-based insurance product to supplement the BVDC data under Enhanced Care, which began May 1, 2021.[72]
ICBC states there are many factors that can impact crash frequency (including weather, congestion, or driving behaviour) and that crash frequency has been declining over the long term, likely influenced by the continued improvements in crash avoidance technology embedded in new vehicles and improvements in road safety. Crash frequency decreased significantly during the COVID-19 pandemic, followed by a rebound once restrictions were lifted in the summer of 2021. Further, since the COVID-19 pandemic, new influences such as sudden changes in gas prices and evolution as to where and how people work, have impacted crash frequency. As a result, ICBC submits that the current environment has made it difficult to assess where crash frequency will stabilize.[73]
Since there is not enough stability in the information available to develop a change in forecast at this time, ICBC deems it reasonable to assume that the pre-COVID-19 pandemic long-term downward BVDC frequency trend will continue through PY 2023. As such, the selected BVDC frequency trend rate is -1.0 percent, based on a 10-year (baseline) simple regression model ending at the third quarter of Fiscal Loss Year (FLY) 2020 to exclude the impacts of the COVID-19 pandemic.[74] ICBC states that this approach appropriately considers the continued improvements in road safety and vehicle safety technology that are embedded in the historical data, as well as short-term variations in BVDC frequency in recent FLYs which are impacted by other factors (e.g. adverse weather) that may not be permanent.[75]
When asked in IRs about alternative frequency trend models such as a shorter 3.75-year simple regression model from FLY 2017 to the third quarter of FLY 2020 (resulting in an annualized trend rate of ‑6.1 percent and ‑16.6 percentage point impact on the PY 2023 actuarial indicated rate change), ICBC stated that, for several reasons, its actuaries would not find the 3.75-year model appropriate to rely on for forecasting. Among these reasons, ICBC stated that the selection of a historical period beginning in FLY 2017 will result in the trend being significantly affected by the effect of adverse winter weather in BC during the third and fourth quarters of that year, resulting in a downward bias to a forecast based on the model because of the high starting point.[76]
With respect to BVDC severity, ICBC explains that the Loss Costs are mainly related to materials and labour costs to repair vehicles, and costs to replace a vehicle when it is deemed a total loss. Loss Costs also include other costs associated with repairs such as towing, storage and use of rental and courtesy cars.[77] In contrast to a declining BVDC frequency trend, ICBC notes that the BVDC severity forecast is higher in comparison to the forecast in the 2021 RRA. ICBC refers to “the high cost of BVDC claim payments seen in the most recent two years. In the most recent two years, ICBC has observed very high inflation in parts costs and vehicle prices, accentuated by increased cycle times for vehicle repairs, which are affected by capacity issues in the vehicle repair industry and parts shortages due to disruptions in supply chains.”[78]
For PY 2023, ICBC states that it selected a five-year simple regression model for BVDC severity, which is shorter than its 10-year baseline model, with an adjustment to account for forecast elevated inflation.[79] The five-year model results in a 7.9 percent annualized trend rate, reflecting the continuing rise in costs for parts and labour as vehicles include more complex technology and expensive materials in recent years compared to the 10-year trend.[80]
However, given that this trend does not fully capture the high cost of payments, which have been in excess of nine percent in the most recent two years, ICBC’s actuaries made an additional adjustment to the model using the BC Consumer Price Index (CPI) inflation forecast (to the extent that it exceeds the typical level of inflation that is embedded in the historical trend). ICBC explains that this adjustment for excess inflation, as outlined in the table below, is applied as an increase to the severity trend for each FLY, in addition to the underlying trend rate of 7.9 percent.[81] ICBC states that it reasonably expects the elevated inflation to continue over the next few years.[82]
Table 5: BC CPI Inflation and Adjustment to BVDC Severity Trend[83]
ICBC explains that its use of a five-year model (versus the 10-year baseline) for BVDC severity is consistent with what it used in the 2021 RRA. ICBC acknowledges, however, that the addition of an adjustment for inflation represents a change from the 2021 RRA: at the time of the 2021 RRA, an elevated level of inflation for BC CPI had not been experienced and was not being forecast.[84]
3.1.2 EAB Claims Forecast Analysis
EAB comprises enhanced medical rehabilitation, enhanced disability benefits, permanent impairment and enhanced death benefits sub-coverages.[85] ICBC explains that because EAB significantly expands the amount and type of coverage available to injured customers, compared to the full-tort and modified-tort Basic insurance models, and because EAB was only introduced in May 2021, ICBC has limited experience available to rely on for its claims costs estimates and PY 2023 forecasts. As such, ICBC considers that reliance on relevant external information is appropriate given the amount of ICBC historical data available is insufficient to support a reliable regression model for its claims costs estimates and PY 2023 forecasts.[86]
The following table summarizes the data sources for EAB sub-coverages for the Application and the 2021 RRA.
Table 6: Data Sources by EAB Sub-Coverage[87]
ICBC states that the table above illustrates that, in most cases, ICBC’s frequency estimates have moved towards using more of ICBC’s own data as compared to the 2021 RRA and it has supplemented its limited Enhanced Care experience with data for accident benefits claims under the legal-based product. However, external data from Manitoba Public Insurance (MPI) continues to fill in the gaps for ICBC’s severity data in many areas because the benefits under Enhanced Care are similar to those offered in Manitoba by MPI.[88] Over time, as ICBC gains more information under Enhanced Care, ICBC states that it intends to place more weight on its own severity data. ICBC submits that it may, however, take several years for its EAB severity forecast to be fully reliant on ICBC’s data given the long-tailed nature of Enhanced Care claims.[89]
For PY 2023, ICBC states that the actuary’s resulting selected EAB frequency trend rates are:[90]
• For each EAB sub-coverage except for death benefits, -1.0 percent per year, which is equal to the BVDC frequency trend rate, assuming that forecast injury frequency will decrease at the same pace as forecast BVDC frequency; and
• For death benefits, a flat frequency trend as there does not appear to be an obvious upward or downward trend in the historical death benefits data.
ICBC states that the above-noted frequency trends rely on the assumption that the propensity to incur an injury claim against each of the EAB sub-coverages, in the event of a crash, will be relatively stable over time. With this assumption, the frequency forecast for each EAB sub-coverage can be derived from the BVDC frequency forecast, based on the observed propensity to claim relative to BVDC claims, which ICBC refers to as the “propensity to BVDC approach.”[91]
With respect to estimating the EAB claim severity, ICBC states that it has adjusted the cost of certain EAB benefits based on BC CPI inflation, as well as the trend due to factors other than inflation.[92] According to the Enhanced Accident Benefits Regulation, BC benefit limits must be adjusted with BC CPI for each fiscal year, capped at 6.0 percent. Consistent with this, ICBC’s actuaries rely on known and forecast BC CPI changes to capture the legislated inflation component of the forecast EAB severities for the coming fiscal years. For sub-coverages where there is also a trend due to factors other than inflation, ICBC explains that a non-inflationary trend is also added based on relevant historical information for each EAB sub-coverage.[93] For example, for enhanced disability benefits, ICBC states that its actuaries have referred to historical data from weekly benefits under the legal-based insurance product and selected a non-inflationary severity trend of 2.2 percent. The 2.2 percent is derived from the legal-based insurance product’s weekly benefits modelled severity trend of 4.2 percent from a seven-year simple exponential regression model ending December 31, 2016, less an annual inflation factor of 2.0 percent.[94] Therefore, ICBC states that the non-inflationary severity trend reflects the aggregate effect of the mix of factors influencing severity over time, such as the age and profession of claimants, and the duration of their disabilities.[95]
The BC CPI forecast, non-inflationary trend, and selected severity trend for each EAB sub-coverage are shown in the figure below.
Figure 7: BC CPI Inflation Forecast, Non-inflationary Trend and Selected Severity Trend
by EAB Sub-Coverage[96]
Positions of the Parties
MoveUP submits the BCUC should accept ICBC’s evidence because attempting to fine-tune ICBC’s estimates would be an arbitrary process and there is little basis on the record to “second-guess” the evidence. In addition, MoveUP acknowledges that ICBC continues to rely on MPI data which is “tweaked to the extent possible to help the evidence conform to [BC’s] unique circumstances.”[97]
BCOAPO submits that the significant increase in claims costs per policy is one of the main drivers of the proposed premiums.[98] BCOAPO outlines its concerns with the BVDC frequency and severity estimates, the frequency and severity estimates for EAB–Extended Disability, which is one of the sub-coverages of the EAB costs, and with ICBC’s description of the ULAE costs.
BVDC Frequency and Severity Estimates
BCOAPO describes its concern with the BVDC frequency estimate, which it submits may result in a higher declining trend than what ICBC has presented. BCOAPO submits that ICBC’s 10-year simple regression model for the BVDC frequency estimate might not adequately reflect the potential for an economic downturn caused by geo-political risks and inflation. Or, that the model fails to take into account changing driving behaviour resulting from, for example, working from home arrangements.[99] ICBC replies that “actual experience as of Q2 2022 shows claims returning, after an initial drop from the COVID-19 pandemic, toward ICBC’s selected trendline, not a trendline that declines more steeply.”[100]
BCOAPO also has concerns with the BVDC severity estimate, which it submits may result in a lower trend than what ICBC has forecast. According to BCOAPO, “adding 2021 and 2022 into the 5-year regression is problematic because those years represent the highest levels of inflation in decades and supply chain issues at the height of the COVID[-19] pandemic.” Including these two years in the regression analysis does not reflect the possibility that these pressures might subside.[101] BCOAPO is also concerned that the ICBC adjustment for excess inflation might overstate a reasonable estimate of BVDC severity for PY 2023. BCOAPO notes that ICBC conceded that “there may be an inherent double counting in the BVDC severity forecast for PY 2023 as a result of using a 7.9% trend that includes inflationary impacts and then adding this additional adjustment for excess inflation on top.”[102] In reply, ICBC submits that it expects inflationary pressures to persist within the forecast period and that it has reduced the potential for “double counting” for inflation by only adjusting the forecast to the extent that inflation is expected to exceed normal levels.[103]
EAB-ED Frequency and Severity Estimates and ULAE Forecast
BCOAPO describes ICBC’s explanation for the significant increase in claims costs for EAB - Extended Disability (EAB-ED) for PY 2023 as “convoluted” and lacking transparency. It states that the ULAE expense estimates also lack transparency. BCOAPO recommends that the “BCUC provide direction to ICBC to improve the understandability and transparency of the EAB-ED and ULAE expense estimates in future RRA’s, beyond excessive references by ICBC to technical appendices.”[104]
In reply, ICBC submits that its “overarching approach to forecasting was explained and explored in the proceeding […and that] material underlying these estimates was available to the BCUC and interveners for further inquiry in information requests (IRs) and for discussion at the Workshop.”[105]
Panel Determination
The Panel finds ICBC’s forecast for the Claims Costs reasonable for the purpose of determining the PY 2023 actuarial indicated rate change. Our review of the evidence focuses on the BVDC and EAB claims forecasts because these coverages comprise most of the Claims Costs. There are other components of Claims Costs, as Table 3 above shows for ULAE and road safety and loss management costs, and Table 4 above shows for third party liability coverages, however, these are quite small by comparison. In reviewing the evidence, we acknowledge the significance of Claims Costs to the actuarial indicated rate change, and that the Panel must be satisfied that the forecast is reasonably determined in accordance with AAP.
The Panel is persuaded that it is reasonable for ICBC to rely on different sources of data in its EAB claims forecast analysis, and on internal data for its BVDC claims forecast analysis. ICBC has described that the forecast is based on estimating claim frequency and claim severity, and that it considers it appropriate to rely on relevant external information because the amount of ICBC data available for Enhanced Care is insufficient to support a reliable regression model for its claims cost estimates and PY 2023 forecasts. Indeed, this was an issue during the 2021 RRA, and the BCUC accepted the need for ICBC to rely on external data because Enhanced Care was so new and moreover, as the BCUC noted, the “2020 Government Directive regarding ICBC’s Application for a General Rate Change Order for the 2021 Policy Year directs ICBC to rely on Manitoba Public Insurance’s (MPI) data, where applicable, in its costing analysis.”[106] The BCUC referenced ICBC’s observation that “more information will become available on the costs associated with the new model over the next few years as BC transitions to the new Enhanced Care model, including information about changes in customer behaviour and cost pressures that are unique to BC.”[107]
Fast forward to 2023, and the issue now becomes whether it is appropriate for ICBC to continue to rely on external data, in this case, continuing to rely on MPI data, and if so, to what extent. ICBC submits that relying on MPI data is not only appropriate, but also necessary as well as consistent with AAP. The Panel notes that, unlike the 2020 Government Directive to the BCUC in the 2021 RRA, Special Direction IC2 does not stipulate reliance on MPI data. Nevertheless, according to ICBC, it does not yet have enough data on Loss Costs under Enhanced Care to produce a credible estimate of the actuarial rate indication if relied upon alone. Therefore, similar to the 2021 RRA, ICBC actuaries continue to rely on both internal and external data in the actuarial analysis.
To estimate EAB claim frequency, ICBC explains that it relies on its own EAB claims experience to a greater extent than in the 2021 RRA. ICBC explains that there is insufficient historical data under Enhanced Care to support a reliable regression model and therefore it has used a forecast approach that relies on the assumption that the propensity to incur an injury claim in the event of a crash will be relatively stable over time. With this assumption, the frequency forecast for each EAB sub-coverage can be derived from the BVDC frequency forecast, based on the observed propensity to claim relative to BVDC claims. ICBC submits that this change reflects a greater reliance on ICBC’s EAB claims experience, which is now available.[108] The Panel accepts that there is no evidence to suggest this is an unreasonable assumption.
To estimate EAB severity, ICBC continues to rely on external information, in particular severity data from MPI because the benefits under Enhanced Care are similar to those offered in Manitoba. ICBC indicates that as it gains more information under Enhanced Care, it intends to place more weight on its own severity data although this may take several years because of the long-tailed nature of Enhanced Care claims. The Panel accepts that this is a reasonable explanation of the need to continue to rely on external data and expects that the next ICBC RRA will place greater weight on ICBC’s internal data as actual claims data emerges over the 24-month policy year.
The Panel also accepts that some factors that influence severity claims data, such as cost pressures and inflation, are unique to BC, and that ICBC has appropriately taken such evidence into account in estimating EAB severity. As MoveUP points out, any attempt to fine-tune ICBC’s estimates would be arbitrary.
BCOAPO questions whether the BVDC frequency trend that ICBC has estimated is in fact declining more steeply than ICBC has presented, or whether the BVDC severity trend is increasing more slowly than ICBC has presented. Further, BCOAPO notes that these estimates go on to impact some of the EAB estimates, but that ICBC’s explanations are convoluted. Although BCOAPO does not challenge the actual data that ICBC presents, it does recommend that the Panel provide some direction to ICBC for its next RRA. However, BCOAPO’s suggestions, such as using a different inflation rate or removing two years from a regression model, have not been tested and nor is there evidence whether it is feasible to change assumptions in isolation or if that would be consistent with AAP.
The Panel is not persuaded that such direction to ICBC is necessary. Actuarial practice is both art, relying on judgment, modelling assumptions and best estimates, and science, relying on input from subject matter experts and their knowledge of the business as well as constraints established by AAP.
In addition to our observations on particular aspects of ICBC’s Claims Costs, the Panel has two general observations regarding ICBC’s forecast, which strengthen our confidence in the reasonableness of the Claims Costs. The first is that, as discussed in Section 2.1 above, ICBC’s estimates are based on AAP. ICBC’s actuaries examined several scenarios to evaluate the sensitivity of their actuarial analysis to changes in certain assumptions. ICBC states that its actuaries cannot foresee any change in assumption or approach that would accord with AAP such that the actuarial indicated rate change is above zero.
The second general observation is that, as discussed in Section 2.2 above, Basic insurance rates are set in a closed system, and any under or over estimation of the forecasted loss costs is carried through to the Basic capital. The closed system indirectly addresses the inherent uncertainty involved in forecasting ICBC’s costs, as the Basic capital absorbs the mis-estimation, and this is carried forward to the subsequent rate application in the closed system. The Panel is persuaded that a closed system such as this protects policyholders from unexpected changes in costs or revenues.
3.2 Operating Expenses
The PY 2023 actuarial indicated rate change includes a forecast for the corporate operating expenses allocated to ICBC’s Basic insurance line of business. As policies issued during PY 2023 may remain in force up until March 31, 2026, ICBC explains that the forecasts include 2023/24, 2024/25, and 2025/26 fiscal years.[109] The operating expense components for the PY 2023 actuarial indicated rate change are derived based on the Basic portion of the financial forecasts for these three fiscal years.[110]
ICBC’s total corporate operating expenses are the costs to run ICBC’s Insurance and Non-insurance business, excluding claims payments, broker commissions and premium taxes. Total corporate operating expenses are allocated between Basic insurance, Non-insurance and Optional insurance using the BCUC-approved financial allocation methodology. ICBC defines all operating expenses as either controllable or non-controllable because some operating expenses, such as year to year changes in pension and post-retirement benefit expense, are mainly driven by factors that are outside of ICBC’s direct control.[111] ICBC explains that it exercises oversight over its corporate operating expenses on an ongoing basis by performing monthly reviews of actual operating expenses compared to budget and updates/monitors the outlook as appropriate. ICBC also states that senior management actively evaluates ICBC’s performance against the measures set out in the ICBC Service Plan to ensure that ICBC is operating efficiently in comparison to industry.[112]
Table 8 below presents ICBC’s total corporate operating expenses by expense category for 2021/22 actual, 2022/23 outlook, and 2023/24, 2024/25 and 2025/26 forecast. ICBC states that it expects total corporate operating expenses to increase on average 4.8 percent year over year between 2022/23 and 2025/26.[113] All expenses in the Table are expressed as total, or gross, amounts for ICBC’s fiscal year (which runs from April 1 through March 31), before allocation to Basic insurance in accordance with the BCUC-approved financial allocation methodology.
Table 8: Corporate Operating Expenses by Expense Category[114]
In the subsections that follow, the Panel addresses the two key drivers of the year over year changes in the total corporate operating expenses: net compensation including the corresponding full-time equivalent (FTE) forecasts, and pension and post retirement benefit expense.
3.2.1 Net Compensation
The net compensation expense line item is the largest component of ICBC’s corporate operating expenses. ICBC states that approximately 63 percent of controllable operating expenses relate to compensation.[115] Net compensation includes salaries and employee benefits but does not include pension and post-retirement benefit expenses. Changes in ICBC’s compensation costs are attributable to a combination of factors including the number of FTEs, negotiated wage increases for unionized employees, the mix of employees (e.g. management and confidential, bargaining unit, professional, administrative, etc.) and changes in employee benefits costs or compensation levels in a particular year.[116]
ICBC states that the 2022/23 outlook for corporate net compensation is expected to increase by $26 million to $516 million compared to the 2021/22 actual of $490 million. ICBC explains that the increase in corporate net compensation expense is mainly driven by an increase in average FTEs due to ICBC’s resumed recruitment efforts to maintain adequate service levels in contact centres and driver licensing offices as traffic volume returns to levels that existed prior to the COVID-19 pandemic. Additionally, the increase in corporate net compensation expense is attributed to general wage increases as negotiated under the Collective Agreement and merit increases for management and confidential staff.[117] The 2023/24 forecast for corporate net compensation is $540 million, a $24 million increase over the 2022/23 outlook of $516 million, and is mainly driven by rising inflation and higher cost of living. ICBC outlines that the overall increase from the 2022/23 outlook to the 2023/24 forecast is driven by:
• $20 million provision for general wage increases that will be negotiated under the Collective Agreement and reported and approved by the Public Sector Employers’ Council (PSEC) Secretariat, as well as individual length of service increases; and
• $4 million provision for expected merit increase in salaries for management and confidential employees and other increases due to changes in staff mix, individual job progression, promotion and other factors.[118]
In the ICBC 2021 RRA Decision, the BCUC directed ICBC to include in its next general rate change application, an analysis of the expected savings that will be achieved and the forecast versus actual savings achieved in 2022/23 and 2023/24 related to phasing out the modified-tort and full-tort insurance models. ICBC explains in the Application that the expected savings in corporate net compensation costs anticipated in the 2021 RRA related to the transition to Enhanced Care are not on target due to pressures that are unrelated to the transition. These pressures include the effects of rising inflation and higher cost of living, which are expected to result in higher than anticipated general wage increases for unionized employees, as well as the effects of changes in staff mix, individual job progression and other factors. In addition, ICBC states that the cost of employee benefits, including health and dental care, Canadian Pension Plan (CPP), Employment Insurance (EI) and other compensation-related costs are higher than originally planned because these are estimated as a percentage of corporate net compensation costs.[119]
ICBC states that corporate net compensation is expected to further increase to $551 million in the 2024/25 forecast and $564 million in the 2025/26 forecast due to negotiated increases per the Collective Agreement and other increases which are expected to be partially offset by a decrease in the average number of FTEs.[120] As ICBC expects the reduction in FTEs to be met by voluntary staff attrition from retirements and resignations, there are no amounts for severance pay included in corporate net compensation costs for the 2023/24, 2024/25 and 2025/26 forecast fiscal years.[121]
Number of FTEs
The following table summarizes ICBC’s total corporate FTEs and contractors for the 2021/22 actual, 2022/23 outlook, and 2023/24, 2024/25 and 2025/26 forecasts.[122]
Table 9: Corporate Average FTEs by Employee Group[123]
The 2022/23 outlook for the corporate bargaining unit FTEs of 4,281 is higher than 2021/22 actual of 4,217 FTEs by 64 FTEs mainly due to resumption of recruitment efforts to address staffing needs in contact centres as previously noted. In addition, ICBC explains that staffing increases also include positions in information services and human resources (HR) to manage growing claims volume, manage and maintain systems solutions, and address other priorities that were postponed while ICBC was focused on delivering Enhanced Care and other key business strategies in prior years.[124]
ICBC explains that the 2022/23 outlook increase in corporate management and confidential FTEs was due in part to ensure there was appropriate management coverage with the bargaining unit in the Claims Injury and Legal Services division during the transition to Enhanced Care in May 2021.[125] ICBC explains that it uses an integrated staffing model, which uses projected business/work volumes, productivity/workload benchmarks expectations, as well as retirement, promotion and training assumptions to forecast staffing requirements across claims-related roles.[126]
In the 2023/24, 2024/25 and 2025/26 forecast fiscal years, ICBC anticipates its corporate staffing requirements in legal-based claims-related areas to gradually reduce as injury claims that occurred prior to the implementation of Enhanced Care continue to settle.[127]
3.2.2 Pension and Post-Retirement Benefit Expense
ICBC’s corporate pension and post-retirement benefit expense is based on International Financial Reporting Standards (IFRS) and actuarial standards and methodologies.[128] The forecast corporate pension and post-retirement benefit expense is determined by ICBC’s external pension actuary, AON, at the beginning of each fiscal year based on the pension plan’s assumptions and financial position at the prior year’s end. The expense is also subject to volatility resulting from changes in the market-based discount rate for pension liabilities.[129] ICBC states that the change in the discount rate, which is influenced by market factors beyond ICBC’s control, is the primary driver of the change in the corporate pension and post-retirement benefit expense over the forecast period.[130]
ICBC states that the difference between the 2022/23 outlook corporate pension and post-retirement benefit expense of $66 million and the 2021/22 actual expense of $101 million, is due to the following main factors:
• A decrease of $24 million due to an 80-basis-point increase in the discount rate, from 3.3 percent in 2021/22 to 4.1 percent in 2022/23.
• A decrease of $15 million due to an improvement in the net deficit position from $368 million to the net asset position of $59 million.
• An increase of $4 million due to an increase in forecast payroll.[131]
The corporate pension and post-retirement benefit expense is estimated to further decrease by $13 million to $53 million in the 2023/24 forecast due to the following main factors:
• A decrease of $17 million due to an 80-basis-point increase in the discount rate, from 4.1 percent in 2022/23 to 4.9 percent in 2023/24.
• An increase of $4 million due to an increase in the inflation rate and rate of compensation increase assumptions.[132]
ICBC states that, as the corporate pension and post-retirement benefit expense is based on a number of long-term assumptions at a point in time, the 2023/24 forecast expense is held constant for the 2024/25 and 2025/26 forecasts.[133]
Positions of the Parties
BCOAPO submits that ICBC’s corporate operating expenses and cost management efforts do not demonstrate a strong “top-down” operating cost budgeting approach as there are no stretch targets or productivity assumptions in the operating costs forecasts. Instead, BCOAPO submits, ICBC uses a “bottom-up” or incremental budgeting approach where operating costs are based on last year’s costs plus general wage increases, merit increases, strategic initiatives, and other cost pressures. As such, BCOAPO recommends that the BCUC direct ICBC to more actively control operating cost pressures by using the following measures:
1. Developing a more top-down operating cost target-setting approach, including a corporate stretch and funding strategic initiatives through productivity enhancements or attrition to reduce the rate of increase in the operating cost curve;
2. Reconsidering the plans to increase management and confidential FTEs in non-insurance administrative functions and reporting on its efforts to contain the growth in FTEs as part of the 2025 RRA. BCOAPO notes management and confidential FTEs are forecast to increase by 8.2 percent between 2019/20 Actual and 2025/26 Forecast, particularly in HR;[134] and
3. Developing and providing options to the BCUC to reduce the volatility in operating expenses and rate indications as a result of discount rate changes associated with corporate pension and post-retirement benefit expenses.[135]
In reply, ICBC responds to BOCAPO’s recommendations as follows:
1. The directions recommended by BCOAPO are unwarranted, ICBC has strong governance in place for managing operating costs and it does use a top-down budgeting approach. ICBC explains it actively evaluates its performance against the measures set out in its Annual Service Plan Report to ensure that ICBC is managing its corporate operating costs efficiently in comparison to industry. ICBC notes that the property and casualty industry expense ratio benchmark for 2021 was 31 percent, as compared to ICBC’s fiscal year 2021/22 Actual result of 23.4 percent which is 7.6 percent better than this industry standard.[136]
2. The increases referenced by BCOAPO are over a 6-year time frame from FY 2019/20 to FY 2025/26. ICBC submits that the increases in management and confidential FTEs are required to support business needs and strategic objectives to provide appropriate levels of staff oversight, enhance governance and data management, and support ICBC’s people strategy and improve the quality of HR services.[137]
3. ICBC has limited ability to reduce the volatility in its corporate pension and post-retirement benefits expense as it is determined by ICBC’s external pension actuary, AON. The expense is subject to volatility resulting from changes in the market-based discount rate for pension liabilities which is influenced by market factors and is therefore beyond ICBC’s control. With consideration that ICBC reports its corporate pension and post-retirement benefits expense by applying IFRS, ICBC also explains that IFRS does not allow for any smoothing mechanisms and prescribes how to determine the market-based discount rate used to calculate the expense.[138]
Panel Determination
The Panel finds the forecast operating expenses for PY 2023 to be reasonable for the purpose of determining the PY 2023 actuarial indicated rate change and are allocated from ICBC’s corporate operating expenses in accordance with the BCUC-approved financial allocation methodology. The Panel is satisfied that ICBC has adequately explained the reasons for the forecast increase in net compensation, which is the largest component of its operating costs. The Panel notes that much of the forecast increase in 2024/2025 and 2025/2026 net compensation results from increases negotiated under the Collective Agreement.
The Panel accepts that one area where ICBC can exert some control of its net compensation is in staffing levels. However, at this time, ICBC is managing three different Basic insurance products – Enhanced Care, modified- tort and full-tort. Thus, until all claims filed under the modified-tort and full-tort models are settled or phased out, the Panel acknowledges that ICBC requires an appropriate level of staffing to manage the transition period. The Panel notes that ICBC continues to anticipate reduced staffing requirements in legal-based claims-related areas as it transitions further into Enhanced Care. Further, the Panel is satisfied that ICBC’s analysis of the expected savings from the transition to Enhanced Care, and its explanation for why these savings have not yet materialized, complies with the BCUC’s directive in the 2021 RRA. Therefore, despite BCOAPO’s recommendation that we direct ICBC to report on its efforts to contain the growth in FTEs as part of the 2025 RRA, we do not consider a specific directive is necessary because we expect ICBC will, in its next RRA, update its progress on staffing levels and net compensation, and as applicable, explain why certain reductions or savings have not materialized.
The Panel dismisses BCOAPO’s recommendation that we direct ICBC to adopt a more top-down funding approach. ICBC indicates that it does use a top-down approach to budgeting, and there is no evidence to suggest otherwise. Further, ICBC states that it reviews budget-to actual operating expenses monthly and actively evaluates its performance against the measures set out in the ICBC Service Plan. It is up to management to decide how to approach its budgeting process, whether top-down or bottom-up for example, from which the Panel can evaluate the reasonableness of the estimates and whether there are controls in place. The Panel is persuaded that ICBC’s processes for reviewing its monthly budget-to-actual operating expenses and evaluating its performance against the ICBC Service Plan indicate a focus on the big picture and are reasonable and as may be expected for an organization its size. The Panel does not suggest there is nothing left for ICBC to improve, only that BCOAPO has not persuaded us that direction from the Panel is warranted.
The one area of uncontrollable costs that ICBC identifies as a key driver of the change in total corporate operating expenses is pension and post-retirement benefit expenses. The Panel accepts that changes in the market-based discount rate are a factor in the volatility of this expense and that ICBC has limited ability to reduce this volatility. Furthermore, the expense is determined by ICBC’s pension actuary. Therefore, the Panel rejects BCOAPO’s recommendation that we direct ICBC to present options of how it might reduce the volatility in operating expenses and rate indications as a result of discount rate changes associated with pension and post-retirement benefit expenses.
3.3 Investment Income
Funds available for investment purposes come primarily from the premiums collected and set aside for future claims. ICBC earns investment income on premiums to reduce future premiums for policyholders.[139] Since 2019, the operational management of ICBC’s investment portfolio is performed by the British Columbia Investment Management Corporation (BCI), a leading provider of investment management services for the BC public sector and one of the largest asset managers in Canada.[140] ICBC’s investment strategy, however, continues to be governed by a Statement of Investment Policy and Procedures (SIPP), which is approved by ICBC’s Board of Directors. The SIPP outlines the strategic asset mix which sets target allocations for individual investment asset classes in ICBC’s investment portfolio.[141]
In the 2021 RRA, ICBC indicated that it expected a longer-term investment horizon under Enhanced Care, and that it anticipated it could increase the allocation within the investment portfolio to less liquid assets with higher expected returns.[142] In this Application, ICBC states that it continues to transition to this new long-term strategic asset mix and it has also introduced an environmental, social and governance (ESG) mandate in ICBC’s investments.[143] These updates, among other related matters, are discussed further in the subsections that follow.
3.3.1 ICBC’s Investment Management Strategy
As a part of the Application, ICBC provided its January 27, 2022 SIPP (January 2022 SIPP), revised from the SIPP submitted in the 2021 RRA. ICBC states that the January 2022 SIPP reflects an updated set of investment beliefs to ensure that ESG factors are considered as part of investing activities. In addition, other revisions to the SIPP related to the findings from the most recently completed asset-liability management (ALM) study in April 2020 and its implications on the strategic asset mix for ICBC’s investment portfolio have been incorporated.[144] The January 2022 SIPP also incorporates an accelerated timetable to achieve ICBC’s strategic shift to hold fewer highly liquid fixed income investments in exchange for less liquid investments that offer the potential for higher returns over the long run. ICBC states that this latter revision was done in conjunction with BCI as BCI believes that ICBC’s capital can be placed on the accelerated timetable in a prudent fashion.[145] ICBC notes that although the latest completed ALM study supports holding more illiquid investments in ICBC’s investment portfolio, the current changes to an accelerated timetable were not triggered by the ALM study.[146] An ALM study is completed by BCI with guidance and direction from ICBC and generally is conducted once every four years to help confirm or revise the fund’s strategic asset mix.[147]
ICBC explains that the objective of the ALM study is to craft a portfolio that is forecast to deliver the highest and best possible return, while working within ICBC’s risk tolerance and mandates with respect to volatility, liquidity and ESG-related issues.[148] ICBC management, BCI, and the ICBC Board of Directors monitor the ICBC Investment Fund to ensure it remains within the Board of Directors’ accepted level of risk which is formalized within the SIPP.[149]
Investment Horizon
ICBC explains that its investment portfolio is designed to support Enhanced Care over the long term, as premiums will be invested longer before being used to pay out claims costs, and the portfolio is positioned to withstand short-term volatility to assist in keeping rates low and stable. Therefore, ICBC states, the methodology of using BCI’s 15-year capital market assumptions for rate-setting purposes is still appropriate.[150] ICBC states that BCI’s 15-year annual return forecast from August 2022 provides long-term return expectations using economic outlook and data available such as consensus views on economic growth, inflation, interest rates, credit spreads, yields, credit ratings, foreign exchange rates and valuation ratios.[151]
ICBC states that it assesses its investment strategy with BCI staff regularly and as part of this process, BCI provides detailed economic scenario analysis, illustrating the potential implications to ICBC’s portfolio under a broad range of economic and market outcomes.[152] ICBC notes that it does not adjust the expected long-term returns on its portfolio based on changes in the Bank of Canada’s short-term growth outlook because it expects long-term performance to be in line with BCI’s forecast. ICBC acknowledges, however, that under the Bank of Canada’s current growth expectations, its investment portfolio may experience heightened volatility in the short term.[153]
Introduction of Leverage
As part of the January 2022 SIPP, ICBC states that it formally introduced leverage into its asset mix.[154] Leverage was included primarily to add the potential for increased returns, while also creating an additional source of liquidity for ICBC.[155] By having established access to financial markets, ICBC states that it can borrow to meet any immediate liquidity needs as it avoids having to sell higher returning assets or liquidating short-term fixed income investments required to maintain an adequate liquidity ratio.[156]
ICBC describes the leverage as repurchase agreements using short term government securities.[157] ICBC confirmed that it has previously used leverage, but the total amount of repurchase agreements was directly linked to the amount of payment plan receivables; therefore, the cost of borrowing was netted against payment plan finance fees.[158] However, with the approval of the new strategic asset mix by ICBC’s Board of Directors, leverage in the form of repurchase agreements is part of the allocation of the investment portfolio.[159]
ICBC explains that leverage allows borrowed funds to be invested in assets that are forecast to return over the long term a higher amount than the cost of borrowing. ICBC acknowledges that it takes on some additional risks around volatility and short-term performance with leverage, in exchange for a forecast increase in returns over the longer run.[160] ICBC determined leverage was appropriate for its investment portfolio based on modelling its asset mix at various levels of risk and weighing that against the benefits of adding leverage.[161] ICBC explains that leverage is kept low so that the level of volatility does not outpace the performance of the whole portfolio.[162] ICBC states its strategic asset allocation currently targets a 10 percent leverage ratio in the portfolio which is consistent with its previous practice.[163] ICBC states that it is comfortable with the 10 percent target because this is within its risk tolerance and notes that the risk of leverage starts to outweigh the reward in the 30 percent target range.[164] ICBC mentions that BCI’s pension fund clients with longer investment horizons use up to a 20 percent leverage ratio.[165]
With ICBC formally recognizing leverage in its SIPP as part of the asset mix, ICBC considers it would be appropriate to have leverage reflected within the New Money Rate (NMR) and the Yield on Capital Available for Rate Settings (YCARS) formulae, to reflect as accurately as possible investment performance within the rate indication.[166] This request for approval is addressed below.
3.3.2 Proposed Changes to the New Money Rate and Yield on Basic Capital Available for Rate Setting Formulae
ICBC seeks approval for a revised NMR formula and a revised YCARS formula to include leverage for PY 2023.[167] ICBC states the revisions are required so that the formulae reflect ICBC’s current strategic asset mix as outlined in the SIPP.[168] The BCUC approved the current formulae in the 2021 RRA.[169]
Change to the New Money Rate Formula
The NMR represents the investment yield expected for premiums collected over the policy year because investment income is earned on these premiums until they are paid out for costs related to the policy year. The NMR is used as the discount rate for the required premium calculation.[170]
To calculate the NMR for PY 2023, the weightings for each asset class have been determined using the target holdings of the portfolio as at April 1, 2023 and April 1, 2024. Tables 10 and 11 provide the NMR for the first and second 12-month periods in the policy year, respectively, using the proposed inclusion of leverage.
Table 10: New Money Rate for the First 12-Month Period[171]
Table 11: New Money Rate for the Second 12-Month Period[172]
An average of the two 12-month periods is taken to arrive at the New Money Rate for PY 2023 of 5.72 percent. The NMR for PY 2023 of 5.72 percent is 160 basis points higher than the NMR of 4.12 percent calculated using the April 2021 SIPP and submitted as part of the 2021 RRA proceeding. ICBC states that the increase is largely attributable to a shift of fixed income assets to higher yielding credit instruments, higher expected returns in select asset classes and higher allocations to less liquid but higher yielding asset classes.[173]
The NMR formula uses the weightings of each asset class according to the strategic asset mix contained in ICBC’s January 2022 SIPP.[174] ICBC states that it uses BCI’s 15-year annualized return forecasts as the source of expected returns for each asset class, including leverage, to calculate the NMR. Due to rising interest rates and geopolitical events, BCI updated its forecasts in August 2022 and used these updated figures to determine the PY 2023 NMR.[175] For the forecast yield on leverage, ICBC states that both the term to maturity and the cost of the repurchase agreements used in leverage are similar to the term and returns of the securities held in the BCI Canadian Money Market program. Therefore, ICBC considers the 15-year expected return of the BCI Canadian Money Market program an appropriate proxy for the cost of leverage over the investment horizon and states that it is consistent with the use of the long-term return forecasts that underpin the Application.[176]
ICBC highlights that the negative yield for leverage shown in the NMR formula is the cost of borrowing only and does not represent the anticipated return from the assets acquired from the proceeds of borrowing.[177] ICBC explains leverage represents money borrowed by the portfolio for purposes of investing (a liability).[178] The additional funds provided by leverage are redeployed across the different asset classes such that the gross assets held would be 10% higher than the amount available before leverage.[179] Since leverage (as a liability) reduces the overall value of the total portfolio, the weight of leverage is subtracted from the weightings of the other asset classes, bringing the overall portfolio to 100% of net value (e.g. 110% of portfolio assets less 10% leverage = 100% overall portfolio).[180]
Change to the Yield on Capital Available for Rate Setting Formula
ICBC is also requesting approval for a revision to the formula for YCARS to include leverage to be consistent with the proposed changes to the NMR formula.[181] ICBC states the YCARS is the sum of the weighted yields for each asset class less the fees for managing the investment portfolio. With the exception for the 15-year weighted average yield on equity assets, actual weightings and yields for all the individual asset classes are used in the formula.[182] ICBC explains that YCARS, as defined in section 1(1) of Special Direction IC2, replaces what was referred to in previous RRAs as Yield on Basic Equity.[183]
ICBC states that a different value for the YCARS is calculated for the first 12-month period of PY 2023 compared to the second 12-month period as there is an expected change in the weighting of the asset classes for the second 12-month period. ICBC explains that, for the first 12-month period, the weightings for each asset class have been determined using the holdings of the existing portfolio as of August 31, 2022 and for most of the asset classes, the current yields are determined from the holdings in the existing portfolio. For the second 12-month period, ICBC states that the weightings for each asset class have been determined using a multi-year investment outlook projection of assets held as at April 1, 2024 and investment yields are held constant with the first 12-month period. Tables 12 and 13 provide the YCARS for the first and second 12-month periods in PY 2023, respectively, inclusive of leverage, as described in Section 3.3.1.
Table 12: Yield on Capital Available for Rate Setting for the First 12-month Period Including Leverage[184]
Table 13: Yield on Capital Available for Rate Setting for the Second 12-month Period Including Leverage[185]
ICBC explained that including leverage, along with a minor change in the equity yield, in the YCARS calculation results in an increase of 27 basis points from 4.77 percent to 5.04 percent for the first 12-month period of PY 2023 and an increase of 34 basis points from 4.97 percent to 5.31 percent for the second 12-month period compared to the YCARS calculation without leverage. This results in a $12 million reduction to the required premium over PY 2023, with $11 million pertaining to the inclusion of leverage in the calculation and about $1 million from updating the equity yield. This has a -0.2 percentage points impact on the actuarial indicated rate change, but due to the application of the Rate Change Floor, this would have no impact on the zero percent proposed rate change.[186]
Due to a shift in asset classes held in the portfolio, as well as changes in the expected return of each asset class, the NMR and YCARS are higher for PY 2023 than the equivalent investment yields for PY 2021. This means that ICBC is expected to generate higher investment returns, resulting in a favourable impact on rates. This favourable impact is in addition to the longer expected payout period for policyholder supplied funds under Enhanced Care, which enables ICBC to hold and invest premiums collected over a longer period of time.[187] ICBC notes the amendments as stated above do not have an impact on the proposed Basic insurance rate change of 0 percent.[188]
Positions of the Parties
Interveners do not object to ICBC’s proposed inclusion of leverage to the NMR and YCARS formulae for PY 2023. MoveUP submits there are no reasons to deny this request and BCOAPO agrees that including leverage would improve the expected investment returns and reduce upward pressures on rates.[189]
BCOAPO submits, however, that a more complete review of the overall risk profile and impacts of SIPP, ALM study and leverage on the actuarial rate indication is required at the next ICBC RRA for 2025. BCOAPO recommends that the BCUC direct ICBC to provide information on its ALM studies and the implications for the strategic asset mix as part of its minimum filing requirements for the 2025 RRA. BCOAPO also recommends that the BCUC direct ICBC to update information during an RRA proceeding for any subsequent release of a revised SIPP to allow the BCUC and interveners to adequately understand and test policy changes for rate-setting purposes during that proceeding.[190]
In reply, ICBC submits that the information already provided is sufficient and the current approach respects the commercial sensitivity of information provided by BCI.[191] The results of the ALM studies are already captured in publicly available governing policies and procedures. In addition, ICBC states that if a revised SIPP is released after the filing date of the RRA, then it was not used in the calculation of the actuarial indicated rate change and serves little use on the record in that RRA proceeding. Further, ICBC notes that BCOAPO made the same argument in the 2021 RRA, which the BCUC did not accept, stating “[i]n the absence of any evidence of imprudence, the Panel views that the choice of investment strategy is a matter for ICBC management in conjunction with its investment advisor, BCI, provided that the basis for such investments is clearly defined in ICBC’s [SIPP] and reviewed regularly.”[192]
McCandless submits that ICBC’s methodology of using an investment income that is based on BCI’s annualized 15-year return is not appropriate for calculating the rate request. McCandless submits the maximum term for a new or renewal automobile insurance policy is 12 months and, while some injury claims incurred during the policy year can have lengthy payout durations, these are a small minority of the total number and value of injury and property damage claims.[193] McCandless states if the investment income is overstated in the determination of the rate change, the resulting premium revenue will be (all else being equal) less than required to achieve a breakeven result. This would lead to a decline in Basic capital.[194]
In reply, ICBC submits that McCandless’ argument is not supported by evidence and notes a significant proportion of the injury claims payments are actually expected to be paid out more than 15 years after the start of the policy year (e.g. 31% of medical and rehabilitation payments and 45% of enhanced disability payments).[195] ICBC explains it uses BCI’s 15-year long-term capital market expectations report as it fits very well with the longer-term, expected claims experience under Enhanced Care, and the use of this longer-term horizon also promotes rate stability. Long-term forecasts do not move significantly in response to short-term volatility, or isolated announcements, or short-term expectations. ICBC also indicates using longer investment horizons help as a form of rate smoothing as it does not want short-term market volatility to create that same kind of volatility within its rate setting.[196]
Panel Determination
The Panel is satisfied that formally recognizing leverage in ICBC’s SIPP as part of the asset mix is reasonable. The Panel finds that it is appropriate for ICBC to change the NMR and the YCARS formulae to reflect as accurately as possible expected investment returns within the rate indication. Therefore, the Panel approves the changes that ICBC proposes to the NMR and YCARS formulae, to include leverage for PY 2023 and on a go forward basis, which reflect ICBC’s new investment strategy.
The Panel observes that the choice of investment strategy, including whether to adopt any amount of leverage, is a matter for ICBC management in conjunction with its Board of Directors and investment advisor, BCI. ICBC has outlined the process by which it develops its investment strategy, including the internal governance requirements, regularly assessing its investment strategy with BCI and, ultimately, approval from the ICBC Board of Directors for the new strategic asset mix. Further, the ICBC Board of Directors determines the corporation’s tolerance for risk related to its investment portfolio, and this comprises part of the SIPP. The Panel finds that there are adequate controls in the development and evaluation of ICBC’s SIPP. Thus, the Panel is not persuaded by BCOAPO that a complete review of the overall risk profile and impacts of the SIPP, ALM study and leverage on the actuarial rate indication is required at this time and therefore we decline to direct ICBC to provide information on its ALM studies and the implications for the strategic asset mix as part of its minimum filing requirements for the 2025 RRA.
ICBC has explained its decision to adopt a longer-term investment strategy that better aligns with the timeframe of much of the Enhanced Care product. Having considered this, the Panel accepts that some of ICBC’s investments have a longer time horizon. Introducing leverage into the investment portfolio creates greater flexibility for ICBC to balance its investment portfolio and to provide an additional source of liquidity for ICBC to borrow to meet any immediate liquidity needs. Under certain circumstances, borrowing may be ICBC’s preference because it can avoid having to sell higher returning assets or liquidating short-term fixed income investments required to maintain an adequate liquidity ratio. The Panel notes that both BCI and ICBC’s governance committee have assessed the risk tolerance incorporated into the SIPP.
While interveners raised issues regarding ICBC’s investment strategy, they did not express any concerns regarding ICBC’s proposal to include leverage in the NMR or YCARS formulae.
During the Workshop, ICBC explained that introducing leverage could enhance returns as well as losses, and that after examining what return ICBC is comfortable with, it decided on a 10 percent leverage target. The Panel is satisfied that ICBC has performed sufficient due diligence by consulting with one of the largest asset managers in Canada, BCI, and knowing that BCI has other clients that choose higher leverage, even up to 30 percent. Nevertheless, given that the introduction of leverage in ICBC’s SIPP is a new strategy, the Panel also considers it appropriate to revisit this issue in the future. Therefore, ICBC is directed to report on the results of formally introducing a 10 percent leverage target into the strategic asset mix for ICBC’s investment portfolio in its next RRA.
The Panel is not persuaded by McCandless that ICBC should not use a 15-year investment return horizon. We note that the appropriate investment return horizon under Enhanced Care is one of the issues explored during the 2021 RRA and that ICBC proposed to use BCI’s 15-year return forecast for calculating the New Money Rate, because it aligned with the longer-term investment horizon expected under Enhanced Care.[197] We continue to view that the 15-year investment horizon aligns with the expected claims experience under Enhanced Care and we are also persuaded that the 15-year investment horizon promotes rate stability.
Nevertheless, in anticipation that the impact of ICBC’s investment strategy on investment returns, and therefore on possible changes to the policyholder rates, will be examined in the next RRA, the Panel directs ICBC to provide an update in the next RRA on the expected liability duration of the Enhanced Care model and how it aligns with the 15-year investment horizon and ICBC’s SIPP.
The Panel rejects BCOAPO’s suggestion to direct ICBC to update information during an RRA proceeding for any subsequent release of a revised SIPP. We agree with ICBC that if a revised SIPP is released after an RRA is filed and was not used in the calculation of the actuarial indicated rate change, it is not relevant in that RRA proceeding.
3.4 Panel Determination on the PY 2023 Proposed Rate Change
The Panel has reviewed elements of the PY 2023 actuarial indicated rate change that ICBC identifies as having the largest influence – Claims Costs, operating expenses and investment income – and found the underlying assumptions to be reasonable and supportive of a rate decrease of -6.5 percent. Based on the findings in sections 3.1 to 3.3, the Panel accepts that the PY 2023 Basic insurance rate indication is based on AAP in Canada, pursuant to legislative requirements, and includes a capital provision equal to 7 percent of the required premium as required by Special Direction IC2 for PY 2023. The Panel acknowledges the uncertainty inherent in actuarial estimates, compounded with the relative newness of Enhanced Care for which there is limited ICBC data. The dearth of ICBC data adds to the uncertainty in the estimate of Claims Costs. Actual claims data related to Enhanced Care will emerge over the course of PY 2023 and ICBC will capture any estimation difference in future rate applications. Further, Enhanced Care data will continue to inform ICBC’s analyses in future rate applications.
The second part of the proposed rate change that ICBC identified is the Rate Change Floor of zero percent, which is directed by Special Direction IC2. In other words, Special Direction IC2 precludes the Panel from approving a rate decrease. The difference between the actuarial rate indication of -6.5 percent and the proposed rate change of zero percent, if approved, will result in an increase in ICBC’s Basic capital, all else being equal. There is no evidence in this proceeding to suggest a Basic insurance rate increase is warranted. Therefore, the Panel approves a permanent Basic insurance rate change of zero percent for PY 2023 for all new or renewal policies with an effective date on or after April 1, 2023, as requested by ICBC in the Application.
Since there is no difference between the interim rate and the permanent rate change now approved in this Decision, no variance adjustments are necessary.
4.0 Considerations for Future Revenue Requirements Applications
As summarized by ICBC during the Workshop, one of the key themes in the IRs in this proceeding was how ICBC’s actuaries used external information to estimate its forecasts. ICBC addressed questions such as:[198]
• How ICBC considered recent events such as the COVID-19 pandemic;
• How ICBC considered influences such as technological improvements in vehicles and recent supply chain issues on BVDC costs; and
• How ICBC considered the impacts of increased immigration (which may lead to higher premiums and costs) in the actuarial analysis.
ICBC submits that it considered external factors such as those listed above in the actuarial forecasting models and that the absence of explicit model adjustments does not mean that the information was not considered.[199] ICBC argues, however, that the use of external information requires balancing simplicity versus added accuracy, while at the same time ensuring the model is predictive and produces a reasonable and intuitive forecast based on known factors. [200]
ICBC states that its current approach to modelling risk exposure is in accordance with AAP and provides a good balance between goodness of fit and simplicity.[201] Where appropriate, ICBC states that it has either excluded March 2020 from the FLY 2022 data[202] or excluded data from March 2020 forward in the regression models[203] to avoid the influence of the COVID-19 pandemic.
ICBC has also considered the impact of technological advances in vehicle safety (which reduce the number of crashes) implicitly in the 10-year BVDC frequency model. No direct adjustment is made because it would be difficult to isolate, assess, quantify and predict the impact of new features entering the vehicle population each year, along with their interaction with other facts that also contribute to the trend such as customer behaviour, weather and congestion. Rather, ICBC submits that over time, the impacts of past, current and future safety technologies on crash frequency will be experienced gradually as it takes time for any particular safety feature to penetrate into the vehicle population as new vehicles (with the feature) are made and purchased and older vehicles (without the feature) are gradually retired.[204] With respect to the impact of recent supply chain issues on BVDC costs, ICBC submits that that is reasonably reflected within the five-year regression model as well as the additional adjustment for excess inflation as discussed in Section 3.1.1.[205]
Finally, with respect to immigration, ICBC considers that any incremental changes in population growth rates will ultimately be captured in the estimated trends as they emerge in data. No explicit consideration is given to the changing population growth rates as the degree of change is difficult to estimate for BC specifically.[206]
In addition to the IRs on how ICBC’s actuaries used external information to estimate its forecasts, during the proceeding, ICBC was asked to provide further information about its selected frequency trend rate and resulting actuarial estimate of permanent impairment (PI) claim exposures, which is an EAB sub-coverage (EAB-PI). ICBC answered questions regarding the difference between the actuarial best estimate for EAB-PI claims exposures compared to the actual EAB-PI claims exposures for FLY 2022 which have been opened by the end of fiscal year 2023 (March 31, 2023).[207]
As discussed in Section 3.1.1, for the actuarial analysis, the selected EAB-PI frequency trend rate is equal to the BVDC frequency trend rate (-1.0 percent per year) given the propensity to BVDC approach. ICBC states the propensity of EAB-PI claim exposures to BVDC claim exposures can be viewed as representing the proportion of Basic crash claims that result in a permanent impairment. This ratio is 4.5 percent.[208] ICBC explained that the resulting actuarial best estimate of all EAB-PI claims exposures for FLY 2022 is approximately five times higher[209] than the actual EAB-PI claims exposures for FLY 2022 to March 31, 2023 due to the long-tailed nature of EAB-PI and because EAB-PI has been introduced as a brand-new benefit under Enhanced Care.[210]
ICBC outlined that its claims division is in the process of enhancing procedures to identify when to open an EAB-PI claim, considering that certain injuries caused by an automobile accident may not be noticeable or reported to ICBC right away and that an injured customer must reach maximum medical recovery before ICBC can evaluate the extent of the customer’s injury as a permanent impairment (hence establishing the benefit amount). ICBC stated that these factors result in an EAB-PI claim exposure being opened towards the end of the treatment process, which could be a long time after the accident occurs. As such, ICBC’s actuaries consider the actuary’s best estimate of FLY 2022 incurred claim exposures, which is derived based on the propensity approach of EAB-PI to BVDC claims, is appropriate.[211]
No issues were raised by interveners with respect to either of the above-noted issues.
Panel Discussion
The Panel recognizes that external information can influence rate forecasts, in some cases quite significantly. Knowing the reasons why potentially significant external factors may or may not influence ICBC’s forecasts helps in the consideration of the requested changes to ICBC’s rates. The Panel notes that explaining these reasons for inclusion or exclusion at the outset of future applications could expedite deliberations, rather than having to pursue the reasons through IRs.
With regard to the actuarial best estimate of all EAB-PI incurred claims exposures, the Panel considers that additional years of data at the time of the next RRA should provide further information regarding the EAB-PI propensity to BVDC approach. The Panel expects ICBC to provide an update in its next RRA on the suitability of this approach. ICBC should compare, for example, its actual experience to date to the actuarial best estimate for EAB-PI claims exposures as included in the PY 2023 rate indication. The update should also describe the alternative approaches ICBC has considered to decouple forecast EAB-PI frequency from BVDC frequency, as appropriate.
5.0 Other Approvals Sought
5.1 Proposed Changes to the Dates for Fiscal Year 2023/24 Compliance Reporting
ICBC requests approval to change the filing deadline for two compliance reports to the BCUC on the basis that the proposed deadlines would coincide better with other filing deadlines.[212] Table 14 below summarizes the request.
Table 14: Compliance Reporting Proposal[213]
With respect to the Road Safety compliance report, ICBC also states that it proposes to defer the filing for that report to December 15, 2024 to coincide with the timing for filing ICBC’s next RRA.[214]
If approved, ICBC states that the two compliance reports would be the annual reports for FY 2023/24 and include details on the actuals for FY 2022/23 and the outlooks for FY 2023/24. Further, the reports would be presented in the same format as in this Application.[215] ICBC indicates that it anticipates the Road Safety compliance report will include updates on the Rate Affordability Action Plan (RAAP) initiatives, non-RAAP initiatives and information on road safety statistics.[216]
Positions of the Parties
Interveners did not raise any issues with the proposed change to the filing deadline for either the Road Safety or Performance Measures compliance report.
Panel Determination
The Panel is satisfied that the filing deadlines for the Road Safety and Performance Measures compliance reports would coincide better with other filing deadlines as proposed by ICBC. Therefore, the Panel approves the amended compliance filing deadlines as proposed by ICBC and directs ICBC to file its next Performance Measures report on or before December 15, 2023. In addition, the Panel directs ICBC to file its next Road Safety report on or before December 15, 2024, to coincide with the timing for filing ICBC’s next RRA.
5.2 Proposed Change to Reporting on Legal Representation Conversion Rate
ICBC requests approval to discontinue reporting on the Legal Representation Conversion Rate (LRCR), which is one of the metrics included in ICBC’s reporting to the BCUC. The LRCR tracks the legal-based bodily injury (BI) claims exposures that became represented, because representation was a significant driver of claims costs under the old legal-based models.[217] ICBC explains that under Enhanced Care, litigation and BI claim payments have largely been removed from ICBC’s claim costs and Basic insurance rates. Consequently, ICBC submits, there is no longer a business need to continue monitoring the LRCR.[218] Further, ICBC submits that due to the different insurance models in place, the LRCR no longer provides meaningful comparisons to previous data and as such is less useful.[219] If approved, ICBC would discontinue reporting on the LRCR in future RRAs.
Positions of the Parties
Interveners did not raise any issues with the discontinuation of the LRCR.
Panel Determination
The Panel is persuaded that the LRCR is no longer relevant under Enhanced Care, primarily because legal representation is no longer a significant driver of claims costs. Therefore, the Panel approves ICBC’s request to discontinue reporting on the LRCR in future RRAs.
5.3 Requests for Confidentiality
As noted in Section 1.3 of this Decision, ICBC makes certain requests for confidentiality in the Application and in its responses to IRs. ICBC seeks to keep the following confidential:[220]
• The unredacted version of Chapter 8, Appendix 8J – 2022/23 Annual Information Technology Capital Expenditure Plan; and
• The responses to the following IRs:
o 2023.1 RR BCUC.43.1;
o 2023.1 RR BCUC.43.2;
o 2023.1 RR BCUC.43.3;
o 2023.1 RR BCUC.43.4; and
o 2023.1 RR BCUC.43.5.
ICBC submits that public disclosure of the redacted information in the 2022/23 Annual Information Technology Capital Expenditure Plan could influence negotiations on current and future IT capital projects and may result in economic harm to ICBC and its customers.[221] With respect to the above-listed IRs, ICBC requests that the responses be held confidentially as they contain confidential security sensitive information which provides insight into the scope and maturity of ICBC’s cybersecurity program which, if made public, could result in cyber-attack harm to ICBC and its customers.[222] ICBC also filed confidential responses to the BCUC’s confidential IRs in Exhibit B-4 of this proceeding.
Part IV of the BCUC’s Rules of Practice and Procedure (Rules) established by Order G-178-22 sets out the rules that apply to confidential documents filed with the BCUC.[223]
No issues were raised by interveners with respect to these confidentiality requests.
Panel Determination
The Panel is persuaded that certain information in this proceeding should remain confidential due to the risks of economic and cyber-attack harm to ICBC and its customers. Therefore, the Panel accepts ICBC’s request to keep the unredacted version of Chapter 8, Appendix 8J – 2022/23 Annual Information Technology Capital Expenditure Plan confidential as well as the responses to IRs related to this section of the Application, until the BCUC determines otherwise.
6.0 Issues Arising
6.1 Financial Statement View versus Policy Year View
As noted in Section 2.1 above, Basic insurance rates are set on a policy year basis. ICBC explains that differences in certain costs and income arise between the information set out in ICBC’s RRAs and the information presented in ICBC’s financial statements because the information is being prepared for different purposes. For example, investment income included in ICBC’s financial statements is not directly comparable to the investment income used to offset ICBC’s cost of providing Basic insurance. Investment income in ICBC’s financial statements refers to the income generated on ICBC’s entire investment portfolio, including Basic and Optional insurance premiums invested, as well as income from other (non-investment) assets. By comparison, the investment income included in the Application refers to the expected investment yield for premiums collected over the policy year until these premiums are paid out for costs related to the policy year (i.e. investment income on policyholder supplied funds) and the investment income earned on capital available for rate setting over the period for which PY 2023 policies are written (i.e. investment income on capital available for rate setting).[224]
While the policy year basis is required based on the application of AAP, in final argument, McCandless submits that the financial statement view should be used to set ICBC’s rates for PY 2023 and that the BCUC should direct ICBC to use the financial statement methodology as the basis for future RRA submissions.[225]
McCandless points to the calculation of the investment income, stating:[226]
In the current two-year rate request ICBC uses a formula to calculate the investment income that averages a 15-year return, rather than forecast the actual return for the two fiscal years under review. […]
In the current financial climate of lower fair value of fixed assets and a [weak] equity markets ICBC’s RRA long-term smoothing methodology overstates the investment income and the bottom line net income. […]
The financial statement approach forecasts a lower investment income, and a small, combined net operating loss for the two years under review. This method allows comparison of the request (budget) to the actual financial statement results at fiscal year-end, which is not possible with the 15-year average approach.
McCandless concludes that the policy year investment income calculation results in a “castles in the air” scenario with a serious overstatement of the investment income, net income and Basic equity/capital available.[227]
In reply, ICBC submits that the legislative and regulatory framework that applies to setting Basic insurance rates requires rates to be set based on the application of AAP – standard principles applied in the insurance industry.[228] At a basic level, ICBC agrees that actuarial indicated rate, which provides for the best estimate of the costs of Basic insurance claims for a specific policy year (including a capital provision), is similar to what is required using a utility cost of service model or financial statement forecast. However, ICBC explains that, in the context of insurance, there are fundamental differences between the financial statement forecast and the rate-setting forecast. That is, the rate-setting forecast is not a mechanism to manage net income by fiscal year but ensures that the costs of Basic insurance, net of investment income over the policy year (from when premiums are received to when costs are paid out) are covered by the rates charged.[229] ICBC states:
If ICBC used its financial statements to form the basis of the rate indication, there would be a significant mismatch: Policyholders would be (a) paying to cover the risk margins required for financial reporting, and (b) would only benefit from the investment income that would be recognized in the next two financial years, rather than the total amount that is expected to be earned from their premium. Ultimately, this mismatch between revenue and costs would not accord with AAP. The reliance on forecast investment income on a fiscal year basis would also introduce volatility into rate setting due to the short-term volatility of investment return forecasts.[230] [Footnote in original omitted]
Panel Determination
The Panel does not accept McCandless’s submission that ICBC should use the financial statement view instead of the policy year to set rates for PY 2023. The financial statement approach that McCandless advocates is not consistent with AAP according to ICBC’s actuaries. Having said that, however, the Panel notes that although the ICBC investment team has set its strategy using the 15-year horizon that BCI uses, this is certainly a case where more data would be helpful to ascertain the appropriate investment horizon. Whereas the Panel accepts that relying on forecast investment income on a fiscal year creates a mismatch between revenues and costs, we note that ICBC is relying on BCI’s selection of a 15-year investment horizon instead of a more rigorous process to demonstrate what length of investment horizon achieves a balance between revenues and costs. The Panel’s determination in Section 3.3.2 above, regarding the alignment between the 15-year investment horizon and the expected liability duration of the Enhanced Care model, means that this issue will be addressed in the next RRA.
6.2 Service Measure Results
In the Application, ICBC reports on three broad categories of performance measures: efficiency, financial, and service measures for customer satisfaction, as directed by the BCUC. The purpose of the BCUC-approved performance measures is to provide information that will help the BCUC to assess whether ICBC’s provision of Basic insurance service to customers is adequate, efficient, just, and reasonable as required by the ICA. These performance measures are reported annually to the BCUC, for which the next reporting deadline is addressed in Section 5.1.
ICBC’s most recent performance measure results are summarized in the following table[231]:
Table 15: Performance Measures Results
Of note, ICBC addresses its service measures results and the 2022/23 Target/Outlook. ICBC describes its service measures for customer satisfaction across the three main lines of business as being for driver licensing, insurance experience, and claims experience. ICBC states it undertakes surveys that aim to measure customer service performance based on the percentage of satisfied customers for three major transaction types or services.[232] These transactions are for driver licensing office experience (where customers visit an ICBC office and complete a knowledge or road test or renew their driver’s license), insurance experience (where customers purchase or renew their policy) and claims experience (where customers start or complete the claims process).[233] The current service measures for customer satisfaction were approved by the BCUC as part of ICBC’s 2019 RRA and replaced ICBC’s prior New Claims Initiation and Customer Contact Service Level (CCSL) metrics, as well as an average speed to answer metric. The CCSL was defined as the weighted average percentage of calls answered within 90 seconds across ICBC’s four contact centres based on the number of calls received.[234]
ICBC submits that it is evolving the customer satisfaction measurement framework and is transitioning from a four-point satisfaction measurement scale to calibrated seven-point scale. ICBC explains that whereas in the four-point scale, customers who felt somewhat satisfied (rating of three out of four) and very satisfied (rating of four out of four) were included in the satisfaction score; in the seven-point scale, only customers who rate as satisfied (six out of seven) and very satisfied (seven out of seven) will be included in the satisfaction score. In other words, ICBC will no longer measure “somewhat satisfied” as a positive outcome.[235]
ICBC describes the change in scale from four to seven measurement points as a means to better distinguish customer satisfaction levels and identify areas requiring improvement. ICBC states that since it will no longer measure “somewhat satisfied” as a positive outcome, both targets and satisfaction scores will be lower in future years. This is reflected in the 2022/2023 Target/Outlook.[236]ICBC further clarifies its position that its “lowering of [service measure] targets beginning in 2022/23 is a result of changing the scale, and not an anticipated drop in customer satisfaction.”[237] As support, ICBC outlines, between the period June 2021 – March 2022, it conducted a parallel operation of the four-point and seven-point satisfaction scales and used the insights from the data collected during the parallel operation to set its targets.[238]
Positions of the Parties
While not addressing the service measures for customer satisfaction explicitly, MoveUP discusses the rate of ICBC staff turnover, especially in ICBC’s contact centres, and the general problems in staff recruitment and retention, which it explored in IRs. MoveUP submits these difficulties have translated into a “precipitous degradation” of call centre service quality. Therefore, MoveUP submits that the BCUC should direct ICBC to demonstrate that it is taking prompt and adequate measures to rectify these deficiencies. MoveUP states:
At the Claims Contact Centre, […] from February 2020 (the month prior to the public heath emergency order) to December 2022, response-time collapsed to the following extent: [239]
• Service Level (% of calls answered within 100 seconds) from 91% to 22%
• Average Speed of Answer (in seconds) from 104 to 975 (equivalent to 16.25 minutes) … following an astonishing low of 2,738 (45.63 minutes!) in December 2021.
[Emphasis in original]
In response to MoveUP, ICBC describes the tactics and mitigation strategies it is using to address this matter, including “...an increased focus on recruitment efforts and employee training and development, as well as new technological capabilities to improve efficiency.”[240]
No issues were raised by other interveners with respect to the service measures results.
Panel Discussion
The Panel notes that ICBC proposes to change the way it measures customer satisfaction, moving from a four-point to a seven-point scale, and that this may lower satisfaction scores. Although ICBC indicates that it ran a parallel application of the four- and seven-point scale satisfaction surveys from June 2021 to March 2022, it compared the ‘somewhat satisfied/satisfied’ scores under the four-point scale to the ‘satisfied/very satisfied’ scores (6 and 7) under the new scale. ICBC did not include the ‘somewhat satisfied’ (5) of the latter scale in the comparison, although doing so may have provided a closer comparison of the two results. That said, the Panel observes that ICBC appears to be aiming for a better measure of customer satisfaction by concentrating on ‘satisfied/very satisfied’ scores (6 and 7). Given that the new scale has only been in place for one year, ICBC should have more data at the time of the next RRA to provide support for the new benchmark for customer satisfaction.
The Panel is not persuaded by MoveUP’s observation that there has been a precipitous degradation in call centre service quality. We note ICBC no longer reports on an average speed of answer or percentage of calls answered within 100 or 90 seconds. Nevertheless, the Panel encourages ICBC to continue to assess the call centre service quality.
6.3 ICBC’s Response to Directions Related to Order G-96-22
By Order G-96-22, on April 7, 2022, the BCUC approved changes to the Basic insurance Tariff (Tariff) with respect to a Basic insurance rebate (Relief Rebate) of $396 million,[241] as directed by Special Direction IC2. By the same order, ICBC was directed[242] to report on the actual administrative cost of the Relief Rebate and the associated impacts as part of its next application for a general rate change, which is this Application.
ICBC states that $2.74 million of costs have been incurred to date against a budget of $5 million related to the administrative costs incurred in distributing the Relief Rebate to customers. Further, ICBC states that it is still handling costs associated with reissuances and exceptions, and that it anticipates most costs related to the administration of the Relief Rebate will be known by the end of April 2023 (although certain costs will be incurred after this date).[243] ICBC explained that this timing is based on when the administrative costs were incurred for the two COVID-19 rebates issued by ICBC[244] pursuant to government direction in 2021.
During the proceeding, ICBC stated that it was unable to provide an outlook for the total administrative costs of the Relief Rebate to be incurred due to various factors, such as the time involved for some costs to materialize.[245]
No issues were raised by interveners with respect to ICBC’s response to the above-noted directive.
Panel Determination
The Panel is not satisfied that ICBC has adequately explained why the actual incurred administrative costs to date of the Relief Rebate are significantly less than forecast, and nor is the Panel satisfied that ICBC has reported the full amount of the actual costs as directed by Order G-96-22. Therefore, the Panel directs ICBC to report the full amount of the actual administrative costs of the Relief Rebate in a compliance filing, with more detailed and complete variance explanations, to be filed by December 15, 2023.
6.4 Issues Raised in Letter of Comment
As noted in Section 1.4, as part of the public process for this proceeding, the BCUC received one letter of comment from Richard Landale (Landale).
Landale expressed his concerns regarding product and rate design matters from the perspective of individuals who are over the age of 65, or seniors, who are Basic insurance policyholders and who do not have work or work-related incomes. Landale states, among other matters, that the Application fails to recognize seniors as the “largest single growing” population of policyholders in both the revenue requirement and the coverages provided by Basic insurance. Landale submits that the exclusion of any wording with respect to seniors in the descriptions of Enhanced Care coverages is of serious concern.[246] Landale notes that the BCUC has no jurisdiction over the Basic insurance product but submits that the BCUC can make recommendations.[247]
Panel Discussion
While the Panel acknowledges Landale’s concerns, the Panel finds that they are beyond the scope of the current revenue requirements proceeding and some aspects are outside of the jurisdiction established by the regulatory framework for the BCUC’s regulation of Basic insurance. As Landale acknowledges, the BCUC does not have the power to change a term or condition of any plan of Basic insurance.
In addition, the purpose of the ICBC’s revenue requirements proceedings is to review ICBC’s request for a general Basic insurance rate change which affects all Basic insurance policyholders equally.[248] In this proceeding, the Panel does not review the Basic insurance rate design or how ICBC’s proposed Basic insurance rate is charged to different policyholders depending on their characteristics.
Dated at the City of Vancouver, in the Province of British Columbia, this 11th day of October 2023.
Original signed by:
____________________________________
E. B. Lockhart
Panel Chair / Commissioner
Original signed by:
____________________________________
B. A. Magnan
Commissioner
List of Acronyms
Acronym |
Description |
AAP |
Accepted Actuarial Practice |
ALM |
Asset-liability management |
Application |
Insurance Corporation of British Columbia’s 2023 Revenue Requirements Application |
Basic insurance |
Universal compulsory automobile insurance |
BC |
British Columbia |
BCI |
British Columbia Investment Management Corporation |
BCOAPO |
British Columbia Old Age Pensioners’ Organization et al. |
BCUC |
British Columbia Utilities Commission |
BVDC |
Basic Vehicle Damage Coverage |
CCSL |
Customer Contact Service Level |
Claims Costs |
Claims and related costs |
CPI |
Consumer Price Index |
CPP |
Canadian Pension Plan |
EAB |
Enhanced Accident Benefits |
EAB-PI |
Enhanced Accident Benefits - Permanent Impairment |
EI |
Employment Insurance |
Enhanced Care |
A care-based insurance system |
Errata |
ICBC's errata to its response to McCandless IR 3.9 |
ESG |
Environmental, social and governance |
FLY |
Fiscal Loss Year |
Frequency |
Number of claim exposures per policy |
FTEs |
Full-time equivalents |
ICA |
Insurance Corporation Act |
ICBC |
Insurance Corporation of British Columbia |
IFRS |
International Financial Reporting Standards |
IR |
Information request |
January 2022 SIPP |
January 27, 2022 SIPP |
Landale |
Richard Landale |
Loss Costs |
Loss and Allocated Loss Adjustment Expenses |
LRCR |
Legal Representation Conversion Rate |
McCandless |
Richard McCandless |
MCT |
Minimum Capital Test |
MoveUP |
Movement of United Professionals |
MPI |
Manitoba Public Insurance |
NMR |
New Money Rate |
Optional insurance |
Optional automobile insurance service |
PI |
Permanent impairment |
PSEC |
Public Sector Employers’ Council |
PY |
Policy year |
PY 2023 |
The 24-month policy year beginning on April 1, 2023 and ending on March 31, 2025 |
RAAP |
Rate Affordability Action Plan |
Rate Change Floor |
The requirement in Special Direction IC2 not to decrease rates for PY 2023 |
Relief Rebate |
Basic insurance rebate |
RRA |
Revenue Requirements Application |
Rules |
BCUC’s Rules of Practice and Procedure |
Severity |
Average cost per claim exposure |
SIPP |
Statement of Investment Policy and Procedures |
Special Direction IC2 |
Special Direction IC2 to the BCUC, BC Regulation 307/2004, as amended |
Tariff |
Basic insurance Tariff |
UCA |
Utilities Commission Act |
ULAE |
Unallocated Loss Adjustment Expenses, or Internal Claims Servicing Costs |
YCARS |
Yield on Capital Available for Rate Setting |
IN THE MATTER OF
the Utilities Commission Act, RSBC 1996, Chapter 473
and
the Insurance Corporation Act, RSBC 1996, Chapter 228, as amended
and
Insurance Corporation of British Columbia
2023 Revenue Requirements Application
EXHIBIT LIST
Exhibit No. Description
Commission documents
A-1 |
Letter dated December 21, 2022 – Appointing the Panel for the review of ICBC 2023 Revenue Requirements Application |
A-2 |
Letter dated January 10, 2023 – BCUC Order G-2-23 establishing a regulatory timetable |
Letter dated February 9, 2023 – BCUC Information Request No. 1 to ICBC |
|
A-4 |
CONFIDENTIAL – Letter dated February 9, 2023 – BCUC Confidential Information Request No. 1 to ICBC |
A-5 |
Letter dated March 6, 2023 – BCUC submitting Workshop Information |
A-6 |
Letter dated March 24, 2023 – BCUC submitting Amended Workshop Information |
A-7 |
Letter dated March 29, 2023 – BCUC submitting Workshop Request to ICBC |
A-8 |
Letter dated April 13, 2023 – BCUC Order G-81-23 establishing further regulatory timetable with Reasons |
A-9 |
Letter dated June 13, 2023 – BCUC amending the Panel for the review of the application |
A-10 |
Letter dated August 22, 2023 – BCUC response to ICBC Information Request No. 1 errata |
Applicant documents
B-1 |
Insurance Corporation of British Columbia (ICBC) - 2023 Revenue Requirements Application dated December 15, 2022
|
B-1-1 |
CONFIDENTIAL - Letter dated December 15, 2022 – ICBC submitting 2023 Revenue Requirements Application confidential Appendix 8J - 2022/23 Annual Information Technology Capital Expenditure Plan
|
B-2 |
Letter dated January 18, 2023 – ICBC submitting confirmation of Public Notice compliance with Order G-2-22
|
B-3 |
Letter dated March 9, 2023 – ICBC submitting responses to BCUC Information Request No. 1
|
B-3-1 |
CONFIDENTIAL – Letter dated March 9, 2023 – ICBC submitting confidential responses to BCUC Information Request No. 1
|
B-4 |
CONFIDENTIAL – Letter dated March 9, 2023 – ICBC submitting confidential responses to BCUC Confidential Information Request No. 1
|
B-5 |
Letter dated March 9, 2023 – ICBC submitting responses to Interveners Information Requests No. 1
|
B-6 |
Letter dated April 4, 2023 – ICBC submitting Workshop Presentation |
B-6-1 |
Letter dated April 5, 2023 – ICBC submitting updated Workshop Presentation slides to rectify page numbers
|
B-7 |
Letter dated April 14, 2023 – ICBC submitting Workshop Transcripts Volumes 1 and 2 corrections
|
B-8 |
Letter dated April 20, 2023 – ICBC submitting response to Workshop Undertakings |
B-9 |
Letter dated August 18, 2023 – ICBC submitting errata to Information Request No. 1 response
|
Intervener documents
C1-1 |
MoveUP (MoveUP) - Letter dated January 12, 2023 submitting request to intervene by Jim Quail
|
C1-2 |
Letter dated February 16, 2023 – MoveUP submitting Information Request No. 1 to ICBC
|
C2-1 |
McCandless, Richard (McCandless) - Letter dated January 20, 2023 submitting request to intervene
|
C2-2 |
Letter dated February 15, 2023 – McCandless submitting Information Request No. 1 to ICBC
|
C3-1 |
Insurance Bureau of Canada (IBC) - Letter dated January 25, 2023 submitting request to intervene by Miranda Lee
|
C3-2 |
Letter dated February 16, 2023 – IBC submitting Information Request No. 1 to ICBC
|
C4-1 |
British Columbia Old Age Pensioners’ Organization, Council of Senior Citizens’ Organizations of BC, Active Support Against Poverty, and Together Against Poverty Society (BCOAPO) – Letter dated January 30, 2023 submitting request to intervene by Irina Mis, Leigha Worth, Darren Rainkie and Kelly Derksen
|
C4-2 |
Letter dated February 16, 2023 – BCOAPO submitting Information Request No. 1 to ICBC
|
Letters of comment
E-1 |
Landale, R. (Landale) – Letter of Comment dated May 3, 2023 |
[1] Exhibit B-1, Cover Letter, p. 1.
[2] Order G-2-23.
[3] Exhibit B-1, Chapter 1, p. 1-1.
[4] ICBC provides vehicle and driver licensing services, vehicle registration services and fines collection on behalf of Government (Exhibit B-1, Appendix E – 2023 RRA Participant’s Reference Guide, p. 2, Footnote 1).
[5] Exhibit B-1, Appendix E – 2023 RRA Participant’s Reference Guide, pp. 1–2.
[6] Insurance Corporation Act, RSBC 1996, c. 228, retrieved from: https://www.bclaws.gov.bc.ca/civix/document/id/complete/statreg/96228_01#part2
[7] Exhibit B-1, Chapter 2, p. 2-2 or Special Direction IC2, section 1 (1) (b.3). “2023 policy year” means the period beginning on April 1, 2023 and ending on March 31, 2025.
[8] Exhibit B-1, Chapter 2, p. 2-3 or Special Direction IC2, section 3 (1.2).
[9] Exhibit B-1, Chapter 2, p. 2-3 or Special Direction IC2, section 3 (1)(h).
[10] Exhibit B-1, Chapter 2, p. 2-3. or Special Direction IC2, section 3 (1) (e.2).
[11] Exhibit B-1, Chapter 2 p. 2-3 or Special Direction IC2, section 3 (1.11).
[12] Exhibit B-1, Chapter 1, p. 1-3.
[13] Exhibit B-1, Chapter 2, p. 2-2.
[14] Exhibit B-1, Chapter 1, p. 1-7; Exhibit B-3, BCUC IR 44.1.
[15] The BCUC established the regulatory timetable y orders G-2-23 and G-81-23 dated January 10, 2023 and April 13, 2023, respectively.
[16] Order G-2-23.
[17] Exhibit A-10.
[18] A policy year comprises all the policies with effective dates during the defined policy year period (e.g. 12-months or 24-months in the case of PY 2023). The experience for a policy year includes all premium, other revenue, and costs associated with those policies regardless of the date of loss of a claim or the date other revenue was generated (Exhibit B-1, Appendix E – 2023 RRA Participant’s Reference Guide, p. 3).
[19] Exhibit B-1, Chapter 3, p. 3-1, Appendix E – 2023 RRA Participant’s Reference Guide, p. 3; Workshop Transcript Volume 1, p. 18.
[20] Exhibit B-1, Chapter 3, p. 3-1.
[21] Exhibit B-1, Appendix E – 2023 RRA Participant’s Reference Guide, p. 3.
[22] Workshop Transcript Volume 1, p. 18.
[23] Workshop Transcript Volume 1, p. 19.
[24] Exhibit B-1, Chapter 1, p. 1-1.
[25] Exhibit B-1, Chapter 3, p. 3-20; Workshop Transcript Volume 1, pp. 14–15.
[26] Exhibit B-1, Chapter 3, p. 3-22.
[27] Exhibit B-1, Chapter 3, pp. 3-20 to 3-21.
[28] Exhibit B-1, Chapter 1, p. 1-1.
[29] Exhibit B-1, Chapter 3, Appendix 3A, p. 3A-3.
[30] ICBC 2021 RRA Decision and Order G-307-21 dated October 28, 2021 (2021 RRA Decision), p. 7.
[31] Special Direction IC2, Section 1: Definitions, “MCT guideline”.
[32] Workshop Transcript Volume 1, p. 15.
[33] Exhibit B-1, Chapter 1, p. 1-1.
[34] ICBC Final Argument, pp. 15–16.
[35] Exhibit B-5, IBC IR 11.2.
[36] Exhibit B-5, IBC IR 11.1.
[37] Exhibit B-3, BCUC IR 13.3.1.
[38] Exhibit B-3, BCUC IR 13.3, 13.3.1.
[39] Exhibit B-1, Chapter 1, p. 1-1. The legal-based insurance model refers to the insurance models where an at-fault motorist could be sued by another party injured in a crash for damages such as pain and suffering, future care and wage loss (Exhibit B-1, Chapter 7, Appendix 7B, p. 7B-1, Footnote 2).
[40] Exhibit B-1, Chapter 7, Appendix 7B, p. 7B-1.
[41] Exhibit B-1, Chapter 8, p. 8-2.
[42] Exhibit B-1, Chapter 7, Appendix 7B, p. 7B-1, Appendix E – 2023 RRA Participant’s Reference Guide, p. 2.
[43] Exhibit B-1, Appendix E – 2023 RRA Participant’s Reference Guide, p. 2.
[44] Exhibit B-1, Appendix E – 2023 RRA Participant’s Reference Guide, p. 2.
[45] Workshop Transcript Volume 1, p. 13.
[46] Exhibit B-1, Chapter 3, p. 3-4.
[47] Exhibit B-1, Chapter 3, p. 3-5.
[48] Exhibit B-1, Chapter 3, p. 3-5.
[49] Current Basic insurance rates include a government-directed capital build provision that adds 11.5 percentage points to the PY 2021 actuarial indicated rate (ICBC 2021 RRA Decision, p. 17).
[50] Exhibit B-1, Chapter 3, p. 3-2; Workshop Transcript Volume 1, p. 14.
[51] Exhibit B-1, Chapter 3, p. 3-10; Workshop Transcript Volume 1, p. 28.
[52] Exhibit B-1, Chapter 3, p. 3-5, Chapter 1, p. 1-1
[53] Exhibit B-3, BCUC IR 2.1.
[54] Exhibit B-1, Chapter 3, p. 3-7, Figure 3.3.
[55] Exhibit B-1, Chapter 3, p. 3-7, Figure 3.3.
[56] MoveUP Final Argument, p. 1.
[57] BCOAPO Final Argument, p. 2.
[58] McCandless Final Argument, p. 8.
[59] Refer to Exhibit B-1, Chapter 3, p. 3-4, Figure 3.1 which shows that claims costs represent approximately $6.6 billion out of the projected costs of $8.1 billion for PY 2023 before offsets from miscellaneous revenue and investment income.
[60] A small portion (1.4 percent) relates to road safety and loss management costs (Exhibit B-1, Chapter 3, p. 3-4, Figure 3.1).
[61] Calculated as $5.9 billion (line (a)) divided by $6.6 billion (line (c)) from Exhibit B-1, Chapter 3, p. 3-4, Figure 3.1.
[62] Exhibit B-1, Chapter 3, pp. 3-4, 3-7 to 3-8, Figure 3.1; Workshop Transcript Volume 1, p. 28.
[63] Exhibit B-3, BCUC IR 2.1.
[64] Exhibit B-1, Chapter 3, pp. 3-7 to 3-8, 3-10; Workshop Transcript Volume 1, p. 28.
[65] Exhibit B-1, Chapter 3, p. 3-11.
[66] Exhibit B-1, Chapter 3, p. 3-12.
[67] In this Application, the enhanced disability benefits sub-coverage is the counterpart of the income replacement and indemnity coverage in the 2021 RRA which ICBC states is a naming change only – that is, there is no change in the coverage definition or benefits provided (Exhibit B-1, Chapter 3, Appendix C.0, p. C.0-3).
[68] Exhibit B-1, Chapter 3, p. 3-11.
[69] Exhibit B-1, Chapter 3, p. 3-12, Figure 3.4. The BCUC removed the footnotes referenced in this table for brevity.
[70] Exhibit B-1, Chapter 3, pp. 3-1 to 3-2.
[71] Exhibit B-1, Chapter 3, Technical Appendix C.2.0, p. TA C.2.0-1.
[72] Exhibit B-1, Chapter 3, Technical Appendix C.2.0, p. TA C.2.0-1. ICBC states that it used the historical vehicle property damage claims in BC from the legal-based insurance product, excluding hit-and-run claims because hit-and-run claims are not covered by BVDC.
[73] Exhibit B-1, Chapter 3, p. 3-13.
[74] Exhibit B-1, Chapter 3, p. 3-14, Appendix C.2.0, p. C.2.0-2.
[75] Exhibit B-1, Chapter 3, p. 3-14; Exhibit B-3, BCUC IR 9.2, 9.2.1; Workshop Transcript Volume 1, pp. 35–37.
[76] Exhibit B-3, BCUC IR 9.2.2, 9.2.4.
[77] Exhibit B-1, Chapter 3, Appendix C.2.0, p. C.2.0-3.
[78] Exhibit B-1, Chapter 3, p. 3-14.
[79] Workshop Transcript Volume 1, p. 40.
[80] Exhibit B-1, Chapter 3, Appendix C.2.0, p. C.2.0-4; Exhibit B-3, BCUC IR 9.2.1; Workshop Transcript Volume 1, p. 39.
[81] Exhibit B-1, Chapter 3, Appendix C.2.0, p. C.2.0-4.
[82] ICBC Final Argument, p. 15.
[83] Exhibit B-1, Chapter 3, Appendix C.2.0, p. C.2.0-5, Figure C.2.0.5.
[84] Exhibit B-1, Chapter 3, Appendix C.2.0, p. C.2.0.4.
[85] Exhibit B-1, Chapter 3, p. 3-15.
[86] Exhibit B-1, Chapter 3, Appendix C.0, p. C.0-5; Exhibit B-6, Workshop Presentation Slides, Slide 18.
[87] Exhibit B-6, Workshop Presentation Slides, Slide 19.
[88] Exhibit B-1, Chapter 3, p. 3-15; Workshop Transcript Volume 1, pp. 34–35.
[89] Workshop Transcript Volume 1, p. 34.
[90] Exhibit B-1, Chapter 3, Appendix C.1.0, p. C.1.0-3.
[91] Exhibit B-1, Chapter 3, Appendix C.1.0, p. C.1.0-2.
[92] Exhibit B-1, Chapter 3, Appendix C.0, p. C.0-5.
[93] Exhibit B-1, Chapter 3, Appendix C.1.0, p. C.1.0-3.
[94] Exhibit B-1, Chapter 3, Appendix C.1.0, pp. C.1.0-7 to C.1.0-8.
[95] Exhibit B-5, BCOAPO IR 4.2.
[96] Exhibit B-1, Chapter 3, Appendix C.1.0, p. C.1.0-4, Figure C.1.0.3.
[97] MoveUP Final Argument, pp. 3–4.
[98] BCOAPO Final Argument, p. 7.
[99] BCOAPO Final Argument, pp. 10–11.
[100] ICBC Reply Argument, p. 8.
[101] BCOAPO Final Argument, p. 11.
[102] BCOAPO Final Argument, p. 11.
[103] ICBC Reply Argument, p. 8.
[104] BCOAPO Final Argument, p. 13.
[105] ICBC Reply Argument, p. 9.
[106] ICBC 2021 RRA Decision, p. 9.
[107] ICBC 2021 RRA Decision, p. 26.
[108] Exhibit B-1, Chapter 3, Appendix C.1.0, p. C.1.0-3.
[109] Exhibit B-1, Chapter 6, pp. 6-1, 6-4. BCUC noted March 31, 2026 instead of March 30, 2026 in this sentence as the date may be a typographical error in ICBC’s Application. In any case, this date change is inconsequential to the Panel’s determination.
[110] Exhibit B-1, Chapter 3, Appendix D, p. D.0-1.
[111] Exhibit B-1, Chapter 6, p. 6-1.
[112] Exhibit B-5, BCOAPO IR 9.4.
[113] Exhibit B-1, Chapter 6, p. 6-9.
[114] Exhibit B-1, Chapter 6, p. 6-10, Figure 6.2.
[115] Exhibit B-5, BCOAPO IR 9.1.
[116] Exhibit B-1, Chapter 6, p. 6-12.
[117] Exhibit B-1, Chapter 6, p. 6-12.
[118] Exhibit B-1, Chapter 6, p. 6-13.
[119] Exhibit B-1, Chapter 6, p. 6-15.
[120] Exhibit B-1, Chapter 6, pp. 6-12 to 6-13.
[121] Exhibit B-3, BCUC IR 31.3.
[122] Exhibit B-1, Chapter 6, pp. 6-13 to 6-14
[123] Exhibit B-1, Chapter 6, p. 6-14, Figure 6.4.
[124] Exhibit B-1, Chapter 6, p. 6-14.
[125] Exhibit B-3, BCUC IR 31.5.
[126] Exhibit B-5, BCOAPO IR 9.1.
[127] Exhibit B-1, Chapter 6, p. 6-14.
[128] Exhibit B-3, BCUC IR 33.5.
[129] Exhibit B-1, Chapter 6, p. 6-19
[130] Exhibit B-1, Chapter 6, p. 6-18.
[131] Exhibit B-1, Chapter 6, p. 6-19.
[132] Exhibit B-1, Chapter 6, p. 6-19.
[133] Exhibit B-1, Chapter 6, p. 6-19.
[134] BCOAPO Final Argument, p. 22
[135] BCOAPO Final Argument, p. 23.
[136] ICBC Reply Argument, p. 10.
[137] ICBC Reply Argument, p. 10.
[138] ICBC Reply Argument, p. 11.
[139] Exhibit B-1, Chapter 5, p. 5-1, Chapter 3, Appendix E.0, p. E.0-1.
[140] Transcript Vol. 1, p. 63.
[141] Exhibit B-1, Chapter 5, p. 5-1; ICBC 2019 RRA, Exhibit B-1, Chapter 5, p. 5-1.
[142] 2021 RRA Decision, pp. 48, 49.
[143] Exhibit B-1, Chapter 5, p. 5-1.
[144] Exhibit B-1, Chapter 5, Appendix 5A, p. 5A-1; Exhibit B-3, BCUC IR 25.3.
[145] Exhibit B-1, Appendix 5A, p. 5A-1; Exhibit B-3, BCUC IR 25.6.
[146] Exhibit B-3, BCUC IR 25.5.
[147] Exhibit B-3, BCUC IR 25.2, 25.3.
[148] Exhibit B-3, BCUC IR 25.1.
[149] Exhibit B-1, Appendix A, Attachment 5A.1, p. 3.
[150] Exhibit B-5, BCOAPOIR 8.1.
[151] Exhibit B-5, BCOAPO IR 8.1; Exhibit B-3, BCUC IR 20.1.
[152] Exhibit B-3, BCUC IR 20.3.1.
[153] Exhibit B-3, BCUC IR 20.3.
[154] Workshop Transcript Volume 1, p. 73.
[155] Exhibit B-3, BCUC IR 18.3, 18.3.1.
[156] Exhibit B-3, BCUC IR 18.3, 18.3.1.
[157] Exhibit B-1, Chapter 5, p. 5-4.
[158] Exhibit B-3, BCUC IR 17.2.
[159] Exhibit B-3, BCUC IR 17.2.
[160] Exhibit B-3, BCUC IR 18.1.
[161] Workshop Transcript Volume 1, p. 79.
[162] Workshop Transcript Volume 1, p. 78.
[163] Exhibit B-1, Chapter 5, Appendix 5B, p. 5B-3; Workshop Transcript Volume 1, p. 76.
[164] Workshop Transcript Volume 1, p. 77.
[165] Workshop Transcript Volume 1, p. 87.
[166] Workshop Transcript Volume 1, p. 73.
[167] Exhibit B-3, BCUC IR 17.1.2.
[168] Exhibit B-3, BCUC IR 19.1.1.
[169] Exhibit B-1, pp. 5-2, 5-5.
[170] Exhibit B-1, Chapter, p. 5-2.
[171] Exhibit B-1, Chapter 5, p. 5-6, Figure 5.3.
[172] Exhibit B-1, Chapter 5, p. 5-7, Figure 5.4.
[173] Exhibit B-1, Chapter 5, pp. 5-6 to 5-7.
[174] Exhibit B-1, Chapter 5, p. 5-4.
[175] Exhibit B-1, Chapter 5, pp. 5-2, 5-4.
[176] Exhibit B-3, BCUC IR 18.2.
[177] Exhibit B-3, BCUC IR 17.3.
[178] Exhibit B-3, BCUC IR 17.4.
[179] Exhibit B-3, BCUC IR 18.1.1.
[180] Exhibit B-3, BCUC IR 17.4 and IR 23.1, Attachment A (Blacklined SIPP dated April 22, 2021), p. 30.
[181] Exhibit B-3, BCUC IR 17.1.2.
[182] Exhibit B-1, Chapter 5, p. 5-8.
[183] Exhibit B-1, Chapter 5, p. 5-5.
[184] Exhibit B-3, BCUC IR 19.1.1.
[185] Exhibit B-3, BCUC IR 19.1.1.
[186] Exhibit B-3, BCUC IR 19.1.1.
[187] Exhibit B-1, Chapter 5, p. 5-1.
[188] Exhibit B-3, BCUC IR 17.1.2.
[189] MoveUP Final Argument, p. 4; BCOAPO Final Argument, p. 2.
[190] BCOAPO Final Argument, p. 17
[191] ICBC Reply Argument, p. 15.
[192] ICBC Reply Argument, p. 16.
[193] McCandless Final Argument, p. 5.
[194] McCandless Final Argument, p. 5.
[195] ICBC Reply Argument, p. 6.
[196] ICBC Reply Argument, p. 7.
[197] ICBC 2021 RRA Decision, p. 42.
[198] Workshop Transcript Volume 1, p. 31.
[199] Exhibit B-6, Workshop Presentation Slides, Slide 18; Workshop Transcript Volume 1, p. 31; ICBC Final Argument, p. 13.
[200] Exhibit B-6, Workshop Presentation Slides, Slide 18; Workshop Transcript Volume 1, p. 31.
[201] Exhibit B-3, BCUC IR 4.4.2.
[202] For example, in the Personal written risk exposure regression models (Exhibit B-3, BCUC IR 4.3.2).
[203] For example, in the BVDC frequency trend rate (Exhibit B-1, Chapter 3, Appendix C.2.0, p. C.2.0-2).
[204] Exhibit B-3, BCUC IR 9.4.3.
[205] Exhibit B-3, BCUC IR 9.4.2.
[206] Exhibit B-3, BCUC IR 4.4, 5.1.
[207] Exhibit B-3, BCUC IR 11.0 series.
[208] Exhibit B-1, Chapter 3, Technical Appendix C.1.0, p. TA C.1.0-24.
[209] The actuarial best estimate for all FLY 2022 EAB-PI incurred claim exposures is 4,985 compared to the actual EAB-PI claims count for FLY 2022 for claims opened by March 31, 2023 is 963.
[210] Exhibit B-3, BCUC IR 11.1.
[211] Exhibit B-3, BCUC IR 11.1.1–11.1.2.
[212] Exhibit B-1, p. 1-5; ICBC Final Argument, p. 27.
[213] ICBC Final Argument, p. 27.
[214] Exhibit B-3, BCUC IR 44.1, Attachment A – Draft Order, Draft Directive 2.
[215] Exhibit B-3, BCUC IR 45.1.
[216] Exhibit B-3, BCUC IR 45.3.
[217] ICBC Final Argument, p. 28.
[218] Exhibit B-1, Appendix 8F, p. 8F-8.
[219] Exhibit B-1, Appendix 8F, p. 8F-8.
[220] ICBC Final Argument, Appendix A – Draft Order, Directive 7.
[221] Exhibit B-1, Cover Letter to the Application, p. 2.
[222] Exhibit B-3, Cover Letter to the Responses to BCUC IR No.1, p. 1.
[223] By Order G-72-23 dated April 3, 2023, the BCUC adopted new Rules of Practice and Procedure. Since ICBC filed its Application on December 15, 2022, the BCUC’s previous Rules of Practice and Procedure approved in Order G-178-22 on June 30, 2022 apply to this proceeding.
[224] Exhibit B-1, Appendix E – 2023 RRA Participant’s Reference Guide, pp. 4–7.
[225] McCandless Final Argument, p. 8.
[226] McCandless Final Argument, p. 4.
[227] McCandless Final Argument, p. 4.
[228] ICBC Reply Argument, p. 3.
[229] ICBC Reply Argument, p. 3.
[230] ICBC Reply Argument, p. 3.
[231] Exhibit B-1, Chapter 8, p. 8A-7, Figure 8A.1. BCUC noted the performance measures related to service may contain typographical errors in the 2022/23 target/outlook column in this table. In any case, this was inconsequential to the Panel’s determination as the Panel relied on the 2023/23 target/outlook figures contained in the rest of ICBC’s Application and the evidence, including Figure 8A.2.
[232] Exhibit B-1, Appendix 8A, p. 8A-8.
[233] Exhibit B-1, Appendix 8A, p. 8A-8.
[234] ICBC 2019 RRA Decision and Order G-192-19 dated August 19, 2019, p. 36; ICBC 2019 RRA, Exhibit B-1, Appendix 1B, p. 1B-2, Appendix 8B, p. 8B-2.
[235] Exhibit B-1, Appendix 8A, p. 8A-9.
[236] Exhibit B-1, Appendix 8A, p. 8A-9.
[237] Exhibit B-1, Appendix 8A, p. 8A-9.
[238] Exhibit B-3, BCUC IR 39.1.
[239] MoveUP Final Argument, p. 6.
[240] ICBC Reply Argument, p. 11.
[241] The $396 million is from page 6 of the Exhibit B-1 of the ICBC Application in Support of a Basic Insurance Relief Rebate ($362 million for personal certificates plus $34 million for commercial certificates) and ICBC’s response in Exhibit B-3 of this proceeding to BCOAPO IR 15.5.
[242] Order G-96-22, Directive 2.
[243] Exhibit B-1, p. 1-6, Figure 1.2; Exhibit B-3, BCUC IR 46.1.
[244] $330 million from the first COVID-19 Rebate plus $188 million from the second COVID-19 rebate.
[245] Exhibit B-3, BCUC IR 46.1.
[246] Exhibit E-1, pp. 3, 6–7.
[247] Exhibit E-1, p. 2.
[248] ICBC 2021 RRA, Exhibits A-4 and A-5.