British Columbia

Figuring out ICBC's new premiums: bad drivers pay more, low mileage gets a break

The Insurance Corporation of British Columbia (ICBC) is overhauling how it calculates insurance premiums next month and there’s more to the algorithm than meets the eye.

Driving record is the biggest factor, but make of car and how much it's driven also play a role

ICBC is introducing a new way of calculating basic premiums, starting on Sept. 1. For drivers who have renewed their policies in advance this month, those changes have already taken effect. (David Horemans/CBC)

The Insurance Corporation of British Columbia (ICBC) is overhauling how it calculates basic insurance premiums next month and there's more to its new formula than meets the eye. 

A bigger chunk of the risk calculation — and, ultimately, the cost — is shifting to who's behind the wheel and that can mean a difference of thousands of dollars for some drivers. 

"Higher-risk drivers, people who are inexperienced and people who cause multiple crashes should be paying more for their insurance than everybody else," said Joanna Linsangan, a media spokesperson with ICBC. 

"That's what this new algorithm is focused on and that's what people are going to start seeing this September."

The upcoming changes come after a series of changes in ICBC's model, including a $5,500-cap on pain and suffering payouts for crash victims with minor injuries.

Roughly 1,200 British Columbians have insured their vehicles in advance under the new policy. Another 350,000 more are expected to renew their insurance in September. (Christer Waara/CBC)

Last year, B.C. Attorney General David Eby vowed to take drastic steps and described the state of the Crown corporation as a "financial dumpster fire."

"These changes are not about generating more money, more money is not coming in," Linsangan said.

"We're basically just redistributing the share [of who is paying what portion]."

Drivers also now have to list anyone who drives their vehicle on their policy.

Previously, if someone borrowed a car and crashed it, the owner of the vehicle was hit with the claim history which could trigger higher premiums. Now, a crash claim follows the driver, rather than the vehicle. 

Prices differences

The changes take effect Sept. 1, but roughly 1,200 British Columbians have already insured their vehicles under the new algorithm by renewing in advance. 

Of those, about 43 per cent saw an average insurance increase of $212 a year. Fifty-six per cent saw an average decrease of $329 annually. 

For some outliers though, the change is much more drastic. 

One driver saw his insurance drop $2,000 because crashes caused by others were wiped from his record, Linsangan said. 

Another driver is facing $2,000 more per year because of crashes. 

"The model is working the way it was intended. Higher-risk drivers are paying more for the benefit of lower-risk drivers," said Linsangan. 

Another 350,000 drivers are expected to renew their insurance in September.

Each insurance policy start with a base premium, currently set at $1,063, which then increases or decreases based on other factors like the driver and the vehicle. (ICBC)

How is the premium calculated?

The premium is primarily determined by who's behind the wheel, based 75 per cent on the main driver and 25 per cent on the incidental driver with the highest level of risk.  

The region where the car is registered also plays a role, based on traffic and other risk factors. The Lower Mainland is the most expensive place to insure, whereas the Peace River region is the cheapest. 

The car itself, and how it's used, also make a difference. Sports cars cost more to insure, for instance.

Bring in all the necessary information — like a photo of the odometer reading, whether the vehicle has autonomous emergency braking and details about the listed drivers — to make insurance renewal easier, Linsangan said. (CBC)

Safety features like autonomous emergency braking reduces premiums by 10 per cent. 

And, starting in September, another 10 per cent will be knocked off if the car is driven less than 5,000 km in a year — but the odometer reading has to be noted at renewal and then applies the following year. 

"Going to a broker is going to be a little bit different this time around," Linsangan said.

"You'll need to take a photo of your odometer.… Same as when you list drivers onto your policy, what we're going to need is the driver's license number and the birth date and, of course, the names of all these people."

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