Earlier this week ICBC released their 3rd Quarter financial results with an accompanying press release stating that they will be seeking a modest increase in basic insurance coverage rates to counteract the consequences of “rising bodily injury costs and falling investment income“.
ICBC is looking at an annual rate increase of about $30. Yesterday ICBC’s CEO wrote an Open Letter To Customers stating that “Today, however, we are facing new pressures. Like other companies and individuals, the challenging world financial markets are negatively affecting us. While our investment returns continue to perform well against the markets, our investment income has dropped by $38 million compared to last year. Our best estimate is that our investment income at year-end will be $90 million less than in 2010.”
While it is true that ICBC’s investment income is down and claims payouts fluctuate year to year, those reasons don’t explain why a rate hike is needed. Historically ICBC is well managed and profitable, I’ve discussed this in the past. They have generated hundreds of millions in net revenues year over year with the current premiums in place. ICBC did what any financially responsible insurer does with such profits and built up substantial reserves to act as a safety net for leaner times. The reserves were so significant that the Government decided to scoop 3/4 of a billion dollars from ICBC’s coffers.
With current rates ICBC can weather the storm of market volatility and the ups and downs of claims payouts year over year. All this with net revenues significant enough to get the company through leaner years. The Government is short on funds, they scooped money from ICBC and that is why motorists are faced with rate increases.