I recently reviewed ICBC’s 2012-2014 Service Plan which reported that “Pursuant to legislative change effective April 2010, ICBC now transfers its excess Optional capital to the Government of British Columbia on an annual basis“.
This had me wonder how the Government scoops and plans to continue to scoop ICBC’s profits while ICBC simultaneously applies for a rate hike. I’m not talking about why this is politically acceptable, but rather the much more basic question of how legally they can do this. What “legislative change” was made in April 2010?
After a bit of digging around I came across the BC Budget Measures Implementation Act which amended section 26 of the Insurance Corporation Act to read as follows to give the Government power over ICBC’s profits:
(2) Subject to subsection (3) and despite any other enactment, the Lieutenant Governor in Council may, by order, direct the corporation to make payments to the government at such times, in such amounts or circumstances, on such bases and in such manners as the Lieutenant Governor in Council may order and to record the required payments as liabilities in the corporation’s financial statements.
From ICBC’s recently released Service Plan it appears that the Government is choosing to exercise this right on an annual basis.
So why does this matter? ICBC, like any other viable company, needs to maintain financial stability. As ICBC reports, the Minimum Capital Test (MCT) “is used to determine whether a company has suf?cient capital levels to protect policyholders from ?nancial risk and provide long-term ?nancial stability.” Scooping profit on an annual basis weakens ICBC’s financial position as they themselves report on page 21 of their Service Plan stating that ICBC’s MCT is lower due to “the transfer of excess Optional capital to the government“.
Actions have consequences. In this case the action of taking profit from an insurer year over year weakens their financial position. This reality is worth keeping in mind if ever faced with the rhetoric that individuals should compromise their civil access to justice rights to have a working auto insurance system.