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This is the Life: Provincial government has hijacked auto insurance through ICBC

Liberals are generally philosophically opposed to providing services the private sector can handle. But they are addicted to the profits...
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Lorne Eckersley is the publisher of the Creston Valley Advance.

Don’t you love situations where the political leaning of a governing party doesn’t square with its own actions? ICBC is a great example. Why, you might wonder, does a supposedly free enterprise party like the BC Liberals continue to operate an automobile insurance company, a large part of its business which comes from a legislated monopoly that prevents private insurers from selling basic coverage?

It isn’t complicated, really. The Liberals have had a long, long time to get out of the insurance business when they are generally philosophically opposed to providing services that the private sector can handle (and wants). But they are addicted to the profits.

There is a certain irony at play here, too. While basic insurance is priced, we are told, to pay its way (hence the most recent request from ICBC to jack up basic rates by more than five per cent), the government-owned company is making money hand over fist in the optional auto insurance sector. It doesn’t lower those rates, though, because that would force the private sector to do the same in order to be competitive. Instead, it forks over the surplus profits to the provincial treasury, the same pot that most tax money ends up in, a pot that funds services that don’t fall under the “user pay” philosophy that has grown popular with conservative-leaning governments in recent years.

This is a relatively new source of revenue for the province. It was only in 2010 that it passed legislation allowing cabinet to grab surpluses from ICBC to use as it pleases. With the current school year not appearing to start any time soon, I feel compelled to point out that the same government that takes money from overcharged optional auto insurance buyers to fund programs has also committed to returning savings from the teachers’ strike back to parents (at least those with school children under 13 years of age).

The Christy Clark government won’t put those savings back into the treasury to help fund a contract that falls in line with court rulings on class size and composition because, well, it doesn’t have any great love for public education and all those pain-in-the-butt unionized employees. But it loves being in the insurance business because it can siphon off profits and keep tax rates lower.

There is something particularly distasteful about this manipulation of the auto insurance market. ICBC doesn’t only provide a break-even basic insurance service without any competition at all. It funds things like police checkstops and highway safety projects that would typically be paid out of taxation. It’s an insidious form of taxation that shields the public from truly understanding how it pays for services, much like the sin taxes on tobacco and alcohol that help pay for other services, but help keep the provincial income tax rates down. A quick check of the state of finances in the province shows huge amounts of long-term debt in Crown corporations, which somehow taxpayers are conned into believing isn’t government debt. It’s such an obvious and tired shell game that apparently we have stopped even thinking about it.

In an excellent recent column on the ICBC issue, Vaughan Palmer of the Vancouver Sun points out that the absurdity doesn’t stop at moving surpluses into general revenues. The government also taxes insurance premium charges, so the customer gets a double whammy.

The best defense for government-owned automobile insurance is that it can be fairer, especially for newer drivers who in other jurisdictions pay much higher rates because statistically they cost insurers a lot of money. So the safe young (or inexperienced) driver pays for the ones who are involved in crashes. Fair enough, the desire to help ease the burden on inexperienced drivers, but in reality a provincial government could legislate the private sector to accomplish what ICBC does. But then the province wouldn’t simply siphon off hundreds of millions of surpluses from private companies, right? Well, actually it could. But it would be taxation, and taxation is a dirty word these days.

Maybe I am an odd duck, but I’d prefer to pay for the services I get from the government through taxation, and have my auto insurance money pay only for auto insurance (including a profit for shareholders of private sector business, because I never have purchased optional ICBC insurance since I had a choice). The political manipulation I can do without.

Lorne Eckersley is the publisher of the Creston Valley Advance.