- 2 - Attachment 6: Correspondence between ICBC and the Commission - - PDF document

June 25, 2010 British Columbia Utilities Commission Sixth Floor 900 Howe Street Vancouver, BC V6Z 2N3 Attention:

• Ms. Erica M. Hamilton, Commission Secretary

building trust. driving confidence.

Re: ICSC's Review Workinq Session Presentation for the 2010 Streamlined Revenue Requirements Application and Supplementary Information Dear Ms. Hamilton: Please find attached a number of documents further to the Review Working Session on June 17, 2010 for inclusion as evidence in this proceeding: Attachment 1: A copy of ICBe's presentation on the 2010 Streamlined Revenue Requirements Application presented at the Review Working Session on June 17, 2010. Please note that there are a couple of revisions on some of the slides in the attached presentation compared to the version that ICBC provided at the Review Working Session.

• Slides 16 and 20: the titles of the graphs have been changed from "Gross Domestic

Product (GDP)" to "BC Gross Domestic Product (GDP}".

• Slide 92: the legends to the graph were incorrect in the handout. The top line of the

graph includes the capital transfer while the bottom line excludes it. Attachment 2: A copy of the hand out listing the Matters of Interest and the slides in the presentation where these have been addressed. Attachment 3: ICBC also handed out a copy of Exhibit D.O which is referred to in the presentation and can be found in Chapter 3 of the 2010 Streamlined Revenue Requirements Application. A summary of the discussion of this exhibit covered at the Review Working Session is included for the record as supplementary information. In addition to the above, the following further supplementary information is provided. Attachment 4: A statement on Prospective Adjustments and Accepted Actuarial Practice in Canada by Bill Weiland, ICBe's appointed actuary. Attachment 5: An explanation of why the capital maintenance provision must be retained.

151 West Esplanade I North Vancouver I British Columbia I V7M 3H9 I 604-661-2800 I regaffairs@icbc.com

B-5 ICBC – 2010 REVENUE REQUIREMENTS

EXHIBIT

• 2 -

Attachment 6: Correspondence between ICBC and the Commission regarding the Driver Risk Premium Program since the January 2008 Decision on Rate Design. Yours truly, June Elder Manager, Regulatory Affairs Cc: Doug Chong, Director, Strategic Services, BC Utilities Commission Bill Grant, Consultant, BC Utilities Commission Claudia McMahon, Financial Analyst, Rates & Finance, BC Utilities Commission Registered Intervenors Donnie Wing, CA, Senior Vice President, Corporate Affairs, ICBC Attachments

151 West Esplanade I North Vancouver I British Columbia I V7M 3H9 I 604-661-2800 I regaffairs@icbc.com

I CBC’s June 2 5 , 2 0 1 0 Filing w ith the BC Utilities Com m ission

I nsurance Corporation of British Columbia June 25, 2010

Attachm ent 1 – Review W orking Session Presentation

6/25/2010 1

Review Working Session ICBC’S 2010 Streamlined Revenue Requirements Application for Basic Insurance Insurance

June 17, 2010

Purpose of Review Working Session

• Explain major items impacting rates
• Explain significant changes in:

– Business operations – External circumstances

• Provide commentary on matters of

interest

1

6/25/2010 2

Matters of Interest (MOI)

• From informal presentation on June 7
• From Commission staff
• From IBC

2

Structure of Presentation

• Session 1

Claims trends and impacts – Claims trends and impacts

• Break
• Session 2

Othe item imp ting te – Other items impacting rates – Basic capital level

3

6/25/2010 3

Key Points

• Favourable impact on claims trends

– 2008 and 2009 drier than 30-year average 2008 and 2009 drier than 30 year average – 2008 and 2009 recession – Enhanced and expanded claims initiatives

• Basic capital level

– Volatility of MCT Volatility of MCT – Excess from unrealized gains – Excess from Capital Transfer from Optional

4

Overview of Rate Change

Component Impact PY 2007 Loss Cost Forecast Variance

• 5.2 ppt

Loss Trend to PY 2010 and Prospective Adjustments + 1.7 ppt Trend in Average Premium + 1.3 ppt Change in Investment Income

• 1.2 ppt

Change in Capital Provisions

• 0.8 ppt

Ch i O ti E + 1 5 t

5

Change in Operating Expenses + 1.5 ppt Other + 0.8 ppt PY 2010 Indicated Rate Level Change

• 1.9 ppt

6/25/2010 4

Session 1 Claims Trends

• History of claims cost estimates

“Claims run off” – Claims run-off

• PY 2007 Loss Cost Update

– Key factors affecting claims

• Loss trending to PY 2010
• Loss trending to PY 2010

– Loss trends – Prospective adjustments

6

Claims Run-off

1,700,000 1,800,000 )

Basic Ultimate Loss & ALAE

1,200,000 1,300,000 1,400,000 1,500,000 1,600,000 Ultimate Loss & ALAE ($ 000's

7

1,000,000 1,100,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 As at December 31, 2004 As at December 31, 2006 As of February 28, 2010

6/25/2010 5

Overview of Rate Change

Component Impact PY 2007 Loss Cost Forecast Variance

• 5.2 ppt

Loss Trend to PY 2010 and Prospective Adjustments + 1.7 ppt Trend in Average Premium + 1.3 ppt Change in Investment Income

• 1.2 ppt

Change in Capital Provisions

• 0.8 ppt

Ch i O ti E + 1 5 t

8

Change in Operating Expenses + 1.5 ppt Other + 0.8 ppt PY 2010 Indicated Rate Level Change

• 1.9 ppt

Loss Cost Update

Basic Loss Cost

9

Accident Year

Actual (2007 Application) PY 2007 Projection (2007 Application)

6/25/2010 6

Loss Cost Update

Basic Loss Cost

10

Accident Year

Actual (2007 Application) Current Application PY 2007 Projection (2007 Application)

Loss Cost Update

Basic Loss Cost

‐5.2 ppt

11

Accident Year

Actual (2007 Application) Current Application PY 2007 Projection (2007 Application) PY 2007 Projection (Current Application)

6/25/2010 7

Claims Costs – Key Factors

• 2008 and 2009 drier than 30-year

average

• 2008 and 2009 recession
• Enhanced and expanded claims

initiatives since 2007

12

Influence of Weather

• BCUC MOI # 5

– How has the trend to warmer winters been factored into the trend analysis?

• In BC, changes in precipitation levels are

highly correlated to claims frequency

– Crashes are more likely to occur on wet roads – Unlike other provinces, winter snow is not a major factor in overall claims frequency

13

6/25/2010 8

Precipitation - Cumulative

1,400

Lower Mainland Cumulative Precipitation

200 400 600 800 1,000 1,200

(mm)

14

• Jan

Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

1971-2000 2007 2008 2009 2010

Precipitation - History

15

6/25/2010 9

Recession Impact

1 400

BC Gross Domestic Product (GDP)

200 400 600 800 1 000 1 200

($ billions) 16

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Year Historical data from STATCAN

Recession Impact

Travel in BC Estimated from Highway Volumes and Diesel Sales

2004 2005 2006 2007 2008 2009 300 320 340 million heavy truck kilometres 2004-07 winter trend 2004-07 summer trend

17

280 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 month-year

6/25/2010 10

Recession Impact - Commercial

• Commercial disproportionately impacted

Commercial Written Exposure

170 000 175 000 180 000 185 000 190 000 195 000 200 000 205 000 210 000 215 000 220 000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

18

Actual Modeled

'04 - '05 '05 - '06 '06 - '07 '07 - '08 '08 - '09 4.2% 3.3% 3.4% 0.2%

• 1.4%

Percent Change

Recession Impact - Personal

• Personal growth rate declined

PersonalWritten Exposure

1 500 000 1 700 000 1 900 000 2 100 000 2 300 000 2 500 000 2 700 000 2 900 000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Personal Written Exposure

19

Actual Modeled

'04 - '05 '05 - '06 '06 - '07 '07 - '08 '08 - '09 2.6% 2.6% 2.8% 1.5% 1.4% Percent Change

6/25/2010 11

Economic Recovery

1 400 1 600

BC Gross Domestic Product (GDP)

200 400 600 800 1 000 1 200

($ billions) 20

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Year Historical data from STATCAN BC Mininstry of Finance Outlook

ICBC Indications of Recovery

• Leading indicators show recovery in

policy & claims activities policy & claims activities

– Growth in delivery vehicle policies of 5.2% , following a decline of 3.9% in 2009 – Commercial claims frequency growth of 0 7% YTD 0.7% YTD

21

6/25/2010 12

Enhanced and Expanded Claims Initiatives

• Initiatives in three areas:

– Claims Handling – Management Accountability – Claims Analytics

• Moderation of claims costs

22

Enhanced and Expanded Claims Initiatives

• Increasing segmentation

g g

– Centralized Claims Injury Center – Personal and commercial

• Effective hassle free interaction for

customers

– Customer service initiatives – Chiropractic agreement

23

6/25/2010 13

Enhanced and Expanded Claims Initiatives

• Increased quality of claims handling

– Claims Quality Review Service – Service Quality Measurement – Ongoing Business improvements

24

Enhanced and Expanded Claims Initiatives

• Management Accountability

a age e t ccou tab ty

– Senior management structure – Span of control – File reviews and authority levels – Risk Assessment Committees

25

6/25/2010 14

Enhanced and Expanded Claims Initiatives

• Improved Analytics

– New claims reporting and analysis function – New high-level reports – Additional detail in reports

26

Loss Cost Update

Basic Loss Cost

‐5.2 ppt

27

Accident Year

Actual (2007 Application) Current Application PY 2007 Projection (2007 Application) PY 2007 Projection (Current Application)

6/25/2010 15

Enhanced and Expanded Claims Initiatives

• Actuarial recognition of impact

– Lower claims cost estimates – Open claims from earlier years also affected – Drives lower BI severity trend

28

Claims Costs – by Coverage

• Bodily Injury (BI)
• Property Damage (PD)
• Medical/ Rehabilitation (MR)

W kl B fit (WB)

• Weekly Benefits (WB)

29

6/25/2010 16

Loss Cost Update

2 00% 2.50%

Bodily Injury Basic Frequency

0.50% 1.00% 1.50% 2.00%

30

0.00% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Accident Year

Loss Cost Update

$30 000 $35 000

Bodily Injury Basic Severity

$5 000 $10 000 $15 000 $20 000 $25 000

31

$0 $5 000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Accident Year

6/25/2010 17

Loss Cost Update

10.00% 12.00%

Property Damage Basic Frequency

2.00% 4.00% 6.00% 8.00%

32

0.00% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Accident Year

Loss Cost Update

$1 600 $1 800 $2 000

Property Damage Basic Severity

$400 $600 $800 $1 000 $1 200 $1 400 $1 600

33

$0 $200 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Accident Year

6/25/2010 18

Loss Cost Update

3.00% 3.50%

Medical/Rehabilitation Frequency

0 50% 1.00% 1.50% 2.00% 2.50%

34

0.00% 0.50% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Accident Year

Loss Cost Update

$1 600 $1 800

Medical/Rehabilitation Severity

$400 $600 $800 $1 000 $1 200 $1 400

35

$0 $200 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Accident Year

6/25/2010 19

Accident Benefits Severity Change

• IBC MOI # 3

– [ W] hy the indicated rate level change for Third P t Li bilit i 0 4% hil th t l l h Party Liability is -0.4% while the rate level change for Part 7's is -18.8%

• Significant change in AB severities

– Observed claims emergence noticeably lower than expected amounts Accident Benefits payments have a longer “tail” – Accident Benefits payments have a longer tail , and therefore more uncertainty than other coverages – Serious injuries have been declining relative to minor injuries

36

Loss Cost Update

0.50% 0.60%

Weekly Benefits Frequency

0.10% 0.20% 0.30% 0.40%

37

0.00% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Accident Year

6/25/2010 20

Loss Cost Update

$5 000 $6 000

Weekly Benefits Severity

$1 000 $2 000 $3 000 $4 000

38

$0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Accident Year

Overview of Rate Change

Component Impact PY 2007 Loss Cost Forecast Variance

• 5.2 ppt

Loss Trend to PY 2010 and Prospective Adjustments + 1.7 ppt Trend in Average Premium + 1.3 ppt Change in Investment Income

• 1.2 ppt

Change in Capital Provisions

• 0.8 ppt

Ch i O ti E + 1 5 t

39

Change in Operating Expenses + 1.5 ppt Other + 0.8 ppt PY 2010 Indicated Rate Level Change

• 1.9 ppt

6/25/2010 21

Value of Personal/ Commercial Segmentation

• All explanatory variables are significant at the

95% level, with two exceptions: , p

– GDP growth in the Personal BI frequency and Personal MR frequency models – The GDP growth variable is included due to its logical connection as an important explanatory factor for the

• bserved effects of the economic recession
• Value of Personal/ Commercial separation and
• Value of Personal/ Commercial separation and

back-testing will be illustrated using BI frequency model

– Selected frequencies would be higher if the latest years were excluded.

40

Loss Trending

2.60% 2.80%

BI Basic Frequency ‐ Personal and Commercial

1.20% 1.40% 1.60% 1.80% 2.00% 2.20% 2.40%

41

1.00% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Accident Year

6/25/2010 22

Trend Analysis

• Models are based on methods which are

inherently unbiased

• Models and assumptions have been tested, and

diagnostic information has been provided (see Chapter 3, Exhibit D.0)

• Residual plots for each model in Exhibit D 0

42

• Residual plots for each model in Exhibit D.0

also demonstrate the lack of bias

Loss Cost Update and Trend

Basic Loss Cost

‐5.2 ppt

43

Accident Year

Actual (2007 Application) Current Application PY 2007 Projection (2007 Application) PY 2007 Projection (Current Application)

6/25/2010 23

Loss Cost Update and Trend

Basic Loss Cost

+2.5 ppt $450 $500 $550 $600

+1.7ppt PY 2010 ‐5.2 ppt

pp

• 0.8 ppt

44

Accident Year

Actual (2007 Application) Current Application PY 2007 Projection (2007 Application) PY 2007 Projection (Current Application)

Trend Model Walkthrough

• Exhibit D.0
• ICBC 2010 Revenue Requirements

Application Exhibit D.0.pdf

45

6/25/2010 24

Loss Cost Update and Trend

Basic Loss Cost

+2.5 ppt $450 $500 $550 $600

+1.7ppt PY 2010 ‐5.2 ppt

pp

• 0.8 ppt

46

Accident Year

Actual (2007 Application) Current Application PY 2007 Projection (2007 Application) PY 2007 Projection (Current Application)

Intersection Safety Camera Savings

• Crashes per site is measured (existing

101 and new 80) 101 and new 80)

• Cost per crash forecast is actuarially

determined from claims data (increasing at 3.3% per annum)

• Frequency reduction estimates based on
• Frequency reduction estimates based on

previous studies – intervention at new site has larger impact which tapers off with time

BCUC MOI # 3

47

6/25/2010 25

Harmonized Sales Tax

• Repair and Loss of Use

– Under the net-of-GST/ HST method for making Under the net of GST/ HST method for making indemnification payments, HST registrants will be required to pay 12% of their car repair to the extent they can claim the amount paid as input tax credit. This is up from 5% under GST. An average of 13% of ICBC customers are registrants.

• Care and Vocational Training

– It is expected that some services provided under this category are taxable, but not all. Those that are taxable will increase from 5% GST to 12% HST.

BCUC MOI # 4

48

Harmonized Sales Tax

• Passenger Vehicle Rental Tax

– Will be repealed effective July 1, 2010. Will be repealed effective July 1, 2010.

• Legal Fees

– ICBC currently pays 7% PST on legal fees, and will save 7% when HST comes into effect because this is an administrative expense and therefore eligible for a rebate.

l i b

• Legal Disbursements

– Where ICBC is currently charged 7% PST on certain charges for legal disbursements, a 7% savings is expected because this is an administrative expense and therefore eligible for a rebate.

49

6/25/2010 26

Harmonized Sales Tax

• Third Party Disbursements

– It is expected that a portion of these costs will rise given It is expected that a portion of these costs will rise given that any component that is services would be taxed at 12% under HST, as compared to 5% under GST.

• Total Loss for Registrants

– ICBC currently pays 7% cash, plus a 5% allowance depending on the registrant’s ability to claim an input tax

• credit. Under HST this will change to a single 12% cash

amount depending on the registrant’s ability to claim an input tax credit. Where the registrant can claim an input tax credit, this will result in a savings to ICBC of 7% .

50

Harmonized Sales Tax

• Total Loss for non-registrants

– ICBC currently pays a tax allowance of 7% cash, plus a 5% GST voucher to non-registrants on their total losses GST voucher to non registrants on their total losses. Because many customers would buy a private vehicle as a replacement, the 5% voucher was often not tendered. Since the private sale of vehicles will now be taxed at the same rate as a dealer purchase, ICBC will be paying 12% cash, and the voucher system will no longer be required.

• Input Tax Credit on sales of salvage

– ICBC is permitted to retain the GST/ HST on the sale of salvage where the customer was not a registrant – this is called a notional input tax credit. These sales account for 80% of vehicles sold as salvage, and the amount retained will rise from 5% under the GST to 12% under the HST.

51

6/25/2010 27

ICBC Costs and Savings Recognition Criteria

“Where it is considered that there is a reasonable probability that a future cost (or savings) will be realized th t ff t th li th t f t t ( i ) that affects the policy year, that future cost (or savings) should be included in the rate level analysis” (2005 Filing)

Must meet all 3 criteria

1. Demonstrated causal relationship between program and costs (or savings) ( g ) 2. Sufficient and accurate data 3. Future costs (or savings) are probable

52

Explicit Recognition of Claims Savings

Program / Factors

Policy Year Savings booked

Intersection Safety Camera 2010 $10m HST on Claims Costs 2010 $7m Customer Service Centre (CSC) – now referred as

Centralized Claims Injury Centre CCIC

2007 $3m Enhanced Graduated Licensing Program 2007 $36m g g (GLPe and GLPt) $

53

6/25/2010 28

Recognition Through Trends

• Examples

– Road Safety MOU – Road Improvement Projects – Sea to Sky Highway is a specific example – Infrastructure projects (e.g. Canada Line, Port Mann bridge, etc.) – DRP Penalties – Claims initiatives (once they are established)

• Important not to double count

54

Appropriate to Exclude at This Time

Program Rationale Program Rationale Increased costs from Olympics (2009 PY) Insufficient data Distracted driving campaign (2010 PY) Mixed results from

• ther jurisdictions

Tougher legislation for impaired driving (late 2010) New program – insufficient data

55

6/25/2010 29

Break

56

Session 2

• Trend in Average Premium
• Change in Investment Income

Change in Investment Income

• Change in Capital Provisions
• Other Rate Impacts
• Change in Operating Expenses
• Basic Capital Levels

historical and outlook

• Basic Capital Levels – historical and outlook
• Wrap Up

57

6/25/2010 30

Overview of Rate Change

Component Impact PY 2007 Loss Cost Forecast Variance

• 5.2 ppt

Loss Trend to PY 2010 and Prospective Adjustments + 1.7 ppt Trend in Average Premium + 1.3 ppt Change in Investment Income

• 1.2 ppt

Change in Capital Provisions

• 0.8 ppt

Ch i O ti E + 1 5 t

58

Change in Operating Expenses + 1.5 ppt Other + 0.8 ppt PY 2010 Indicated Rate Level Change

• 1.9 ppt

Premium Trend Model

• Average premium has declined from

2007 levels 2007 levels

• Rate of decline is expected to slow down
• Detailed modelling (incl. P/ C split &

Retro adj) for enhanced accuracy j) y

• Total impact of + 1.3% on PY 2010 rates

59

6/25/2010 31

Impact of Retro Adjustments

• BCUC MOI # 10

– Retrospective rating adjustments were previously – Retrospective rating adjustments were previously implicitly included in historical and projected premium amounts. What impact does the previous methodology have on the indication?

• Impact on PY 2007 rates using current

(explicit) methodology is + 0 1% (explicit) methodology is + 0.1%

– PY 2007 indication would have been + 3.4% instead of + 3.3%

60

Trailers Average Premium Model

• BCUC MOI # 11

– Please discuss the average premium model for Trailers of low R² value of 76% which suggests a poor fit to the model.

• R² value of 76% is considered a good fit.

61

6/25/2010 32

Overview of Rate Change

Component Impact PY 2007 Loss Cost Forecast Variance

• 5.2 ppt

Loss Trend to PY 2010 and Prospective Adjustments + 1.7 ppt Trend in Average Premium + 1.3 ppt Change in Investment Income

• 1.2 ppt

Change in Capital Provisions

• 0.8 ppt

Ch i O ti E + 1 5 t

62

Change in Operating Expenses + 1.5 ppt Other + 0.8 ppt PY 2010 Indicated Rate Level Change

• 1.9 ppt

Investment Income

• New Money Rate lower than 2007 -

New Money Rate lower than 2007 adverse impact on rates (+ 0.5% )

• Yield on Retained Earnings lower than

2007 – adverse impact on rates (+ 0.1% )

• Retained earnings higher than 2007 –

favourable impact on rates (-1.8% )

63

6/25/2010 33

Investment Income

8% 1 600

Basic Retained Earnings and Investment Yields

1% 2% 3% 4% 5% 6% 7% 8% 200 400 600 800 1,000 1,200 1,400 1,600 Rates of Return Retained Earnings in $ Millions

64

0% 2006 Year-end 2007 Year-end 2009 Q1 2010 Q1 Basic Retained Earnings Return on Retained Earnings New Money Rate

Overview of Rate Change

Component Impact PY 2007 Loss Cost Forecast Variance

• 5.2 ppt

Loss Trend to PY 2010 and Prospective Adjustments + 1.7 ppt Trend in Average Premium + 1.3 ppt Change in Investment Income

• 1.2 ppt

Change in Capital Provisions

• 0.8 ppt

Ch i O ti E + 1 5 t

65

Change in Operating Expenses + 1.5 ppt Other + 0.8 ppt PY 2010 Indicated Rate Level Change

• 1.9 ppt

6/25/2010 34

Change in Capital Provisions

• Capital Provision in rates consists of:

– Capital build/ release – to reach management target of 130% MCT – Capital maintenance – to address growth of the business

66

Change in Capital Provisions

• Capital build is no longer required –

removal has rate impact of -0 6% removal has rate impact of 0.6%

• Government Directive requires no capital

release in 2010

• Excess capital used to offset future rates
• Excess capital used to offset future rates

67

6/25/2010 35

Capital Maintenance Provision

• ICBC to apply Capital Management Plan

except as regards to release of capital except as regards to release of capital

• Capital Management Plan includes

capital maintenance provision

• 2010 capital maintenance provision is

p p $30.8 million - less than 2007 with rate impact of -0.2%

68

Overview of Rate Change

Component Impact PY 2007 Loss Cost Forecast Variance

• 5.2 ppt

Loss Trend to PY 2010 and Prospective Adjustments + 1.7 ppt Trend in Average Premium + 1.3 ppt Change in Investment Income

• 1.2 ppt

Change in Capital Provisions

• 0.8 ppt

Ch i O ti E + 1 5 t

69

Change in Operating Expenses + 1.5 ppt Other + 0.8 ppt PY 2010 Indicated Rate Level Change

• 1.9 ppt

6/25/2010 36

Other Matters of Interest

• Detailed exposure model
• No changes to trend analysis
• ULAE percentages

P li b k f

• Per-policy broker fees
• Miscellaneous revenue (DRP)

70

Detailed Exposure Model

• Detailed models of homogeneous

business segments business segments

• Value is more accurate estimates
• Nearly all explanatory variables are

significant at the 95% level. significant at the 95% level.

71

6/25/2010 37

Changes to Trend Analysis

• No changes were made subsequent to

th i iti l l ti f t di d l i the initial selection of trending models in ICBC’s Q1 trend analysis.

72

ULAE Percentage

• 3-year average reflects recent experience while

reducing volatility from individual years

• 3-year average is consistent with average used in

2007 RRA, for all coverages except Bodily Injury

• Unlike in 2007, where trend was observed in the BI

ULAE factors, historical factors are fairly consistent

• Sensitivity tested for alternate assumptions:

– Tested latest-year through 5-year average factors – All alternate averages result in a rate indication of -1.8%

73

6/25/2010 38

Per-Policy Broker Fees

• Basic per-policy broker fees in Exhibit H.4 are

projected to PY 2010 using exposure growth of:

– 1.5% in 2010 – 1.9% in 2011

• Exposure growth is based on the combination of

Personal and Commercial power-unit exposure models.

– Combined total of 3.1% growth from to PY 2010 is the same as is used for Manual Basic exposure growth from 2009 in Exhibit B.4.1

74

DRP Program Approach

• ICBC bills for DRP Phase 1 and DPP

(about 1% positive impact on rates) (about 1% positive impact on rates)

• DRP Phase 2 not implemented is a 1.6%

impact on rates

• Will be addressed in 2011 rate design

g application

75

6/25/2010 39

Overview of Rate Change

Component Impact PY 2007 Loss Cost Forecast Variance

• 5.2 ppt

Loss Trend to PY 2010 and Prospective Adjustments + 1.7 ppt Trend in Average Premium + 1.3 ppt Change in Investment Income

• 1.2 ppt

Change in Capital Provisions

• 0.8 ppt

Ch i O ti E + 1 5 t

76

Change in Operating Expenses + 1.5 ppt Other + 0.8 ppt PY 2010 Indicated Rate Level Change

• 1.9 ppt

Operating Exp: Annual Impact

Expense Type Impact on rate indication Annual Increase Annual Impact per Basic policy * indication (PY 2007 to 2010 ) Basic policy * Government Initiatives 0.8% 0.27% $1.62 Base 0.7% 0.23% $1.38 Total 1.5% 0.50% $3.00

77

* Average Basic Policy $600

If inflation is 2% , this is 1/ 10 of inflation

6/25/2010 40

Operating Expense

• 15% of overall costs
• Continued prudent cost management
• Strong governance and accountability framework
• Strong governance and accountability framework
• Excluding Olympics and Transformation Program

(TP) 3 Components

• Business as usual (base operations)

78

• Unusual fluctuation highlighted (Unique items)
• Government Initiatives

Operating Expense - Base

Need to invest in business after sustained fiscal restraint

– Focus on claims initiatives – Reduced road test wait time – More customer focus (language line, research and communication) – Better management to staff ratio – Aging facilities

79

Aging facilities – Change management and manager development – Improved governance and controls

6/25/2010 41

Operating Expense - Base

Increase is cumulative over 4 years (2006 to 2010)

• Compensation $55m

p $

– $35m contractual, PSEC-approved compensation rates – (~ 2% per annum) – $10m FTE increases for business needs – $10m staffing mix for business needs

• Buildings $7m

Claims Licensing Finance Human Res Strategic Mktg

80

g $

• Professional Services $7m
• Other Operating $9m

Program Change from 2006 $m

Operating Expense – Government Initiatives

$m Compliance ($6.2) Road Safety MOU 8.6 Intersection Safety Camera (ISC) 4.3* Distracted Driving Campaign 2.5 Driver Licensing Security 1.3 $16.7m new g y Total increase $10.5m

81

All programs 100% Basic *$10 m savings for ISC in 2010 rate indication

6/25/2010 42

Operating Expense - Allocation

• Same allocators as 07 RR Application
• Based on Commission-approved allocators
• Same content, detail and format as previously

approved

• Overall Basic % consistent over 4 years (66%

82

• Overall Basic % consistent over 4 years (66%

to 67% )

Allocation: Marketing and Broker

IBC: rationale behind the new allocation method and change in focus for the department

• New method moves $36k to Basic = 0.002% impact on

rates – negligible

• Change in department focus due to business requirement
• Allocator change to maintain causal link between

b i d ll business and allocator

• No allocator change until Commission approval

IBC MOI # 2

83

6/25/2010 43

Other Government Initiatives

• Those with potential impacts on future

rates

• Introduced into Service Agreement

documents

• Two categories:

Introduced prior to 2010 – Introduced prior to 2010 – New

84

Introduced Prior to 2010

• Canadian DL Agreement: deferred to 2011 –

support BC in meeting national standards pp g

• Enhanced Driver’s Licences: shortfall in

volumes and unable to recover costs from user fees

• Drinking and Driving: Example of initiative with

g g p potential cost impacts < $1 million

85

6/25/2010 44

New Initiatives

• Identity management
• Impaired driving (roadside prohibitions and

changes to vehicle impoundment)

• Motorcycle safety (licensing, training,

equipment)

• Off-Road Vehicles (new regulatory framework)

86

Government Directed Reporting

• Report on Distracted Driving included
• Also service agreement documents and

Road Safety MOU

• Future reporting on other items if they

will impact future rates

87

6/25/2010 45

Basic Capital Level

• Volatility of MCT
• Excess from unrealized gains
• Excess from Capital Transfer from

Optional

88

MCT – Walk Thru 2007 to 2009

• 2007: Change in OSFI guidelines and

accounting standards

• 2007: Increase of 15% - due to net income
• ffset by AOCI
• 2008: Increase of 5% - due to negative

impacts of economy offset by lower claims cost and higher revenue g

• 2009: Increase of 22% - due to largely due to

market recovery (higher investment income and AOCI)

89

6/25/2010 46

Quarterly MCT Since Last Filing

167% 160% 170%

Basic MCT %

121% 124% 119% 133% 136% 141% 138% 123% 141% 132% 151% 158% 162% 167% 155% 120% 130% 140% 150% 160% 12% drop in 2 months 90 119% 100% 110% 06-Q4 07-Q2 07-Q4 08-Q2 08-Q4 09-Q2 09-Q4 10-May Basic MCT under “old” OSFI and accounting standards 107% at Dec 06

MCT is Volatile–Historical Trends

170% 180%

Basic MCT %

136% 141% 138% 123% 141% 132% 151% 158% 162% 167% 155% 130% 140% 150% 160% 170% 12% drop in 2 months 91 123% 120% 07-Q4 08-Q1 08-Q2 08-Q3 08-Q4 09-Q1 09-Q2 09-Q3 09-Q4 10-Q1 10-May

6/25/2010 47

MCT – Impact of Capital Transfer

162% 140% 160% 180% 140% MCT without AOCI 42% 79% 107% 136% 141% 42% 54% 58% 85% 40% 60% 80% 100% 120%

Including Capital Transfer Excluding Capital Transfer

61% MCT ith t AOCI $630m Capital transfer 92 22% 22% 5% 23% 0% 20% 2003 2004 2005 2006 2007 2008 2009 without AOCI and without capital transfer

MCT is Sensitive to External Factors

Change in Claims (impact on Basic income) Impact on Basic MCT 1% change in current year claims costs ($20m) 2% 1% change in Unpaid Claims ($45m) 5% 1% change in discount rate ($100m) 10% Change in Investment Impact on Basic MCT 1% change in investment yield ($70m) 7%

93

1% change in investment yield ($70m) 7% 1% change in equity prices ($170m) 17% 1% change in interest rates on fixed income investments ($130m) 13%

6/25/2010 48

MCT – 2008 Example of Volatility

Main Component of 2008 Basic Capital Available Impact on Basic MCT Available Basic MCT % Favourable Prior Years’ Claims Adjustments ($90m) + 10% Decrease in AOCI ($ 118m)

• 14%

94

MCT at End 2011

• Q1 forecast of MCT at end 2010 is

168.5%

• MCT at end 2011 is forecasted to

decrease to 164%

• Assumes claims cost trend increase of

1.1% offset by -0.4% for change in income from retained earnings income from retained earnings

• Rate indication offset to 0% per

government directive

95

6/25/2010 49

Basic Excess Capital Summary

• Historical trends showed MCT is volatile (nearly

40% swing in 2 years quarterly fluctuations) 40% swing in 2 years, quarterly fluctuations)

• Much of excess over 130% is from unrealized

gains

• Sensitive to external factors
• Result of $630m capital transfer from Optional

per Government Directive

96

Basic Excess Capital Outlook

• Investment market volatility likely to persist

St k t d t

• Stock returns modest
• Downward pressure on bond value as interest

rates trend higher

• Strong likelihood that market forces adversely

impact net income and MCT in short term

• Improvements in claims cost trend unlikely to

persist as the BC economy recovers

97

6/25/2010 50

Review Working Session

• Explain major items impacting rates √
• Explain significant changes in: √

– Business Operations – External Circumstances

• Provide commentary on matters of √
• Provide commentary on matters of √

interest

98

Next Steps

• Information Requests – June 29
• ICBC Responses – July 20
• Letters of Comment – August 4

ICBC Reply August 17

• ICBC Reply – August 17
• BCUC Decision – August 31

99

I CBC’s June 2 5 , 2 0 1 0 Filing w ith the BC Utilities Com m ission

I nsurance Corporation of British Columbia June 25, 2010

Attachm ent 2 – Matters of I nterest

MATTERS OF I NTEREST

Review Working Session, June 17, 2010

1

Matter of I nterest # Question/ Request Presentation Reference 2010 RR BCUC.MOI.1 Given that developing losses using traditional actuarial methodologies is a subjective exercise, please demonstrate via a claims run-off exhibit by coverage how accurate the previous ultimate loss estimates have been at successive valuations. Slide 7 2010 RR BCUC.MOI.2 How are the following items that would be expected to reduce the claims trends for 2010, factored into the trend analysis: tougher legislation for drinking driving expanded intersection cameras, DRP penalties to discourage bad driving, Sea to Sky highway improvements, the Canada Line, Road Safety MOU, Distracted Driving Programs and enhanced driver licensing security measures? Slides 52-55 2010 RR BCUC.MOI.3 Please provide additional discussion relating to the prospective loss adjustment for Intersection Safety Camera (ISC) savings, specifically covering the following issues: rationale for crash sites being lower for new sites than existing sites, support for the average cost per crash forecasts, weather the frequency reduction estimates are based on the initial cohort

• f sites and if so to please provide progression of historical frequency

rates. Slide 47 2010 RR BCUC.MOI.4 Please provide rationale for category percentages selected for the HST prospective adjustment. Slides 48-51 2010 RR BCUC.MOI.5 How has the trend to warmer winters been factored into the trend analysis? Slides 13 and 15 2010 RR BCUC.MOI.6 For any changes or after the fact modifications that have been made to the trend analysis please provide and explanation of why the changes were made. Slide 72 2010 RR BCUC.MOI.7 Please provide additional concrete analysis to support that the trend analyses are not conservative but are aimed to provide an unbiased "best estimate" of costs and revenues. Slide 41 2010 RR BCUC.MOI.8 Is possible to incorporate into the trend analysis an estimate of a factor with no historical data points. If yes, how does ICBC make these types of estimates? Slides 42 and 46 2010 RR BCUC.MOI.9 Please provide additional information, not included in Chapter 6, on measures to moderate BI court award. 2010 RR BCUC.MOI.10 Premiums: Retrospective rating adjustments were previously implicitly included in historical and projected premium amounts. What impact does the previous methodology have on the indication? Slide 60 2010 RR BCUC.MOI.11 Premiums: Please discuss the average premium model for Trailers of low R² value of 76% which suggests a poor fit to the model. Slide 61 2010 RR BCUC.MOI.12 Exposure: Given that personal exposure is forecasted by summing the modeled exposure for the underlying business segments, is it ICBC’s

• pinion that individual business segment models for personal exposure

have better fit (R² and F-statistic values)? Additional details on individual business segment models and their fit statistics, including significance tests for explanatory variables (T-scores) would be helpful. Slides 18, 19 and 71 2010 RR BCUC.MOI.13 For Loss and Expenses please provide additional information on:

• ULAE percentages being selected on a 3 year average when a 2 year

average was used previously. Slide 73 2010 RR BCUC.MOI.14 For Loss and Expenses please provide additional information on:

• The origin of the exposure growth rate used in the Basic Commercial Per-

Policy Broker Fees Slide 74

MATTERS OF I NTEREST

Review Working Session, June 17, 2010

2

Matter of I nterest # Question/ Request Presentation Reference 2010 RR BCUC.MOI.15 For Loss and Expenses please provide additional information on:

• It appears that for certain business segments the personal and

commercial split of data for frequency and severity modeling has resulted in a much lower “fit” to frequency and severity models than in previous

• filings. Please elaborate on the following:
• the option of combining personal and commercial data for business

segments where there is insufficient data to produce meaningful econometric models or where models selected produce lower R² values than when combined data is used

• how combined personal and commercial models change current

frequency and severity estimates and ultimately the final indications.

• the use of back testing on the models selected?
• the significance levels of coefficients for the econometric models (T-

scores). Slide 40 2010 RR BCUC.MOI.16 Given the size of the MCT, would it be reasonable to discontinue the provision for maintaining MCT until MCT falls to more reasonable levels? Is there anything in the government directives or Commission decisions which would preclude the Commission from reducing or eliminating the provision for maintaining the MCT in 2010? How much is that provision? Slide 68 2010 RR BCUC.MOI.17 In ICBC’s Quarterly Report filed with the BCUC on May 28th the Year-End

• utlook (December 31, 2010) estimates the MCT to be 168.5% . Please

provide a discussion on what ICBC expects the MCT to be at the end of either PY 2010 or December 31, 2011, including a details on how the - 1.9% rate reduction applied for is expected to slow down the growth in the MCT as experienced since 2006 when it was 121% . Slide 95 2010 RR IBC.MOI.1 The rationale for the revised approach to the DRP program and the implications this has for risk and changes in premiums going forward. Slide 75 2010 RR IBC.MOI.2 The rationale behind the new Marketing and Broker Services allocation method, including the rationale for the change in focus for the Marketing and Broker Services Department. Slide 83 2010 RR IBC.MOI.3 An explanation as to why the indicated rate level change for Third Party Liability is -0.4% while the rate level change for Part 7's is -18.8% and the underlying explanation for the different percentages, particularly in terms

• f claims handling.

Slides 35, 36 and 38

I CBC’s June 2 5 , 2 0 1 0 Filing w ith the BC Utilities Com m ission

I nsurance Corporation of British Columbia June 25, 2010

Attachm ent 3 – Sum m ary of Exhibit D.0 as Discussed at Review W orking Session

I CBC’s June 2 5 , 2 0 1 0 Filing w ith the BC Utilities Com m ission

I nsurance Corporation of British Colum bia 1 June 25, 2010

SUPPLEMENTARY I NFORMATI ON

Sum m ary of Exhibit D.0 as Discussed at Review W orking Session

1. ICBC’s trending process is designed to produce predictive models which are significant and logical, yet parsimonious, and which generate an unbiased estimate of future claims costs. As each coverage may have unique circumstances, ICBC evaluates models for each coverage separately. The type of model and length of experience period used are based on a number of important considerations, including:

• Stability of the model over time.
• Responsiveness of the model to key features of the data.
• Overall statistical fit of the model to historical data.
• Logical connection between the explanatory variables and the claims statistic

being modeled.

• Features of the historical data including recurring or non-recurring changes

(e.g., operational changes, coverage changes, distributional changes in types of risks).

• Experience from previous use of similar models.
• Economic and social influences.

2. The selected models are shown in Chapter 3, Exhibit D.0, as well as the historical

• values. The responsiveness of the model and its fit to the historical values may be

evaluated visually by comparison of the modeled and actual values for each year. The graphs may also show key features of the historical values, and be used to consider the reasonability of the model forecasts. It should be noted that the econom etric models are used in order to capture the key features and influences seen in the historical data in order to provide a more accurate forecast, while the exponential models are used to m ore simply capture observed trends in the data without attempting to fit closely to historical values. 3. In addition to the graph of historical versus m odeled values, Exhibit D.0 also notes the explanatory variables, gives statistics for goodness-of-fit to historical values, and shows additional diagnostic graphs. The explanatory variables should be seen to have a logical connection to the claims statistics, where possible. The measures of fit to the historical values should correspond to the visual comparison discussed above, and are considered to be good for all econom etric models. The diagnostic charts dem onstrate certain statistical features of the m odel residuals, which is the difference between the modeled value and

I CBC’s June 2 5 , 2 0 1 0 Filing w ith the BC Utilities Com m ission

I nsurance Corporation of British Colum bia 2 June 25, 2010

actual historical value for each period. The plot of residuals versus fitted values may be used to illustrate that the model is unbiased, because the points may be seen to be equally distributed both above and below the level of zero on the vertical axis. Additional technical features of the m odels which are depicted in the diagnostic charts are described in paragraph 11 of Exhibit D.0. 4. Please note that ICBC’s selection of trending models and forecasted values relies on statistical and qualitative considerations com bined with actuarial judgement. While it is desirable to have strong statistical evidence of a good fit (such as having a high R2), it is equally as desirable to select models that provide strong intuitive appeal (explanatory variables should be logically related to the item being forecasted). The actuarial Standards

• f Practice in Canada require that a number of factors be considered when preparing a

trending model. ICBC actuaries considered that the factors described in the Standards of Practice and the selected trending models represent an appropriate balance

• f

considerations which ICBC believes is dem onstrated by the material included in Exhibit D.0.

I CBC’s June 2 5 , 2 0 1 0 Filing w ith the BC Utilities Com m ission

I nsurance Corporation of British Columbia June 25, 2010

Attachm ent 4 – Prospective Adjustm ents and Accepted Actuarial Practice in Canada

I CBC’s June 2 5 , 2 0 1 0 Filing w ith the BC Utilities Com m ission

I nsurance Corporation of British Colum bia 1 June 25, 2010

SUPPLEMENTARY I NFORMATI ON

Prospective Adjustm ents and Accepted Actuarial Practice in Canada

1. The Standards of Practice of the Canadian Institute of Actuaries cover ratemaking for property casualty insurance through section 2600 which is in the form of an exposure draft effective September 2009. An exposure draft forms part of accepted actuarial practice in

• Canada. These standards apply to the derivation of indicated rates (i.e., rate indications)

for property and casualty insurance. 2. Section 2600 indicates that the data used in the preparation of actuarial rate indications is of two types: subject experience and related experience. Subject experience includes premiums, claims, expenses, and other data that is relevant, meaning that the information has a significant and demonstrable bearing on the matter at hand. Related experience is information other than the subject experience that is analogous to the coverage under consideration. The analogous information permits the actuary to infer that, because the analogous information agrees with the subject information in some respects, it probably will agree in other respects as well. 3. The 2010 Streamlining Revenue Requirements Application includes prospective adjustments to recognize factors that will have a bearing on the premiums, claims or expenses for the policy period in question but which otherwise cannot be captured by the actuaries through the development or trending processes used in preparing the rate

• indication. Prospective adjustments are determ ined based on related experience as defined

in the preceding paragraph. 4. The current application includes two prospective adjustments. One is for the Harm onized Sales Tax that is to be effective July 1, 2010 and another is for the enhancem ent of Intersection Safety Cam eras (ISC). The latter prospective adjustm ent makes a useful illustration of the use of analogous information to determine a prospective

• adjustment. Intersection safety cam eras exist at present and claims frequency and severity

data is available for existing sites. In the evaluation of the impact of the enhancem ent of ISC, the data for existing sites is analogous information and it can be used to evaluate the expected savings associated with enhancem ents. It is appropriate to include a prospective adjustment in this case because there is a meaningful enhancement that is going to occur and also because there is related experience with which to estimate the impact of enhancem ents.

I CBC’s June 2 5 , 2 0 1 0 Filing w ith the BC Utilities Com m ission

I nsurance Corporation of British Colum bia 2 June 25, 2010

5. Recently a Distracted Driving Campaign has comm enced in BC. It includes restrictions on using hand-held devices while operating a motor vehicle. While it is hoped that this will result in a reduction in the number of crashes, there is no data in BC to indicate this is the case. Other jurisdictions, for instance California, have introduced similar restrictions and information from such jurisdictions is a potential source of related

• experience. However, the early indication from the California experience is that there is no

statistically significant reduction in crashes attributable to these restrictions. The Distracted Driving Campaign is an example of a situation where there is no analogous data available to support a prospective adjustment being included in the actuarial rate indication. Another way of putting this is that at the present time the best available estimate of the impact of the Distracted Driving Campaign is $0. 6. Certain road improvem ent projects or infrastructure projects, such as the Sea to Sky Highway or the Canada Line, are similar in nature to the Distracted Driving Campaign in that there is no related experience to use in estimating the impact on claims of these particular projects. It is also the case that road improvem ents and infrastructure projects have taken place in the past and their impact is embedded in the subject experience and results in some level of improvement being forecasted as part of the loss trending process. In order for it to be appropriate to consider making prospective adjustments for such projects, they would have to be seen as having a greater than normal impact on claims as compared to other such projects in the past. In addition related experience would need to be available to determine the prospective adjustment, which is not the case.

• W. T. Weiland

18 June 2010

I CBC’s June 2 5 , 2 0 1 0 Filing w ith the BC Utilities Com m ission

I nsurance Corporation of British Columbia June 25, 2010

Attachm ent 5 – Capital Provision in the Actuarial Rate I ndication

I CBC’s June 2 5 , 2 0 1 0 Filing w ith the BC Utilities Com m ission

I nsurance Corporation of British Colum bia 1 June 25, 2010

SUPPLEMENTARY I NFORMATI ON Capital Provision in the Actuarial Rate I ndication

1. At the Review Working Session, ICBC agreed to elaborate in writing on its response to Commission Staff Matter of Interest (MOI) 2010 RR BCUC.MOI.16: Given the size of the MCT, would it be reasonable to discontinue the provision for maintaining MCT until MCT falls to more reasonable levels? Is there anything in the government directives or Com mission decisions which would preclude the Commission from reducing or eliminating the provision for maintaining the MCT in 2010? How much is that provision?1 2. This Supplementary Information addresses the legal rationale for including the capital maintenance provision in the policy year 2010 rate indication. There are two key points, each of which is addressed below:

• Accepted actuarial practice, which Special Direction IC2 provides that the

Commission must apply in fixing rates, precludes the approach contemplated in 2010 RR BCUC.MOI.16 of setting rates lower than required to cover costs.

• The Governm ent Directive 2

A SPECI AL DI RECTI ON I C2 AND ACCEPTED ACTUARI AL PRACTI CE

• f May 18, 2010 with respect to Basic Excess Capital

approved by Order in Council 287/ 10, May 27, 2010 (the Governm ent Directive regarding Basic Excess Capital) requires ICBC to retain excess capital and apply it to offset future rate increases, and the approach outlined in 2010 RR BCUC.MOI.16 is inconsistent with that intention. 3. Section 3(1)(c) of Special Direction IC2 requires the Commission to “… fix [ Basic insurance] rates on the basis of accepted actuarial practice… ”. Accepted actuarial practice precludes the approach contemplated in 2010 RR BCUC.MOI.16 for the reasons explained

• below. The information provided in paragraphs 4 to 9 below on accepted actuarial practice

in this context is the evidence of ICBC’s Chief Actuary and the Reviewing Actuary. 4. The Standards of Practice of the Canadian Institute of Actuaries cover ratemaking for property and casualty insurance through section 2600 which is in the form of an exposure draft effective September 2009. An exposure draft forms part of accepted actuarial practice in Canada. These standards apply to the derivation of indicated rates (i.e., rate indications) for property and casualty insurance.

1 ICBC addressed the issue in, the first instance, at slide 68 of the Presentation (see Attachment 1). 2 Appendix 4 A of the 2010 Streamlined Revenue Requirements Application.

I CBC’s June 2 5 , 2 0 1 0 Filing w ith the BC Utilities Com m ission

I nsurance Corporation of British Colum bia 2 June 25, 2010

5. Section 2610.06 requires that a rate indication provide for all costs so that the insurance system is financially sound. Therefore, it would be inconsistent with accepted actuarial practice to omit a cost element from the rate indication. One of these cost elements is the amount of capital required to meet and maintain the target capital levels, which ICBC refers to as the capital provision. In a situation where there is a law or Government Directive that the actuary must follow and which conflicts with accepted actuarial practice, then under the Standards of Practice the actuary is to comply with the law or Government Directive. 6. ICBC submitted a Capital Management Plan 3

• A capital maintenance provision to account for the growth in the capital required

under the Minimum Capital Test (MCT) that occurs because of factors such as growth of the driving population, increases in the liabilities for claims costs, and growth in investment assets. The additional required capital due to the impact

• f these factors is a cost item, as defined under the standard of practice noted

above, that must be accounted for in the rate indication analysis. that sets out the determination of the capital provision as the sum of the two am ounts:

• A capital build provision that provides an amount according to the Capital

Management Plan that adjusts the capital available toward the target level of 130% MCT. For the 2010 Streamlined Revenue Requirements Application, the capital build was not determined in accordance with ICBC’s Capital Management Plan because of the Government Directive regarding Basic Excess Capital not to release excess capital where the actuarial rate indication is negative. 7. The two components of the capital provision were defined separately for distinct

• purposes. The capital maintenance provision provides for the growth in required capital,

and as such is considered by the actuaries as a necessary permanent component of the

• rate. The capital build provision, on the other hand, is the mechanism to build or release

capital, when there is a capital shortfall or excess, respectively. Moreover, the capital maintenance component of the capital provision is an important element in achieving the

• bjective of relatively stable and predictable rates. The Commission has accepted the

Capital Management Plan, and ICBC has applied the Capital Management Plan consistently.

3 Chapter 6.2 of the 2007 Revenue Requirements Application.

I CBC’s June 2 5 , 2 0 1 0 Filing w ith the BC Utilities Com m ission

I nsurance Corporation of British Colum bia 3 June 25, 2010

8. To illustrate what occurs if a cost element such as the capital maintenance provision (or any other cost element, such as broker fees or premium tax) were omitted from the rate indication analysis, consider the impact that it would have on rates. The effect would be to use capital to make up for the cost not covered by the rates. In the case of the capital provision it would mean a reduction to the MCT level by 3% to 4% per year. The reduction in the MCT level each year attributable to excluding any other element such as broker fees

• r premium taxes from the rate indication will differ depending on the size of the cost

element being excluded, but the principle is the same. Setting rates in a way that omits a cost element is inconsistent with accepted actuarial practice. 9. Furtherm ore, if the capital maintenance provision were included in the rate indication

• nly when the capital level fell below a certain threshold, the reintroduction of the capital

maintenance provision would have an adverse impact on rates in the range of 1.5% to 2.0% and would contribute to volatility in the rates. This impact would be on top of any

• ther factors that influence ICBC’s rate level.

10. In order to remain consistent with accepted actuarial practice and Special Direction IC2, the capital maintenance provision in the policy year 2010 rate indication should remain to account for the growth in required capital.

B THE GOVERNMENT DI RECTI VE REGARDI NG BASI C EXCESS CAPI TAL

11. ICBC respectfully submits that the Government Directive regarding Basic Excess Capital also precludes the Com mission from altering the Capital Management Plan to rem ove the capital maintenance provision from the PY 2010 rate indication. 12. The Government Directive regarding Basic Excess Capital is legislation, which the Commission must recognize and accept pursuant to section 3(1)(c.1) of Special Direction

• IC2. Principles of legislative interpretation require that the Commission look to the words of

the legislation (i.e. the Directive), and also consider those words in light of the overall

• bjective and context of the Directive. In this case, the wording of the Directive, and the
• verall thrust or objective of the Directive, dictate that ICBC should continue to employ the

capital maintenance provision contemplated in the Capital Management Plan. 13. The Directive specifies that “ICBC should continue to apply the Capital Management Plan, except with respect to the release of capital.” The Directive assum es the Capital Management Plan rem ains in place with the exception of the release of capital. As

I CBC’s June 2 5 , 2 0 1 0 Filing w ith the BC Utilities Com m ission

I nsurance Corporation of British Colum bia 4 June 25, 2010

discussed above, the Capital Management Plan, which the Commission approved in Order G- 3-08 in the context of the 2007 Revenue Requirem ents Application 4 14. The approach evident in the above description of including a capital maintenance provision calibrated to the management target, regardless of the actual MCT level, is consistent with the distinct purpose served by a maintenance provision and its role in limiting volatility in rates. , addressed the capital maintenance provision and the capital build/ release provisions separately. The capital maintenance provision has a particular purpose as described above. 15. More fundamentally, as a matter of legal interpretation, the Commission must give effect not only to the written word of the legislation, but also the spirit or objective of the

• Directive. In this case, Government has been explicit regarding its intention. The Directive

sets out Government’s intention to retain capital in 2010 and use it to offset future rate

• increases. It states:

The directions contained herein are intended to outline a fram ework to the Insurance Corporation of British Columbia that will provide for rate stability and predictability while minimizing the need for Basic rate increases. And further: This approach advances the objective of ensuring relatively stable and predictable universal compulsory autom obile insurance rates. By applying this approach in the current situation, for instance, ICBC will use its Basic capital to help moderate actuarially indicated rate increases for Basic automobile insurance in the future. Also, limiting the annual and cumulative amount by which capital available can be released ensures that Basic automobile insurance will remain sufficiently capitalized over time. 16. The approach outlined in the question of reducing or eliminating the capital maintenance provision to reduce Basic excess capital is, in essence, a m eans of accomplishing indirectly what Governm ent has specifically directed ICBC not to do – i.e., release capital to further reduce rates in 2010 instead of using it to offset future rate

• increases. ICBC respectfully submits that the Commission must give effect to (i.e.,

recognize and accept) the Governm ent Directive regarding Basic Excess Capital by continuing to apply the capital maintenance provision as contemplated in the Capital Management Plan and retaining the excess capital to offset future rate increases.

4 January 2008 Decision on Revenue Requirements, page 17.

I CBC’s June 2 5 , 2 0 1 0 Filing w ith the BC Utilities Com m ission

I nsurance Corporation of British Columbia June 25, 2010

Attachm ent 6 – Correspondence on Status of Driver Risk Prem ium Program Phase 2

I CBC’s June 2 5 , 2 0 1 0 Filing w ith the BC Utilities Com m ission

I nsurance Corporation of British Colum bia 1 June 25, 2010

SUPPLEMENTARY I NFORMATI ON

Correspondence on Status of Driver Risk Prem ium ( DRP) Program Phase 2

1. Since the January 2008 Decision on Rate Design ICBC has kept the Commission apprised of the status of DRP Phase 2, beginning with a letter on March 17, 2008. In Order G-125-08 the Commission approved a proposed delay of the fourth category (Phase 2)

• ffences of DRP with a scan period to begin on January 1, 2009 and inclusion in the DRP

program on January 1, 2010. 2. In Letter L-60-08 dated January 25, 2009, the Commission directed ICBC “to provide with its next revenue requirements application a description of the measures that it proposes to undertake in order to replace the DRP revenue that will not be collected as a result of the delayed implementation of Phase Two of the DRP program.” As requested, ICBC responded to the directive in Chapter 3, Section D.9.4 of the 2010 Streamlined Revenue Requirem ents Application. The Letter also directed ICBC to “… submit a calculation

• f the expected impacts associated with the detailed estimates within 30 days of the date of

this letter.” ICBC responded on February 25, 2009 by providing the requested calculation. 3. As to the role of DRP Phase 2 in its rate design, ICBC most recently provided a Rate Design Update to the Commission in early 2010 indicating its intent to put forward a proposal for a revised approach to the DRP program for the Commission’s approval with its rate design application for a Driving Record Model (DRM) in 2011, under which higher-risk drivers will pay more Basic insurance premiums. In advance of DRM, ICBC does not intend to undertake any new measures to replace Basic insurance premiums that would have been charged for DRP Phase 2. These plans are consistent with a letter issued by Governm ent to ICBC on February 25, 2010 regarding ICBC’s rate design initiatives. The Rate Design Update is currently before the Commission. 4. ICBC’s correspondence with the Commission regarding DRP from March 17, 2008 to present is attached.

… / 2

151 West Esplanade | North Vancouver | British Columbia | V7M 3H9 | 604-661-2800

March 17, 2008 British Columbia Utilities Commission Sixth Floor 900 Howe Street Vancouver, BC V6Z 2N3 Attention:

• Ms. Erica M. Hamilton, Commission Secretary

Re: Basic I nsurance Rate Design - Update on Other Operator and Driver Risk Prem ium Dear Ms. Hamilton: I would like to take this opportunity to provide the Commission with information on the status

• f two matters addressed in ICBC’s past Rate Design Application, Other Operator and the

Driver Risk Premium (DRP). Other Operator As discussed in the Rate Design Application, Other Operator is an initiative directed at moving towards a more driver-based rate design and having Basic insurance rates more reflective of

• risk. ICBC has taken a number of steps to implement Other Operator and are awaiting the

necessary amendments to the Insurance (Vehicle) Regulation. ICBC will advise the Commission when the amendments to the Regulation are enacted. As a period for training and other implementation steps will be required after the amendments’ wording and effective date are known, ICBC expects to proceed with implementation of the Other Operator proposal approximately nine months after the amendments are brought into force. Driver Risk Prem ium DRP, which is directed at high-risk drivers, is an important aspect of ICBC’s Multi Year Rate Design Plan. The Commission approved the DRP in advance of the Rate Design Application Decision (Order G-126-07, issued on October 19, 2007) in recognition of ICBC’s need to educate customers and stakeholders about DRP prior to January 1, 2008. The Commission will recall that DRP involved premiums being charged to drivers who, over a period of three years have accumulated:

• At least one motor vehicle related Criminal Code of Canada conviction, or 10 point

Motor Vehicle Act conviction (as set out in Appendix 17.1B of ICBC’s Application);

• At least two roadside suspensions, under section 215 or 90.3 of the Motor Vehicle Act;

• 2 -
• At least one conviction for Excessive Speed, under section 148(1) of the Motor Vehicle

Act; or

• At least three convictions for any motor vehicle offences under the Motor Vehicle Act,

the Motor Vehicle Act Regulations, Criminal Code of Canada convictions, Excessive Speed convictions, and roadside suspensions. ICBC commenced an extensive communication campaign relating to DRP in late 2007, as

• planned. ICBC has also proceeded as planned with implementing the scan period for the first

three categories above as of January 1, 2008, and is on target to begin charging the higher of the Driver Penalty Point (DPP) premium or DRP premium starting in January 2009. In light of a number of recent inquiries and concerns expressed by the public and other stakeholders directed at understanding the correlation between the fourth DRP category and driving behaviour, ICBC believes that further public and stakeholder communication and feedback is warranted prior to implementation of that one aspect of DRP. ICBC believes that this can be successfully completed within a year. As a result, ICBC intends to begin the scan period for the fourth category on January 1, 2009 (i.e., one year later) and similarly begin charging premiums starting in January 2010. Yours truly, Donnie Wing, CA Senior Vice President, Insurance, Marketing and Underwriting CC: James Fraser, Director

151 West Esplanade | North Vancouver | British Columbia | V7M 3H9 | 604-661-2800

ERICA M. HAMILTON COMMISSION SECRETARY Commission. Secretary(a)bcuc.com web site: http://www.bcuc.com

VIAE-MAIL

dO llnie. wing@ichc.com regaffairs@icbc.com Mr, Donnie Wing, CA Senior Vice President, Insurance, Marketing and Underwriting Insurance Corporation of British Columbia Suite 340 - 151 W. Esplanada North Vancouver, B.c. V7M 3H9 Dear Mr. Wing: March 31, 2008 Re: Update on Other Operator and Driver Risk Premium

SIXTH FLOOR, 900 HOWE STREET, BOX 250 VANCOUVER, s.c. CANADA V6Z 2N3 TELEPHONE: (604) 660-4700 BC TOLL FREE: 1-800-663- 1385 FACSIMILE: (604) 660-1102

• Log. No. 24648

Insurance Corporation of British Columbia's ("ICBC") letter dated March 17,2008 regarding Basic Insurance Rate Design - Update on Other Operator ("00") and Driver Risk Premium ("DRP"), discusses the timing of implementation of the 00 and DRP programs. As noted in the letter, the DRP involves premiums being charged to drivers who have accumulated over a three year period:

• At least one motor vehicle related Criminal Code of

Canada conviction or ten point Motor Vehicle Act ("MVA") conviction;

• At least two roadside suspensions;
• At least one conviction for Excessive Speed; or
• At least three convictions for any motor vehicle offences under the MVA, MVA Regulations, Criminal

Code of Canada convictions, Excessive Speed convictions or roadside suspensions. ICBC's letter states that it has proceeded as planned with implementing the scan period for the first three categories as of January 1, 2008 and is on target to begin charging the higher of the Driver Penalty Point ("DPP") premium or DRP starting in January 2009. The letter also states that in light of recent stakeholder inquiries and concerns, ICBC believes that further public and stakeholder communication and feedback is warranted prior to implementation of the fourth aspect of the DRP program. ICBC believes that the public and stakeholder communication and feedback can be successfully completed within a year and therefore it intends to begin the scan period for the fourth category on January 1, 2009 and begin charging premiums in January 2010. The January 31, 2007 Special Direction from the BC Solicitor General, approved by Order in Council No. 039 dated February 2,2007, states that "Changes affecting high-risk drivers should be applied to driver actions

• ccurring in 2008 and subsequent years. ICBC must submit the plan for high risk drivers to the Commission for

its approval prior to its implementation." ..

.12

2 ICBC's March 29,2007 Rate Design Application outlined a DRP program and implementation schedule that included a scan on all four categories of

• ffences beginning in January 1, 2008. Commission Order
• No. G-126-07 approved the DRP, as applied-for, prior to issuing its Reasons for Decision on the Application in
• rder to allow ICBC to " ...

undertake a communications campaign to ensure that the public is aware of changes regarding ICBC's proposed transition from the DPP program to the DRP ... ". The Commission is requesting additional information regarding ICBC's proposed change to the implementation

• f

the DRP and requests responses to the following questions by April 14, 2008. 1. Does ICBC's proposed change to the implementation of the DRP program meet the requirements set out in the January 31, 2007 Special Direction from the BC Solicitor General? Why or why not? 2. ICBC's letter states that "In light of a number of recent inquiries and concerns expressed by the public and

• ther stakeholders directed at understanding the correlation between the fourth DRP category and driving
• behaviour. ..

" it believes further public and stakeholder communication and feedback is warranted. Please provide more detail on the number of recent inquiries and concerns expressed and on the specific issue or issues related to the correlation between the fourth DRP category and driving behaviour. Were

• ther issues related to the DRP program raised that were material to ICBC's conclusion that it should defer

implementation of the fourth DRP category for a year? If so, please describe those issues. 3. The Commission, in its January 9,2008 Decision on page 27, notes that it had approved the DRP by Order

• No. G-126-07 and directed ICBC to file an actuarial analysis report for the DRP program following the

third anniversary of

• implementation. It further states that "This directive does not preclude ICBC from

recommending DRP rate adjustments in the interim, to improve the effectiveness and/or fairness ofDRP, based on statistical analysis, practical experience and/or industry practice." Is it consistent with the program applied-for and approved by the Commission to delay the implementation

• f

the fourth DRP category until January 1, 201O? Ifso, how? Ifnot, why does ICBC not see a need to reapply to the Commission to amend the implementation of the program from that which it applied-for and which was approved by the Commission? Does ICBC consider the proposed delay in implementation of the fourth DRP category to be consistent with the Commission's comment on page 27 of the Decision? Why or why not? 4. ICBC in its March 17 letter states that it intends to begin the scan period for the fourth category on January 1,2009 and begin charging premiums starting in January 2010. The 'scan period' was described in ICBC's 2007 Rate Design Application (p. 17.1-3) as the 12-month period ending five months prior to the driver's birthday, during which time driving convictions committed would be added to the driver's record for the purpose of determining the DRP premium. While the initial scan period was proposed to be one year, ICBC also stated in the Application that" ...

• ne

year is not a sufficiently long enough time period to develop the information required to establish a driver's premium" (2007 Rate Design Application, p. 17.1-5). Did ICBC consider beginning the scan period for the fourth category of violations on January 1, 2008, even though it proposes that the premium based on that fourth category would not be implemented until January 1, 201 O? If not, why not? If so, why was it rejected? .. ./3

3 Will the proposed delay in the 'scan period' also limit or delay the data collection required to provide the actuarial analysis report for the DRP as directed by the Commission's Rate Design Decision at page 27? If so, please explain why such data collection cannot proceed irrespective of a delay in the implementation of the DRP based on the fourth category of violations? Yours truly

ffiuviU-

Erica M. Hamilton JWF/dg

ICSC/Cor/Other Operator & Driver Risk Premium-IR No. 1

April 14, 2008 British Columbia Utilities Commission Sixth Floor 900 Howe Street Vancouver, BC V6Z 2N3 Attention:

• Ms. Erica M. Hamilton, Commission Secretary

Re: Additional I nform ation Regarding the Driver Risk Prem ium ( DRP) Program Dear Ms. Hamilton: This letter is in response to the Commission’s letter of March 31, 2008 requesting additional information concerning ICBC’s update on the implementation of the DRP program. ICBC’s responses to the Commission’s additional information requests are included in the following pages. We trust that this information will be of assistance to the Commission. Yours truly, Donnie Wing, CA Senior Vice President, Insurance, Marketing and Underwriting CC: James Fraser, Director, Strategic Services Kathy Parslow, Director Regulatory Affairs and Planning, ICBC Enclosures

151 West Esplanade | North Vancouver | British Columbia | V7M 3H9 | 604-661-2800 | regaffairs@ex.icbc.com

I CBC’s DRP Response, April 1 4 , 2 0 0 8

Additional I nform ation Regarding the Driver Risk Prem ium ( DRP) Program

Q1 . Does I CBC’s proposed change to the im plem entation of the DRP program m eet the requirem ents set out in the January 3 1 , 2 0 0 7 Special Direction from the BC Solicitor General? W hy or w hy not? A1 . The portions of the January 31, 2007 government directive specifically relating to high-risk drivers read as follows: ICBC can contribute to solving the aggressive driving issue through the initiation of a more driver based rate design system that increases the direct accountability of drivers by ensuring that those high-risk drivers who have more crashes, more claims, multiple motor vehicle violations and/ or serious Criminal Code convictions are required to pay more premium dollars. … ICBC is directed to prepare and implement a basic insurance rate design plan that must: … (2) address the issue of high-risk drivers, as set out in this directive, as a new rate design factor beginning in the 2008 rate year. ... This approach to rate design positions ICBC to introduce changes required for a more driver based rate design structure in a gradual and systematic manner without undermining historical stability and predictability. The government directive requires ICBC to:

• 1. Develop a rate design plan that ensures that drivers who exhibit high-risk

characteristics “pay more premium dollars”;

• 2. Ensure that the rate design plan includes a rate design factor targeting these

drivers beginning in the 2008 rate year;

• 3. Implement rate design in a gradual and systematic manner that ensures stability

and predictability. ICBC has complied with the government directive as follows:

• 1. The DRP provides for direct accountability and ensures that those high-risk drivers

who have received 24-hour roadside suspensions, a conviction(s) for excessive speed, and/ or serious Criminal Code convictions are required to pay more premium dollars.

• 2. The Driver Risk Premium has been implemented as a new rate design factor

beginning in the 2008 rate year.

• 3. Implementation of the 4th category of the DRP (three or more convictions)

beginning in January 1, 2009 continues to be in keeping with the government directive to make changes in a “gradual and systematic manner”.

Insurance Corporation of British Columbia 1

I CBC’s DRP Response, April 1 4 , 2 0 0 8 Q2 . I CBC’s letter states that “I n light of a num ber of recent inquiries and concerns expressed by the public and other stakeholders directed at understanding the correlation betw een the fourth DRP category and driving behaviour…” it believes further public and stakeholder com m unication and feedback is w arranted. Please provide m ore detail on the num ber of recent inquiries and concerns expressed and on the specific issue or issues related to the correlation betw een the fourth DRP category and driving behaviour. W ere other issues related to the DRP program raised that w ere m aterial to I CBC’s conclusion that it should defer im plem entation of the fourth DRP category for a year? I f so, please describe those issues. A2 . Background The vast majority of customer feedback received about the DRP related to the DRP Warning Letter sent to approximately 144,000 customers in December 2007. The letter informed these customers about the DRP program and advised that if they maintained their current level of convictions/ roadside suspensions that they may be paying the DRP to reflect the increased risk that they posed. The purpose of the letter was to inform and educate customers about the inception of DRP and why convictions/ roadside suspensions impact premiums (customers were advised that this was just a warning letter and not a bill). Customers were advised that if they did not want to be included in DRP in the future, they needed to change their driving behaviour. ICBC’s various customer call centres (Customer Contact Head Office, Customer Contact Victoria, Driver Testing & Vehicle Information, Broker Enquiry Unit, Autoplan Sales and Claims Contact Centre), logged approximately 3,500 calls from customers relating to the DRP during the period from December 2007 to February 2008. In addition, brokers have reported that numerous customers contacted them to discuss DRP during the period, but the exact number

• f these contacts is not known.

Further, ICBC received approximately 570 calls, letters, and emails to its Fair Practices Department concerning the DRP program that required individual responses during the same

• period. Other contacts which were not specifically logged include those made in person or

phoned in at Driver Service Centres and Claim Centres. Discussion ICBC received a significant amount of feedback about the DRP and the following summarizes key comments:

• Customers who never had a claim or a recent claim did not understand the correlation

between violations and risk of having a crash;

• Customer did not think that their particular type of violation(s) such as seatbelt

violations should result in an additional premium for them;

• Customer would like to see more customer friendly communication regarding the DRP;
• Customers did not remember that they had three or more convictions;

Insurance Corporation of British Columbia 2

I CBC’s DRP Response, April 1 4 , 2 0 0 8

• Customers do not see the intuitive relationship between certain driving violations and

the cost of insurance. A key issue arising from this feedback is that many customers felt that some of the violations that are included in the 4th DRP category are not indicative of high risk behaviour. As a result, ICBC wants to undertake additional customer and stakeholder consultations, analyze the feedback and get a better understanding of their issues. After ICBC has an

• pportunity to analyze this information, ICBC may incorporate this customer feedback into its

analysis as we proceed with the program. Additional examples of customer feedback to ICBC about the DRP are enclosed. Q3 . The Com m ission, in its January 9 , 2 0 0 8 Decision on page 2 7 , notes that it had approved the DRP by order No. G-1 2 6 -0 7 and directed I CBC to file an actuarial analysis report for the DRP program follow ing the third anniversary

• f

im plem entation. I t further states that “This directive does not preclude I CBC from recom m ending DRP rate adjustm ents in the interim , to im prove the effectiveness and/ or fairness of DRP, based on statistical analysis, practical experience and/ or industry practice.” I s it consistent w ith the program applied for and approved by the Com m ission to delay the im plem entation of the fourth DRP category until January 1 , 2 0 1 0 ? I f so, how ? I f not, w hy does I CBC not see a need to reapply to the Com m ission to am end the im plem entation of the program from that w hich it applied for and w hich w as approved by the Com m ission? Does I CBC consider the proposed delay in im plem entation of the fourth DRP category to be consistent w ith the Com m ission’s com m ent on page 2 7 of the Decision? W hy or w hy not? A3 . ICBC believes that the DRP, incorporating the implementation of the fourth category in 2009, is consistent with the Commission’s Decision. Fundamentally, DRP was intended to address the problem of high-risk drivers, and this remains the intention and effect of the DRP. ICBC’s Filing envisioned the implementation of DRP as an incremental process. As noted in the question, the Commission also recognized that the implementation of DRP would be subject to adjustments over time in its January 9, 2008 Decision (at p.27): “This directive does not preclude ICBC from recommending DRP rate adjustments in the interim, to improve the effectiveness and/ or fairness of DRP, based on statistical analysis, practical experience and/ or industry practice.” Both ICBC and the Commission also recognized the importance of ensuring that the public was aware of, and understood, the DRP prior to its implementation, as communication is essential to obtain additional benefit associated with altered behaviour. Paragraph 65 of Chapter 17.1 refers to the need for a public communication process, and the Commission’s Order No. G-126-07 provided early approval of the DRP program so that ICBC could

Insurance Corporation of British Columbia 3

I CBC’s DRP Response, April 1 4 , 2 0 0 8 “undertake a communications campaign to ensure that the public is aware of [ the] changes… ”. ICBC has, via the media and its own communications, provided comprehensive awareness of DRP to the majority of people in the province. In particular, DRP received coverage via local television news, many newspaper articles and letters, and many radio news clips. In addition, ICBC sent out the DRP Warning Letters mentioned in the response to question two, posted DRP information on icbc.com, communicated to brokers so that they could discuss DRP with customers, and relevant ICBC brochures were updated to include DRP references. Despite these communications, based upon the customer feedback received, the fourth category (three or more convictions for any motor vehicle offence) is not adequately understood by customers. As indicated in question two, ICBC intends to undertake further analysis of customer and stakeholder feedback. Once ICBC’s analysis of this information is complete ICBC may incorporate it as it proceeds with the program. The fundamental elements of the DRP remain intact and the changes are consistent with the Commission’s Decision. ICBC believes that a one year change in the implementation date for

• ne of four elements of the DRP is required and that it can and should be implemented by

way of ICBC filing revised Tariff pages with the Commission prior to the end of 2008. Q4 . I CBC in its March 1 7 letter states that it intends to begin the scan period for the fourth category on January 1 , 2 0 0 9 and begin charging prem ium s starting in January 2 0 1 0 . The ‘scan period’ w as described in I CBC’s 2 0 0 7 Rate Design Application ( p. 1 7 .1 -3 ) as the 1 2 -m onth period ending five m onths prior to the driver’s birthday, during w hich tim e driving convictions com m itted w ould be added to the driver’s record for the purpose of determ ining the DRP prem ium . W hile the initial scan period w as proposed to be one year, I CBC also stated in the Application that “… one year is not a sufficiently long enough period of tim e to develop the inform ation required to establish a driver’s prem ium ” ( 2 0 0 7 Rate Design Application, p. 1 7 .1 -5 ) . Did I CBC consider beginning the scan period for the fourth category of violations on January 1 , 2 0 0 8 , even though it proposes that the prem ium based on that fourth category w ould not be im plem ented until January 1 , 2 0 1 0 ? I f not, w hy not? I f so, w hy w as it rejected? W ill the proposed delay in the ‘scan period’ also lim it or delay the data collection required to provide the actuarial analysis report for the DRP as directed by the Com m ission’s Rate Design Decision on page 2 7 ? I f so, please explain w hy such data collection cannot proceed irrespective of a delay in the im plem entation of the DRP based on the fourth category of violations? A4 . ICBC did consider beginning the scan period for the 4th category as outlined above, but decided not to proceed. Given the feedback from stakeholders and customers, ICBC felt it was prudent to delay the implementation of the 4th category until the consultations and analysis of the customer and and stakeholder feedback has been completed. (NOTE - the scan period referenced in the first paragraph in the second sentence of the Commission’s question refers to the scan period for DPP and not DRP.)

Insurance Corporation of British Columbia 4

I CBC’s DRP Response, April 1 4 , 2 0 0 8 Implementing the scan for the 4th category in January 2009 will not limit or delay the data collection required to provide the actuarial analysis report for the DRP as directed by the Commission.

Insurance Corporation of British Columbia 5

Subject: Customer email regarding DRP letter, Example 1 To whom it may concern, Recently I recieved a letter from you stating that I am a bad driver, and that ICBC is "getting tough on drivers like you". First off it has been three years since I have received a speeding ticket. How may I ask, does this lump me into the dangerous driver category. Second, in my 8 years of driving I have never been in any kind of accident. How again does this make me a ?dangerous driver?? I have never been so insulted in my entire life. The letter that I received was rude and absolutely ridiculous. If you think that I am going to sit back and let you insult me, you are dead wrong. I would like a letter of apology, signed by Paul Taylor himself, or I will be going to all newspapers in the Okanagan to let them know just what kind of entity that ICBC is. Sincerely

Subject: Customer feedback on DRP letter, Example 2 Dear ICBC; It is with considerable alarm that I received a very aggressive and unfair letter (dated Dec. 11) from Paul Taylor basically accusing me of being a bad driver and further, if I don't smarten up, I will be paying a lot more for insurance in the future. Have you people taken leave of your senses? I made a phone call and asked what my driving record was in recent years. I have 3 seat belt violations and 1 failure to produce a valid driver's licence. Very naughty, but harmless, and quite fluky actually. I almost always wear my seat belt these days, finally. When I started driving there were no seat belts in cars and it took me a while to adjust without slipping up. The seat belt checks were almost literally outside my door in North Van, the failure to produce a valid drivers licence was at one of those seat belt checks, 1 block from home when I was going to the corner store. I have this 'bad' habit of buckling up after I start moving. Sometimes when I am driving a block, or two I have forgotten, not anymore. By the way, the seat belt check is a regular occurrence on Keith Road at the same location, I have been waved thru countless times. I live around the corner. I have no points and haven't had any in years. I don't think that I have ever had more than 3 points in any given year (and most years none) in the 45 years of my driving record. I have had nothing more than a handful of minor speeding tickets on

• pen highways (always radar and always the lowest penalty possible).

I have never in 45 years of driving been convicted of any driving offence other than your 'garden variety' that even good drivers get caught up in from time to time. I have one claim against me in 45 years, a minor rear ender, no damage to my vehicle. I keep hearing that drivers like myself can get cheaper insurance from companies in the private sector. I have never bothered looking into this as I am aware that I am currently paying the lowest rate possible at ICBC. Thanks to your threatening letter, it is my intention to now look into spending my insurance money elsewhere. Yours truly,

From: Sent: Monday, DecemlJer 17, :m07 2:06 PM To: Feedback Subject: Letter of 12/11/07 Driver Risk Premium

Subject:

'Letter of 12/11/07 Driver Risk Premium

Name:

E-mail:

Comments: To Paul Taylor:

I was surprised and angered to read the letter you sent da~ed

December 11, 2007. In it YO.li say I have had "multiple driving convictions and/or

suspensions in the past number of years, which means you are putting others at risk because of your bad driving habits". I take exception to-being accused of being a bad driver. I arn-guiity 6£ having three-speeding tickets in the past 10 years, and none for the

past 4 years. Does this. make me a bad driver. I applaud the idea of bad drivers paying more for driving "convictions and/or suspensions!!, but not for occasional speeding tickets. I

would appreciate some clairfication on the criteria you used to select

drivers for this mailing list.

Sincerely,

",OfJJ

UlI r I , ~

reference date

.

_!:=_c:-~!ft-.tf!Z

Paul Taylor

LCBC

151 W. Esplanade

North Vancouver BC

V7M 3H9

Dear Mr. Taylor,

RfEClEffVfEfU I . DE~

21 2007

I

.... _ ....... ""'---- ... _-c-,;.-

Enclosed a copy of a letter I received today under your signature and North Vancouver address.

,

DEC 2 2U07

I do not know about the multiple driving convictions and/or suspen,siohs this letter says I've had.

You included a brochure on the new Driver Pena'lty Point premiums

which mentions roadside suspensions, excessive speed convictions and Criminal Code of Canada offences. I am not aware of having any

• f these either.

In the last three years I have had some tickets for not wearing a seat

• belt. I just looked at my last one. It is called a Violation Ticket.

Is this what the letter is refering to as a "driving conviction"? I don't recall any speeding charges in the past three years. I have not

had an alcholic drink in 25 years so that eliminates roadside suspensions and drunk driving, etc. I have been involved in some automobile accidents

in the past three years. Every single one was determined to be 100% the

• ther parties fault in every case.

Because of my safe driving and good record my automobile insurance with

ICBe in 2005 had the 43% discount. In 2006 I had the 43% discount. In 2007 I had the 43% discount. r expect the full discount when I get my

2008 insurance. Your letter begins by telling me I've had multiple driving convictions

arid/or suspensions and that I'm putting others at risk. I do not under-

• stand. Would you please explain?

Thank you for your consideration,

Quesnel Cariboo Observer, Page 0006, 26-Dec-2007 Little too late Canada Post carriers bags are little heavier this year as they have to cart around nasty letters from ICBC to thousands of drivers throughout the province. Wording in the letters state ICBC is concerned about how they drive and have plans to do something about it in the new year. They say ICBC is getting tough on drivers like you (those who receive the letters) and come Jan. I they're introducing driver risk premiums which means extra costs to reflect the increased risk these drivers pose on the road. These premiums, according to ICBC, help keep insurance rates low and stable for good drivers. The letters list convictions of driver-related offences, road-side suspensions and such over a three- year period. This heavy-handed approach has certainly generated response in all media with many stories of drivers receiving the letters for offences such as seat belt infractions. We are all for reducing the rates we pay, but it doesn't appear drivers not deemed bad, are receiving letters telling them their rates are going down. One bad driver letter recipient reported he enjoys the Road Star package with accompanying benefits and yet the letter suggests otherwise. Many say the offences are at least three years old and why threaten now. It would appear ICBC president and CEO Paul Taylor has adopted a Grinch-style attitude right before Christmas. The letter indicates rate increases on average of $500, or possibly thousands of dollars more a year as early as 2009. It's hard to imagine if a driver chooses not to wear a seat belt, gets caught several times, pays the fines, could be a menace to other drivers, but according to ICBC that's exactly what they believe. Drinking and driving, habitually excessive speed and reckless driving, absolutely should be slammed, but that should have been done since the first drivers' licences were issued back nearly 100 years. Where was ICBC then? Maybe ICBC should look more closely at who they are calling bad drivers and nail the real

• ffenders.

Painting everyone with the same brush, is just another whitewash job and this province certainly doesn't another one of those.

ERICA M. HAMILTON COMMISSION SECRETARY

• Commission. Secretary@beuc.com

web site: http://www.beuc.com

VIAE-MAIL

regaffairs@icbc.com

• Ms. Kathy Parslow

Director, Regulatory Affairs and Planning Insurance Corporation of British Columbia Suite 340 - 151 West Esplanada North Vancouver, B.C. V7M 3H9 Dear Ms. Parslow: May 12,2008

SIXTH FLOOR, 900 HOWE STREET, BOX 250 VANCOUVER, B.C. CANADA V6Z 2N3 TELEPHONE: (604) 660-4700 BC TOLL FREE: 1-800-663-1385 FACSIMILE: (604) 660-1102

• Log. No. 24648

Re: Insurance Corporation of British Columbia ("ICBC") Implementation of Other Operator and Driver Risk Premium The Commission, in its January 9, 2008 Decision, approved various elements ofICBC's 2007 Basic Insurance Rate Design Application, including the Other Operator ("00") and Driver Risk Premium ("DRP") program. ICBC, in a letter dated March 17, 2008, discussed the timing of implementing the 00 and DRP programs. Other Operator In its letter, ICBC stated that it has taken a number of steps to implement 00 and is awaiting the necessary amendments to the Insurance (Vehicle) Regulation and will advise the Commission when the amendments to the Regulation are enacted. ICBC also states that because further implementation steps will be required after the amendments are enacted, it expects to implement its 00 proposal approximately nine months later. Driver Risk Premium The DRP involves premiums being charged to drivers who have accumulated over a three year period:

• At least one motor vehicle related Criminal Code a/Canada conviction or ten point Motor Vehicle Act

("MVA") conviction;

• At least two roadside suspensions;
• At least one conviction for Excessive Speed; or
• At least three convictions for any motor vehicle offences under the MVA, MVA Regulations, Criminal

Code a/Canada convictions, Excessive Speed convictions or roadside suspensions. ICBC's letter stated that it has proceeded as planned with implementing the scan period for the first three categories as of January 1,2008 and is on target to begin charging the higher of the Driver Penalty Point ("DPP") premium or DRP starting in January 2009. The letter also stated that in light of recent stakeholder inquiries and concerns, ICBC believes that further public and stakeholder communication and feedback is warranted prior to implementation of the fourth category of the DRP program. ICBC believes that the public and stakeholder communication and feedback can be successfully completed within a year and therefore it intends to begin the scan period for the fourth category on January 1, 2009 and begin charging premiums in January 2010. . .

.12

2 In a letter dated March 31, 2008 the Commission requested that ICBC provide additional infonnation by way of responses to specific questions with respect to the proposed change to the implementation of the DRP. ICBC responded to the Commission's request on April 14,2008. The Commission has reviewed ICBC's responses and notes ICBC's comments regarding the customer feedback it received, namely:

• Customers who had not had a claim or a recent claim did not understand the correlation between

violations and the risk of a collision;

• Customers did not think that their particular types ofviolation(s) such as seatbelt violations should result

in an additional premium for them;

• Customers would like to see more customer friendly communication regarding the DRP;
• Customers did not remember that they had three or more convictions; and
• Customers do not see the intuitive relationship between certain driving violations and the cost of

Insurance. The Commission further notes ICBC's submission that the fundamental elements of the DRP remain intact and that implementing the scan for the fourth category in January 2009 will not delay or limit the data collection required to provide the actuarial analysis report for the DRP as directed by the Commission. The Commission also acknowledges ICBC's submission that the proposed changes comply with the provincial government's January 31, 2007 directive relating to high-risk drivers, and that the changes are consistent with the Commission's January 9,2008 Decision. Commission Detenninations With respect to the delay in implementing the 00, the Commission recognizes that ICBC cannot proceed with implementation until after the Regulation is amended and accepts ICBC's proposal, but directs ICBC to report to the Commission by May 1, 2009 on the status of the 00 program, if it has not been implemented by then. Concerning the proposed change in implementation of the DRP, the Commission accepts that customer response with respect to the fourth category indicates a need for further customer communication and warrants a delay of the scan for those violations until January 1,2009. The nature of the customer feedback, summarized above, indicates that in order to avoid any further delay, ICBC must take more care in its customer communications. For example, the Commission is sympathetic to the concerns of customers who fail to see the connection between seatbelt violations and increased risk. ICBC's future communications with customers on the DRP should either do a more thorough job of drawing the connections between driver behaviour and the associated impact on premiums, or the program should be more precise in selecting only those violations that increase the risk. ICBC has indicated that it will implement the DRP fourth category scan by January 1,2009, but ifICBC intends to change the fonn of the DRP or if it wishes to delay beyond that date, ICBC is directed to apply to the Commission for approval. JWF/rt

lCBC/Cor/Other Operator and Driver Risk Premium

cc:

• Mr. Donnie Wing, CA

Chief Financial Officer Insurance Corporation of British Columbia

• d01lnie. wing@icbc.com

ICBC Rate Design Intervenors (ICBC-2007RD-RJ)

June 27, 2008 British Columbia Utilities Commission Sixth Floor

900 Howe Street

Vancouver, BC V6Z 2N3 Attention:

• Ms. Erica M. Hamilton, Commission Secretary

building trust. driving confidence. Re: Revised Tariff for Implementation of Driver Risk Premium Dear Ms. Hamilton: Please find enclosed for the Commission's approval, proposed amendments to the Basic Insurance Tariff for implementation of the Driver Risk Premium (DRP) except the DRP fourth category. ICBC's March 29, 2007 Rate Design Application contained a proposal for the creation of a new Driver Risk Premium. Further to that proposal, ICBC's letter to the Commission dated July 20, 2007 included proposed amendments to the Basic Insurance Tariff for implementation of the DRP and Other Operator. While the Commission accepted those changes, the related DRP amendments were not in Tariff page format for the Commission Secretary to sign. The attached Tariff pages are now in Tariff format and contain additional revisions as discussed below. In Schedule E, the definition of a "MVA Conviction" has been rewritten. The version of this definition filed with ICBC's July 20, 2007 letter defined the term "MVA Conviction" with reference to the list of offences that presently trigger Driver Penalty Points (DPP) in the Schedule to Division 28 of the Motor Vehicle Act Regulation, BC Reg 26/58. ICBC's review

• f the DRP program indicated that the list of DPP offences does not capture a number of

Motor Vehicle Act offences that were used in the analysis of the correlation between MVA convictions and crash rates referred to in ICBC's Rate Design Application at pages 17.1-7 to 17.1-11. The revised definition of "MVA Conviction" in the attached version of Schedule E captures offences that are committed while driving which is consistent with the statistical analysis that ICBC conducted in designing the DRP program. In Section 4.2 of Schedule E, reference to roadside suspensions has been added. Roadside suspensions were inadvertently left out of the July 20, 2007 draft. That omission, if not corrected, would mean that receipt of a roadside suspension would not result in a reinstatement of DRP despite the fact that the driver had been found driving without a

• licence. In addition, the list of driving related offences that will result in a reinstatement of

the DRP has been expanded to include MVA Convictions, as defined in Schedule E. Finally, as discussed in ICBC's letters to the Commission dated March 17, 2008 and April 14, 2008, the proposed amendments reflect the delayed implementation of the category of DRP

• ffences that relate to motorists who accumulate three or more convictions or roadside

suspensions within a three year scan period.

.../2

151 West Esplanade I North Vancouver I British Columbia I V7M 3H9 I 604-661-2800 I regaffairs@icbc.com

• 2 -

lCBC is requesting the enclosed amendments to be effective January 1, 2008, which is consistent with the date in the 2007 Rate Design Application and previously approved by the Commission. Yours truly,

• Q I

/J

c:::--J u-~r

• +or

Kathy Parslow Director, Regulatory Affairs and Planning Cc: James Fraser, Director, Strategic Services Donnie Wing, CA, Chief Financial Officer, ICBC Enclosures

151 West Esplanade I North Vancouver I British Columbia I V7M 3H9 I 604-661-2800 I regaffairs@icbc.com

Insurance Corporation of British Columbia Basic Insurance Tariff Basic Insurance Premiums Page 33 First Revision Effective: January 1, 2008

Amended effective January 1, 2008 Accepted:__________________________

2.G. Premium Payable for Driver’s Certificates 2.G.1 Premium Payable for Driver’s Certificate The annual premium payable by a person for a driver’s certificate issued pursuant to section 43

• f the IVR is the total of:

(a) the greater of: (i) the point penalty premium calculated in accordance with Section 2 of Schedule E, and

C

(ii) the driver risk premium calculated in accordance with Section 3 of Schedule E, and

N

(b) the multiple crash premium calculated in accordance with Schedule F. 2.G.2. Application of Other Basic Insurance Tariff Provisions and IVR Sections Section 2.K of this Basic Insurance Tariff and section 15.7 of the IVR apply in respect of premium payable for driver’s certificates.

Commission Secretary:__________________________

Insurance Corporation of British Columbia Basic Insurance Tariff Schedule E: Driver Penalty Point Premium Page 1 First Revision Effective: January 1, 2008

Amended effective January 1, 2008 Accepted:__________________________

SCHEDULE E DRIVER PENALTY POINT PREMIUM 1. Definitions In this Schedule: “10 point MVA Conviction” means a conviction for any offence under the Motor Vehicle Act that is listed in Table 4 set out in the Schedule to Division 28 of the Motor Vehicle Act Regulation, BC Reg 26/58 as amended from time to time,

N

“Contravention” means any: (a) 10 point MVA Conviction, (b) Criminal Code of Canada Conviction, (c) Conviction for Excessive Speed, or (d) Roadside Suspension, “Conviction for Excessive Speed” means a conviction for an offence under section 148 of the Motor Vehicle Act, “Criminal Code of Canada Conviction” means a conviction for any driving offence under the Criminal Code of Canada that is listed in Table 4 set out in the Schedule to Division 28 of the Motor Vehicle Act Regulation, BC Reg 26/58 as amended from time to time, “MVA Conviction” means any conviction for an offence under the Motor Vehicle Act or the Motor Vehicle Act Regulation that (a) arises directly or indirectly out of the use or operation by the offender of a vehicle

• ther than a cycle, or

(b) is committed while the offender is using or operating a vehicle except a cycle, “one-year scan period”, in respect of a person, means the 12 month period starting 17 months before the anniversary of the person's birth date, “Roadside Suspension” means a suspension pursuant to section 90.3 or 215 of the Motor Vehicle Act,

N

“three-year scan period” in respect of a person, means the 36 month period starting 41 months before the anniversary of the person’s birth date, but does not include any portion of that 36 month period before January 1, 2008. 2. Penalty Point Premium 2.1 For the purpose of this section 2, the classes of drivers set out in Table 1 of this Schedule are established.

Commission Secretary:__________________________

Insurance Corporation of British Columbia Basic Insurance Tariff Schedule E: Driver Penalty Point Premium Page 2 First Revision Effective: January 1, 2008

Amended effective January 1, 2008 Accepted:__________________________

2.2 A person falls within a class of drivers established under subsection 2.1, if the total of the following equals the number of point penalties that in column A of Table 1 identifies that class: (a) the number of point penalties recorded by ICBC against the driving record of that person for offences committed during the one-year scan period; and (b) the number of point penalties recorded by ICBC, since the date of the last assessment, against the driving record of that person for offences committed before the one-year scan period. 2.3 The annual point penalty premium payable by a person for a driver's certificate is the amount shown in column B of Table 1 opposite the number of point penalties that, in column A

• f that Table, identifies the person's class.

Commission Secretary:__________________________

Insurance Corporation of British Columbia Basic Insurance Tariff Schedule E: Driver Penalty Point Premium Page 3 First Revision Effective: January 1, 2008

Amended effective January 1, 2008 Accepted:__________________________

TABLE 1 – Penalty Point Premium Column A Column B Class of Drivers by Number of Point Penalties Annual Premium ($) 0-3 nil 4 175 5 230 6 300 7 415 8 520 9 640 10 905 11 1 080 12 1 260 13 1 680 14 1 920 15 2 160 16 2 480 17 2 800 18 3 120 19 3 440 20 3 760 21 4 160 22 4 560 23 4 960 24 5 360 25 5 760 26 6 240 27 6 720 28 7 200 29 7 680 30 8 160 31 8 720

Commission Secretary:__________________________

Insurance Corporation of British Columbia Basic Insurance Tariff Schedule E: Driver Penalty Point Premium Page 4 First Revision Effective: January 1, 2008

Amended effective January 1, 2008 Accepted:__________________________

32 9 280 33 9 840 34 10 480 35 11 120 36 11 760 37 12 400 38 13 040 39 13 680 40 14 560 41 15 360 42 16 160 43 16 960 44 17 760 45 18 560 46 19 520 47 20 480 48 21 440 49 22 400 50 or more 24 000

Commission Secretary:__________________________

Insurance Corporation of British Columbia Basic Insurance Tariff Schedule E: Driver Penalty Point Premium Page 5 First Revision Effective: January 1, 2008

Amended effective January 1, 2008 Accepted:__________________________

3. Driver Risk Premium 3.1 The annual driver risk premium payable by a person for a driver’s certificate is determined with reference to the Contraventions recorded by ICBC in respect of that person during the three-year scan period and is the total of the amounts set out in Column B of each of Tables 2, 3 and 4 that correspond to the number and type of Contraventions referred to in each Table. TABLE 2 – Driver Risk Premium for Criminal Code Convictions and 10 Point MVA Convictions Driver Risk Premium Schedule Column A Column B Number of Contraventions: Criminal Code

• f Canada

Conviction or 10 point MVA Conviction Premium 1 $ 905 2 $ 3,760 3 $ 8,160 4 $ 14,560 5 $ 24,000 6 $ 24,000 7 $ 24,000 8 $ 24,000 9 $ 24,000 10 $ 24,000 11 $ 24,000 12 $ 24,000 13 $ 24,000 14 $ 24,000 15 $ 24,000 16 $ 24,000 17 $ 24,000 18 $ 24,000 19 $ 24,000 20 $ 24,000 21 $ 24,000 22 $ 24,000

N

Commission Secretary:__________________________

Insurance Corporation of British Columbia Basic Insurance Tariff Schedule E: Driver Penalty Point Premium Page 6 First Revision Effective: January 1, 2008

Amended effective January 1, 2008 Accepted:__________________________

23 $ 24,000 24 $ 24,000 25 $ 24,000 26 $ 24,000 27 $ 24,000 28 $ 24,000 29 $ 24,000 30 $ 24,000 31 $ 24,000 32 $ 24,000 33 $ 24,000 34 $ 24,000 35 $ 24,000 36 $ 24,000 37 $ 24,000 38 $ 24,000 39 $ 24,000 40 $ 24,000 41 $ 24,000 42 $ 24,000 43 $ 24,000 44 $ 24,000 45 $ 24,000 46 $ 24,000 47 $ 24,000 48 $ 24,000 49 $ 24,000 50 $ 24,000 TABLE 3 – Driver Risk Premium for Roadside Suspensions Driver Risk Premium Schedule Column A Column B Number of Contraventions: Roadside Suspension Premium 1 $ 0 2 $ 370 3 $ 430 4 $ 490

N

Commission Secretary:__________________________

Insurance Corporation of British Columbia Basic Insurance Tariff Schedule E: Driver Penalty Point Premium Page 7 First Revision Effective: January 1, 2008

Amended effective January 1, 2008 Accepted:__________________________

5 $ 560 6 $ 640 7 $ 740 8 $ 850 9 $ 980 10 $ 1,130 11 $ 1,300 12 $ 1,500 13 $ 1,730 14 $ 1,990 15 $ 2,290 16 $ 2,630 17 $ 3,020 18 $ 3,470 19 $ 3,990 20 $ 4,590 21 $ 5,280 22 $ 6,070 23 $ 6,980 24 $ 8,030 25 $ 9,230 26 $ 10,610 27 $ 12,200 28 $ 14,030 29 $ 16,130 30 $ 18,550 31 $ 20,000 32 $ 20,000 33 $ 20,000 34 $ 20,000 35 $ 20,000 36 $ 20,000 37 $ 20,000 38 $ 20,000 39 $ 20,000 40 $ 20,000 41 $ 20,000 42 $ 20,000 43 $ 20,000 44 $ 20,000 45 $ 20,000 46 $ 20,000 47 $ 20,000 48 $ 20,000

N

Commission Secretary:__________________________

Insurance Corporation of British Columbia Basic Insurance Tariff Schedule E: Driver Penalty Point Premium Page 8 First Revision Effective: January 1, 2008

Amended effective January 1, 2008 Accepted:__________________________

N

49 $ 20,000 50 $ 20,000 TABLE 4 – Driver Risk Premium for Convictions for Excessive Speed Driver Risk Premium Schedule Column A Column B Number of Contraventions: Convictions for Excessive Speed Premium 1 $ 320 2 $ 370 3 $ 430 4 $ 490 5 $ 560 6 $ 640 7 $ 740 8 $ 850 9 $ 980 10 $ 1,130 11 $ 1,300 12 $ 1,500 13 $ 1,730 14 $ 1,990 15 $ 2,290 16 $ 2,630 17 $ 3,020 18 $ 3,470 19 $ 3,990 20 $ 4,590 21 $ 5,280 22 $ 6,070 23 $ 6,980 24 $ 8,030 25 $ 9,230 26 $ 10,000 27 $ 10,000 28 $ 10,000

Commission Secretary:__________________________

Insurance Corporation of British Columbia Basic Insurance Tariff Schedule E: Driver Penalty Point Premium Page 9 First Revision Effective: January 1, 2008

Amended effective January 1, 2008 Accepted:__________________________

29 $ 10,000 30 $ 10,000 31 $ 10,000 32 $ 10,000 33 $ 10,000 34 $ 10,000 35 $ 10,000 36 $ 10,000 37 $ 10,000 38 $ 10,000 39 $ 10,000 40 $ 10,000 41 $ 10,000 42 $ 10,000 43 $ 10,000 44 $ 10,000 45 $ 10,000 46 $ 10,000 47 $ 10,000 48 $ 10,000 49 $ 10,000 50 $ 10,000

N C

4. Refunds 4.1 In the circumstances described in column A of Table 5 of this Schedule E and subject to the minimum time requirements set out in column B of Table 5 and the additional requirements set

• ut in column C of Table 5, ICBC shall, on application, refund to a person named on a driver’s

certificate or his personal representative that part of the premium, calculated according to section 2.H of this Basic Insurance Tariff, paid for the period the driver’s certificate is not in use

• r for the term of the driver’s certificate remaining unexpired on the day it is surrendered.

C

4.2 Notwithstanding anything in section 4.1 of this Schedule E, if a person who has applied for and been granted a refund in accordance with section 4.1 is, during the term of the driver’s certificate for which the refund has been granted:

N

(a) convicted of an offence listed in Tables 2, or 4 of this Schedule or convicted of any MVA Conviction, or receives a roadside suspension, or (b) involved in a motor vehicle crash while driving a motor vehicle, the person must repay the amount of the refund paid by ICBC as premium.

Commission Secretary:__________________________

Insurance Corporation of British Columbia Basic Insurance Tariff Schedule E: Driver Penalty Point Premium Page 10 First Revision Effective: January 1, 2008

Amended effective January 1, 2008 Accepted:__________________________

C

TABLE 5 — Refund of Driver Penalty Point Premium Column A Circumstances Column B Minimum Time Requirements Column C Additional Requirements Suspension 60 days or more Motor Vehicle Branch confirmation on suspensions before 1982. Voluntary surrender 30 days or more Motor Vehicle Branch confirmation Out of province for part or whole period covered in billing 30 days or more written confirmation of issue date, or photocopy of new drivers licence Not in Canada or U.S.A. for part

• r whole period

covered in billing 30 days or more photocopies of passport date stamp confirming out

• f country dates

Incarceration 30 days or more letter from prison authorities, confirming dates of incarceration and that there were no out privileges when driver's licence could have been used Medical reason 30 days or more physician's letter confirming that person is unable to drive no evidence of driving, e.g. points or claim on driving record * Minimum time requirement refers to a continuous period of time.

Commission Secretary:__________________________

From: Roberts, Tony BCUC:EX To: Elder, June Subject: ICBC - Revised Tariff for Implementation of Driver Risk Premium Date: Tuesday, July 22, 2008 3:47:41 PM

Hi June, Further to our conversations concerning the June 27, 2008 letter re Revised Tariff for Implementation of DRP: We discussed the proposed definition of MVA Convictions. I indicated that the Commission had some concern regarding the fact that the new definition does not refer to particular Acts or Regulations, in contrast to the DPP version, and the original version submitted for the RDA. We discussed the value

• f clarity vis-a-vis public perception and communication. I discussed this with Jim Fraser, and he

suggested that ICBC submit the relevant Business Practices concerning how the new definition would be interpreted. If that document is available, there would not be a need to specify particular Acts or Regulations associated with the new defintion. Please advise as to whether that solution is practicable. We discussed the impacts that the one year delay in the implementation date for the "fourth category" will have. As would be expected, there will be a slight decrease in the number of drivers affected versus the figures submitted in Figure 17.1.4 of the 2007 RDA. As the result, there will be a slight decrease in DRP revenues which, will not be captured by DPP during the interim. I understand from you and Fred Squires that a precise estimate of the impact would not be readily available, but that the expectation is for between 1,500 and 2,000 drivers affected, with an associated revenue decrease of $1M. Please provide an estimate as to when ICBC would be able to provide a more reliable estimate

• f the figures.

We also discussed the inclusion of roadside suspensions into Schedule 'E', whether the delay in implementation of the fourth category would allow ICBC to collect more data regarding "failure to yield," and the possibility of the delay affecting the deterrent impact of DRP. Finally, we discussed the matter of the form of further communications. I had recommended that you provide any follow-up information in a letter addressed to me. To save on communications time and effort, let us use e-mail instead. Therefore, please use this message as the basis for response regarding the issues discussed during our telephone conversations on Friday (July 18) and today (July 22). In the event that I have missed any important points of those conversations, please include same in your response. Regards, Tony Tony Roberts, Senior Economist British Columbia Utilities Commission Phone: 604-660-4755 email: tony.roberts@bcuc.com

From: Horvathova, Vladimira on behalf of Elder, June To: "Roberts, Tony BCUC:EX" Subject: RE: ICBC - Revised Tariff for Implementation of Driver Risk Premium Date: Friday, August 01, 2008 5:40:53 PM Attachments: ICBC DRP Response.pdf DRP Contraventions.pdf

Hi Tony, Please find attached additional information in regard to your email of July 22, 2008, concerning the revised Tariff for implementation of Phase 1 of the DRP. As indicated in your email, the Commission noted that ICBC had not referred to specific Acts or Regulations in its definition of MVA Conviction. It was suggested that in lieu of providing specific Acts or Regulations that ICBC submit relevant Business Practices that relate to how the definition of MVA Conviction would be interpreted. MVA Convictions are

• nly considered in the limited circumstances that relate to reinstatement of the DRP. This is further

described in pages 1 and 2 of the first attachment. As the process is essentially automated, there has been no business need for specific Business Practices that relate to the interpretation of MVA Conviction; however, included in the first attachment is an outline of the processes that occur in order to identify the circumstances that require reinstatement of the DRP. In addition, included in the first attachment is ICBC's response to your request for an estimate on the time it will take to provide a more reliable estimate of the dollar impact arising from the delay in implementing the fourth category of DRP offences. Should you have any further questions, please contact me at (604) 982-2489. Thank you, Vladimira for June Elder June Elder Manager, Regulatory Affairs ICBC #339 - 151 W. Esplanade North Vancouver, BC V7M 3H9 Phone: 604-982-2489 Fax: 604-982-7209

• ----Original Message-----

From: Roberts, Tony BCUC:EX [mailto:Tony.Roberts@bcuc.com] Sent: Tuesday, July 22, 2008 3:47 PM To: Elder, June Subject: ICBC - Revised Tariff for Implementation of Driver Risk Premium Hi June,

Further to our conversations concerning the June 27, 2008 letter re Revised Tariff for Implementation of DRP: We discussed the proposed definition of MVA Convictions. I indicated that the Commission had some concern regarding the fact that the new definition does not refer to particular Acts or Regulations, in contrast to the DPP version, and the original version submitted for the RDA. We discussed the value of clarity vis-a-vis public perception and communication. I discussed this with Jim Fraser, and he suggested that ICBC submit the relevant Business Practices concerning how the new definition would be interpreted. If that document is available, there would not be a need to specify particular Acts or Regulations associated with the new

• defintion. Please advise as to whether that solution is practicable.

We discussed the impacts that the one year delay in the implementation date for the "fourth category" will have. As would be expected, there will be a slight decrease in the number of drivers affected versus the figures submitted in Figure 17.1.4 of the 2007 RDA. As the result, there will be a slight decrease in DRP revenues which, will not be captured by DPP during the

• interim. I understand from you and Fred Squires that a precise estimate of the impact would not

be readily available, but that the expectation is for between 1,500 and 2,000 drivers affected, with an associated revenue decrease of $1M. Please provide an estimate as to when ICBC would be able to provide a more reliable estimate of the figures. We also discussed the inclusion of roadside suspensions into Schedule 'E', whether the delay in implementation of the fourth category would allow ICBC to collect more data regarding "failure to yield," and the possibility of the delay affecting the deterrent impact of DRP. Finally, we discussed the matter of the form of further communications. I had recommended that you provide any follow-up information in a letter addressed to me. To save on communications time and effort, let us use e-mail instead. Therefore, please use this message as the basis for response regarding the issues discussed during our telephone conversations on Friday (July 18) and today (July 22). In the event that I have missed any important points of those conversations, please include same in your response. Regards, Tony Tony Roberts, Senior Economist British Columbia Utilities Commission Phone: 604-660-4755 email: tony.roberts@bcuc.com

Driver Risk Prem ium

Insurance Corporation of British Columbia August 1, 2008 1

DEFI NI TI ONS FOR I MPLEMENTATI ON OF DRP – PHASE 1

Under Schedule E of the Basic Insurance Tariff (the Tariff) there is specific reference to sections of the Motor Vehicle Act (MVA) and Motor Vehicle Act Regulation (MVAR) in regard to those contraventions that will result in a charge for DRP, which are as follows:

• 10-point MVA Conviction - defined in the Tariff as any offence under the Motor

Vehicle Act that is listed in Table 4 set out in the Schedule to Division 28 of the Motor Vehicle Act Regulation, BC Reg 26/ 58, as amended from time to time.

• Conviction for Excessive Speed - defined in the Tariff as a conviction for an offence

under section 148 of the Motor Vehicle Act.

• Criminal Code of Canada Conviction - defined in the Tariff as a conviction for any

driving offence under the Criminal Code of Canada that is listed in Table 4 set out in the Schedule to Division 28 of the Motor Vehicle Act Regulation, BC Reg 26/ 58, as amended from time to time.

• Roadside Suspension - defined in the Tariff as a suspension pursuant to sections

90.3 or 215 of the Motor Vehicle Act. Copies of the relevant sections of the legislation are provided for your reference. As noted by Commission staff, included in Schedule E of the Tariff amendment is a definition for “MVA Conviction”, which is defined as follows: “MVA Conviction” means any conviction for an offence under the Motor Vehicle Act or the Motor Vehicle Act Regulation that (a) arises directly or indirectly out of the use or operation by the offender of a vehicle other than a cycle, or (b) is committed while the offender is using or operating a vehicle except a cycle. This definition is included in the Tariff only for the purpose of triggering the reinstatement of the DRP bill under Section 4.2 of Schedule E, which will apply to a very limited number of

• cases. In circumstances where a driver has received a DRP billing and has surrendered his
• r her licence, ICBC will waive or reduce the annual DRP charge. However, if the driver is

convicted of a driving related offence under the MVA or MVAR during the period when the licence was surrendered, ICBC will reinstate the driver’s DRP charge. The reason for reinstating the DRP charge under such circumstances is that a conviction for such an offence provides evidence that the individual was operating a vehicle despite the fact that they applied for a waiver or reduction in their DRP charge on the basis that they were no longer driving. The definition of MVA Conviction is limited to only those offences in the MVA and MVAR that are driving related. For example, a reinstatement of the DRP would occur in the circumstance where an individual received a conviction for a seatbelt offence if that individual was the operator of a vehicle, but the DRP would not be reinstated if the conviction related to a seatbelt offence where the individual was a passenger. Coding of a ticket by the police will indicate whether or not an offence under the MVA or MVAR is a driving related offence.

Driver Risk Prem ium

Insurance Corporation of British Columbia August 1, 2008 2

The process for identifying circumstances where reinstatement of the DRP is required is discussed below:

• The Driver Risk Premium system will automatically conduct a scan of all drivers’

records approximately 6 weeks before the anniversary of a driver’s birth date.

• The scan is for a 36 month period, starting 41 months before the anniversary of the

person’s birth date. This period is known as the scan period.

• For a reinstatement of the DRP to occur, the individual’s driver’s licence must be

coded as “non-active”. This indicates that the driver’s licence has been surrendered (a necessary condition in order to be eligible to receive a reduction or waiver of the DRP).

• ICBC’s systems scan the driving records searching for convictions under the MVA or

the MVAR and evaluate whether an offence is a driving related offence utilizing information provided by the police.

• The scan will search for any conviction under the MVA or the MVAR that has been

coded as a “driving related violation” by the police officer who issued the ticket. This coding indicates that the individual receiving the ticket was operating a vehicle at the time the ticket was issued and prevents the scan from including convictions that do not directly involve the use or operation of a vehicle, in keeping with the definition of MVA Conviction noted above. Convictions for driving related offences under the MVA or the MVAR as described immediately above act as a trigger to reinstating the DRP charge. The actual premium that will be reinstated is based upon the contraventions described in the Tariff, i.e., only 10-point Motor Vehicle Act convictions, convictions for Excessive Speed, Criminal Code of Canada convictions, and Roadside Suspensions.

I MPACT OF THE DELAY I N I MPLEMENTATI ON OF THE 4 TH CATEGORY OF DRP OFFENCES

With respect to determining the dollar impact on DRP premiums of the delay in implementation of the 4th category of DRP offences, this involves undertaking detailed analysis and we anticipate this analysis to be completed in the Fall 2008.

Driver Risk Prem ium

Insurance Corporation of British Columbia August 1, 2008 3

DRI VER RI SK PREMI UM BUSI NESS RULES - PHASE 1

The following is an outline that describes the business processes and rules that occur in

• rder to effectively administer the DRP program:

Scan of driving record

• The Driver Risk Premium system will automatically conduct a scan of all drivers’

records approximately 6 weeks before the anniversary of a driver’s birth date.

• The scan is for a 36 month period, starting 41 months before the anniversary of the

person’s birth date. This period is known as the scan period.

• The scan will search for any of the contraventions that are specifically set out in the

Tariff for the purposes of charging DRP under Phase 1.

• If a driver has contraventions that meet the above criteria during the scan period, an

invoice will be generated and sent to the driver.

• During Phase 1, only 10-point Motor Vehicle Act convictions, convictions for

Excessive Speed, Criminal Code of Canada convictions, and Roadside Suspensions will be used to charge DRP. Billing the Prem ium

• If the driver has contraventions as set out in the Tariff during the scan period, an

invoice will be generated and sent to the driver.

• The invoice will include the contraventions that led to the bill, giving the violation

date, conviction date, location, and description.

• The driver will receive the invoice about 6 weeks before the driver’s birth date.

Payment is due on the anniversary of the driver’s birth date. Paying the I nvoice The driver can pay the invoiced premium at any bank or other financial institution, any ICBC point of service, or by mail. Methods of payment accepted are cheque, Visa, MasterCard, American Express, debit card, or cash. Non-Active Driver’s Licence Even if a driver has a non-active driver’s licence (e.g., prohibited, suspended, or surrendered) on the date of the scan, the driving record will still be scanned. The scan will search for contraventions in the same manner as set out above. The difference is that regardless of the driver’s qualification for an invoice, none will be sent because the driver has a non-active driver’s licence. A pending invoice will be created that reflects the driver’s status for that scan period. Once the driver reinstates his or her license, the pending invoice is prorated for the number of days their driver’s licence was inactive in that Billing Period. The driver will receive a prorated invoice approximately 2 weeks after their driver’s licence is reinstated. Payment of the invoice, in this case, is due immediately. DRP Process Exam ple This scenario illustrates the DRP processing for a driver with a birth date of May 2nd:

• The

driver’s record will be scanned

• n

approximately March 21, 2009 (6 weeks prior to the driver’s birth date). The scan period will be from January 1, 2008 to December 2, 2008.

• If the driver had contraventions during that period that meet the DRP criteria, an

invoice will be generated that details the conviction(s) plus their date and location.

• Payment of the Driver Risk Premium at a designated premium payment location, on
• r before the driver’s birth date is required.

Driver Risk Prem ium

Insurance Corporation of British Columbia August 1, 2008 4

A draft example of a DRP invoice is shown below. The invoice will also include additional messaging regarding the DRP program and contact information. Draft Regular I nvoice Insurance Corporation 151 West Esplanade Of British Columbia North Vancouver, BC V7M 3H9 Driver Risk Prem ium I nvoice Date: March 21, 2009 Account: Driver Licence: 1234567 Client: Due Date: May 2, 2009 Invoice: Invoice Amount: $320 Violation Date Conviction Date Location Violation Description June 10, 2008 June 25, 2008 Sparwood Excessive Speed

1 0 -Point MVA Conviction and Crim inal Code of Canada Conviction ( MVA Regulations) Table 4 For breaches listed in this table, the number of point penalties recorded shall be 10.

Motor Vehicle Act Description of Offence 1 Section 90.4 Driving while suspended 2 Section 95 Driving while prohibited or suspended 3 Repealed [B.C. Reg. 257/98, App. 1, s. 4.] 4 Section 100 Failing to stop for peace officer 5 Section 102 Driving while prohibited or suspended 6 Section 103 Driving while suspended 7 Section 224 Driving with more than 80 milligrams of alcohol in blood 8 Section 226 Refusal to give blood sample 9 Section 234 (1) Driving while suspended Criminal Code (Canada)3 Description of Offence 1 Section 220 Causing death by criminal negligence 2 Section 221 Causing injury by criminal negligence 3 Section 233 (1) Criminal negligence 4 Section 233 (2) Failing to fulfill duty of person having care, charge or control of vehicle involved in accident 5 Section 233 (4) Dangerous driving

6 Section 234 Driving while ability impaired 7 Section 235 Breath sample not provided 8 Section 236 Driving with more than 80 milligrams of alcohol in blood 9 Section 236 Manslaughter 10 Section 249 (1) (a) Dangerous operation of a motor vehicle 11 Section 249 (3) Dangerous operation causing bodily harm 12 Section 249 (4) Dangerous operation causing death 12.1 Section 249.1 (1) Flight 12.2 Section 249.1 (3) Flight causing bodily harm or death. 13 Section 252 (1) Failure to stop at scene of accident 14 Section 253 (a) Operation of motor vehicle while ability impaired by alcohol or drugs 15 Section 253 (b) Operation of motor vehicle with more than 80 milligrams alcohol in blood 16 Section 254 (5) Failure or refusal to provide sample of breath or blood 17 Section 255 (2) Operation of a motor vehicle while impaired causing bodily harm 18 Section 255 (3) Operation of a motor vehicle while impaired causing death 19 Section 259 (4) Operation of motor vehicle while disqualified

Excessive speeding

148 (1) A person who drives a motor vehicle on a highway at a speed greater than 40 km/ h over the applicable speed limit set under the authority of an enactment commits an offence and is liable on conviction to not less than the aggregate of the fine amount and the applicable supplemental fine amount, if any, prescribed under section 148.1 for this offence and, subject to those amounts, section 4

• f the Offence Act applies.

(2) If a person is charged with an offence under subsection (1) and the evidence does not prove the offence but does prove a contravention of section 140, 146 or 147, the person may be convicted of contravening section 140, 146 or 147, as the case may be, and the person is liable

• n that conviction to not less than the aggregate of the fine amount

and the applicable supplemental fine amount, if any, prescribed under section 148.1 for that offence.

Roadside Suspensions Motor Vehicle Act

1 2 hour suspension 90.3 (1) In this section: "approved screening device" means a device prescribed for the purposes of this section; "driver" means a driver who holds a driver's licence on which a condition is imposed under section 25 (10.1) and includes any such person having the care or control of a motor vehicle on a highway or industrial road whether or not the motor vehicle is in motion. (2) A peace officer may, at any time or place on a highway or industrial road if the peace officer has reasonable and probable grounds to believe that a driver has alcohol in his or her body, (a) request the driver to drive the motor vehicle, under the direction of the peace officer, to the nearest place off the travelled portion of the highway or industrial road, and (b) by demand made to that driver, require the driver to promptly provide a sample of breath that, in the opinion of the peace officer, is necessary to enable a proper analysis

• f the breath to be made by means of an approved

screening device and, if necessary, to accompany the peace officer for the purpose of enabling that sample of breath to be taken. (3) If (a) a driver, without a reasonable excuse, fails or refuses to comply with a demand made under subsection (2) (b),

• r

(b) the peace officer, pursuant to an analysis of the breath

• f the driver under subsection (2) (b), has reasonable and

probable grounds to believe that the driver has alcohol in his or her body, the peace officer may (c) serve the driver with a notice of licence suspension, and (d) if the driver is in possession of a driver's licence, request the driver to surrender that licence. (4) If a peace officer requests a driver to surrender the driver's licence under subsection (3) (d), the driver must promptly surrender the driver's licence to the peace officer. (5) A person's driver's licence is automatically suspended for a period

• f 12 hours from the time the peace officer served the driver with a

notice of licence suspension under subsection (3) (c). (6) [ Repealed 2004-68-8.] (7) A peace officer acting under subsection (3) need not hold the

• pinion that the blood alcohol level of the driver exceeds 3 mg of

alcohol in 100 ml of blood. (8) If a peace officer serves a notice of licence suspension under subsection (3) (c), the peace officer must cause a report of the suspension to be delivered to the Insurance Corporation of British Columbia. (9) The report referred to in subsection (8) must be in a form established by the Insurance Corporation of British Columbia. (10) The Lieutenant Governor in Council may prescribe an approved screening device for the purposes of this section.

2 4 hour prohibition 215 (1) In this section: "approved screening device" means a device prescribed by the Lieutenant Governor in Council for the purposes of this section; "driver" includes a person having the care or control of a motor vehicle on a highway or industrial road whether or not the motor vehicle is in motion. (2) A peace officer may, at any time or place on a highway or industrial road if the peace officer has reasonable and probable grounds to believe that a driver's ability to drive a motor vehicle is affected by alcohol, (a) request the driver to drive the motor vehicle, under the direction of the peace officer, to the nearest place off the travelled portion of the highway or industrial road, (b) serve the driver with a notice of driving prohibition, and (c) if the driver is in possession of a driver's licence, request the driver to surrender that licence. (3) A peace officer may, at any time or place on a highway or industrial road if the peace officer has reasonable and probable grounds to believe that a driver's ability to drive a motor vehicle is affected by a drug, other than alcohol, (a) request the driver to drive the motor vehicle, under the direction of the peace officer, to the nearest place off the travelled portion of the highway or industrial road, (b) serve the driver with a notice of driving prohibition, and (c) if the driver is in possession of a driver's licence, request the driver to surrender that licence.

(4) If a peace officer requests a driver to surrender his or her driver's licence under this section, the driver must forthwith surrender to the peace officer his or her driver's licence issued under this Act or any document issued in another jurisdiction that allows him or her to drive

• r operate a motor vehicle.

(5) Unless the prohibition from driving a motor vehicle is terminated under subsection (6) or (8), the driver is automatically prohibited from driving a motor vehicle for a period of 24 hours from the time the peace officer served the driver with a notice of driving prohibition under subsection (2) or (3). (6) If a driver, who is served with a notice of driving prohibition under subsection (2), forthwith requests a peace officer to administer and does undergo as soon as practicable a test that indicates that his or her blood alcohol level does not exceed 50 mg of alcohol in 100 mL of blood, the prohibition from driving is terminated. (6.1) A test referred to in subsection (6) may be performed with an approved screening device. (6.2) Despite subsection (6), a driver who is served with a notice of driving prohibition does not have a right to request or undergo a test under subsection (6) if (a) the peace officer who served the notice first performed a test of the driver's blood alcohol level with an approved screening device, (b) the test indicated that the driver's blood alcohol level exceeded 50 mg of alcohol in 100mL of blood, and (c) the peace officer used the results of the test as part of the basis on which the peace officer formed reasonable and probable grounds to believe that the driver's ability to drive a motor vehicle was affected by alcohol. (7) [ Repealed 2004-68-18.] (8) If a driver, who is served with a notice of driving prohibition under subsection (3), satisfies a peace officer having charge of the matter

that his or her ability to drive a motor vehicle is not affected by a drug,

• ther than alcohol, the prohibition from driving is terminated.

(9) A peace officer acting under subsection (2) need not hold the

• pinion that the blood alcohol level of the driver exceeds 50 mg of

alcohol in 100 mL of blood. (10) If a peace officer prohibits a person from driving a motor vehicle under this section, the peace officer must cause a report of the prohibition to be delivered to the Insurance Corporation of British Columbia unless the prohibition from driving a motor vehicle is terminated under subsection (6). (11) The report referred to in subsection (10) must be in a form established by the Insurance Corporation of British Columbia. (12) The Lieutenant Governor in Council may prescribe an approved screening device for the purposes of this section.

From: Roberts, Tony BCUC:EX To: Elder, June Cc: Horvathova, Vladimira Subject: RE: ICBC - Revised Tariff for Implementation of Driver Risk Premium Date: Tuesday, August 05, 2008 8:01:52 AM

Hi June, Thank you for the documents. I'm just back from vacation today, and it will likely take some time to get caught up. I will review as soon as practicable. Regards, Tony. Hi Vladimira, Thanks for sending me the documents. Regards, Tony Tony Roberts, 604-660-4755 From: Horvathova, Vladimira [mailto:Vladimira.Horvathova@icbc.com] On Behalf Of Elder, June Sent: Friday, August 1, 2008 5:41 PM To: Roberts, Tony BCUC:EX Subject: RE: ICBC - Revised Tariff for Implementation of Driver Risk Premium Hi Tony, Please find attached additional information in regard to your email of July 22, 2008, concerning the revised Tariff for implementation of Phase 1 of the DRP. As indicated in your email, the Commission noted that ICBC had not referred to specific Acts or Regulations in its definition of MVA Conviction. It was suggested that in lieu of providing specific Acts or Regulations that ICBC submit relevant Business Practices that relate to how the definition of MVA Conviction would be interpreted. MVA Convictions are

• nly considered in the limited circumstances that relate to reinstatement of the DRP. This is further

described in pages 1 and 2 of the first attachment. As the process is essentially automated, there has been no business need for specific Business Practices that relate to the interpretation of MVA Conviction; however, included in the first attachment is an outline of the processes that occur in order to identify the circumstances that require reinstatement of the DRP. In addition, included in the first attachment is ICBC's response to your request for an estimate on the time it will take to provide a more reliable estimate of the dollar impact arising from the delay in implementing the fourth category of DRP offences. Should you have any further questions, please contact me at (604) 982-2489. Thank you,

Vladimira for June Elder June Elder Manager, Regulatory Affairs ICBC #339 - 151 W. Esplanade North Vancouver, BC V7M 3H9 Phone: 604-982-2489 Fax: 604-982-7209

• ----Original Message-----

From: Roberts, Tony BCUC:EX [mailto:Tony.Roberts@bcuc.com] Sent: Tuesday, July 22, 2008 3:47 PM To: Elder, June Subject: ICBC - Revised Tariff for Implementation of Driver Risk Premium Hi June, Further to our conversations concerning the June 27, 2008 letter re Revised Tariff for Implementation of DRP: We discussed the proposed definition of MVA Convictions. I indicated that the Commission had some concern regarding the fact that the new definition does not refer to particular Acts or Regulations, in contrast to the DPP version, and the original version submitted for the RDA. We discussed the value of clarity vis-a-vis public perception and communication. I discussed this with Jim Fraser, and he suggested that ICBC submit the relevant Business Practices concerning how the new definition would be interpreted. If that document is available, there would not be a need to specify particular Acts or Regulations associated with the new

• defintion. Please advise as to whether that solution is practicable.

We discussed the impacts that the one year delay in the implementation date for the "fourth category" will have. As would be expected, there will be a slight decrease in the number of drivers affected versus the figures submitted in Figure 17.1.4 of the 2007 RDA. As the result, there will be a slight decrease in DRP revenues which, will not be captured by DPP during the

• interim. I understand from you and Fred Squires that a precise estimate of the impact would not

be readily available, but that the expectation is for between 1,500 and 2,000 drivers affected, with an associated revenue decrease of $1M. Please provide an estimate as to when ICBC would be able to provide a more reliable estimate of the figures. We also discussed the inclusion of roadside suspensions into Schedule 'E', whether the delay in implementation of the fourth category would allow ICBC to collect more data regarding "failure to yield," and the possibility of the delay affecting the deterrent impact of DRP. Finally, we discussed the matter of the form of further communications. I had recommended that you provide any follow-up information in a letter addressed to me. To save on communications time and effort, let us use e-mail instead. Therefore, please use this message as the basis for

response regarding the issues discussed during our telephone conversations on Friday (July 18) and today (July 22). In the event that I have missed any important points of those conversations, please include same in your response. Regards, Tony Tony Roberts, Senior Economist British Columbia Utilities Commission Phone: 604-660-4755 email: tony.roberts@bcuc.com

This email and any attachments are intended only for the named recipient and may contain confidential and/ or privileged material. Any unauthorized copying, dissemination or other use by a person other than the named recipient of this communication is

• prohibited. If you received this in error or are not named as a recipient, please notify the sender and destroy all copies of this email

immediately.

From: Roberts, Tony BCUC:EX To: Elder, June Subject: ICBC - Revised Tariff for Implementation of DRP Date: Wednesday, August 13, 2008 9:22:52 AM

Hi June, I have reviewed the documents you submitted on August 1. The document "Defintions for Implementation of DRP - Phase 1" describes the limitations on MVA Conviction in the final paragraph

• n page 1. A version of Basic Insurance Tariff, Schedule 'E', Page 1, with the definition of MVA

Conviction amended to incorporate the substance of the aforementioned paragraph, will likely pass muster for approval. (Of particular significance is the final sentence of that paragraph.) Please give me a call if you wish to discuss. Otherwise, please send over an amended Basic Tariff, Schedule 'E', Page 1. Regards, Tony Tony Roberts, Senior Economist British Columbia Utilities Commission Phone: 604-660-4755 email: tony.roberts@bcuc.com

From: Roberts, Tony BCUC:EX To: Elder, June Subject: ICBC - DRP Program - Revised Tariff for Implementation - Notes Date: Thursday, August 14, 2008 11:30:26 AM

Hi June, Further to yesterday's conversation concerning the Tariff Revisions for Implementation of DRP, here are my summary notes.

• 1. You called to clarify some DRP matters which I described in my e-mail to you on August 13. We

were joined by Alex from the ICBC Business Group.

• 2. We primarily discussed the final paragraph on Page 1 of the document "Definitions for

Implementation of DRP - Phase 1". Of particular interest were the first and last sentences of that

• paragraph. We agreed that the first sentence captures the existing proposal for the amended definition
• f MVA Conviction--as presented in the June 27, 2008 ICBC letter to the Commission. I rendered

my opinion that the incorporation of the paragraph's last sentence of the paragraph into the amended definition would probably be adequate for gaining Commission approval.

• 3. You indicated your understanding of the "requiring a ticket aspect." You indicated that you would

discuss this with ICBC legal and business process staff.

• 4. If they find the amendment satisfactory, you will be sending amended Tariff pages to the

Commission Secretary, with copy to me. Otherwise, we would resume our communications on the matter.

• 5. You confirmed that ICBC wishes to obtain approval of the Tariff amendments as soon as

practicable. In the event that I have missed anything, or believe that I have not captured our discussion correctly, please advise. Regards, Tony Tony Roberts, Senior Economist British Columbia Utilities Commission Phone: 604-660-4755 email: tony.roberts@bcuc.com

From: Roberts, Tony BCUC:EX To: Elder, June Subject: ICBC - DRP Implementation - Amended Tariff Pages Date: Monday, August 18, 2008 8:17:06 AM

Hi June, Further to our conversations, and my e-mail on August 14, is it likely that the revised Tariff pages will be available by Tuesday afternoon? Thanks, Tony Tony Roberts, Senior Economist British Columbia Utilities Commission Phone: 604-660-4755 email: tony.roberts@bcuc.com

From: Roberts, Tony BCUC:EX To: Elder, June Subject: FW: ICBC - DRP Implementation - Amended Tariff Pages Date: Monday, August 18, 2008 11:34:12 AM

Hi June, I just retrieved your voice mail. Thanks for the update. I shall 'stay tuned.' Cheers, Tony Tony Roberts, 604-660-4755

______________________________________________ From: Roberts, Tony BCUC:EX Sent: Monday, August 18, 2008 8:17 AM To: 'Elder, June' Subject: ICBC - DRP Implementation - Amended Tariff Pages

Hi June, Further to our conversations, and my e-mail on August 14, is it likely that the revised Tariff pages will be available by Tuesday afternoon? Thanks, Tony Tony Roberts, Senior Economist British Columbia Utilities Commission Phone: 604-660-4755 email: tony.roberts@bcuc.com

August 22, 2008 British Columbia Utilities Commission Sixth Floor 900 Howe Street Vancouver, BC V6Z 2N3 Attention:

• Ms. Erica M. Hamilton, Commission Secretary

building trust. driving confidence.

Re: Amendment to ICSC's June 27, 2008 Filing Dear Ms. Hamilton: Further to ICBC's June 27, 2008 filing of the revised Tariff for implementation of the Driver Risk Premium CDRP) and subsequent to discussions with Commission staff, ICBC has prepared the enclosed attachments. Included in the attachments is an amendment to the definition of "MVA Conviction", as contained in Schedule E of the Basic Insurance Tariff. This amendment is intended to further clarify the types of contraventions under the Motor Vehicle Act and Motor Vehicle Act Regulation that will be used for the purpose of reinstating the DRP. The attachments also contain a minor revision to the Tariff index and the inclusion of Driver Risk Premium in the Tariff Definitions which are necessary to maintain consistency with the amendments in Schedule E. Yours truly,

~-l~ for

Kathy Parslow Director, Regulatory Affairs and Planning Cc: James Fraser, Director, Strategic Services Tony Roberts, Senior Economist, Strategic Services Donnie Wing, CA, Chief Financial Officer, ICBC Attachments

151 West Esplanade I North Vancouver I British Columbia I V7M 3H9 I 604-661-2800 I regaffairs@icbc.com

Insurance Corporation of British Columbia Basic Insurance Tariff Index Page 4 First Revision Effective: January 1, 2008

Amended effective January 1, 2008 Accepted:__________________________

4. SCHEDULES A. Territories B. Vehicle Rate Classes C. Schedule of Basic Insurance Premiums D. Claim-Rated Scale C E. Driver Penalty Point Premium and Driver Risk Premium F. Multiple Crash Premium G. Disability Discount H. ICBC Payment Plan Agreement I. Fleet Discounts and Fleet Surcharges J. Fleet Premium Adjustment Agreement – Plan A K. Fleet Premium Adjustment Agreement – Plan B L. Garage Policy Premiums M. Garage Policy - Plate Points N. Garage Policy - Employee Points O. Garage Policy - Business Codes P. Transitioned Vehicles Q. Short Term Certificates R. Temporary Operation Permit and Owner’s Certificate of Insurance Premiums S. Minimum and Retained Premiums

Commission Secretary:__________________________

Insurance Corporation of British Columbia Basic Insurance Tariff Definitions Page 1 First Revision Effective: January 1, 2008

Amended effective January 1, 2008 Accepted:__________________________

• 1. DEFINITIONS

Note: Unless otherwise noted in this Basic Insurance Tariff, terms defined in the Insurance (Vehicle) Act or the Insurance (Vehicle) Regulation have the same meaning when used in this Basic Insurance Tariff. base rate premium means the premium for a vehicle determined in accordance with Schedule C before applying discounts and surcharges. Basic insurance means universal compulsory vehicle insurance coverage as defined in section 1 of the Insurance (Vehicle) Act. business code means the number corresponding to a garage operator’s business determined in accordance with Schedule O. certificate unless otherwise specified, includes an owner’s certificate, a garage policy, coverage under a temporary operating permit and a special coverage policy. Commission means the British Columbia Utilities Commission. disability discount means a discount applied to a base rate premium in accordance with Schedule G. N driver risk premium means a premium calculated in accordance with Section 3 of Schedule E. Fleetplan means the method of calculation of the premium payable for coverage provided for a fleet. fleet discount means the discount described in Section 2.D.3 of this Basic Insurance Tariff. fleet surcharge means the surcharge described in Section 2.D.4 of this Basic Insurance Tariff. garage policy means a garage vehicle certificate established under section 149(1)(k) of the Insurance (Vehicle) Regulation. ICA means the Insurance Corporation Act as amended from time to time. ICBC means the corporation defined in section 1 of the Insurance (Vehicle) Act. IVA means the Insurance (Vehicle) Act as amended from time to time.

Commission Secretary:__________________________

Insurance Corporation of British Columbia Basic Insurance Tariff Definitions Page 2 First Revision Effective: January 1, 2008

Amended effective January 1, 2008 Accepted:__________________________

IVR means the Insurance (Vehicle) Regulation as amended from time to time. light commercial vehicle means a commercial vehicle with a GVW of 5,000kg or less. motor vehicle means a motor vehicle as defined in the Motor Vehicle Act. multiple crash premium means a premium calculated in accordance with Schedule F. point penalties means point penalties that may be recorded against the driving record of a driver under the Motor Vehicle Act and Motor Vehicle Act Regulations. C point penalty premium means a premium calculated in accordance with Section 2 of Schedule E. premium payable means the premium determined in accordance with Section 2.C., 2.D, 2.E, 2.F, 2.G or 2.N of this Basic Insurance Tariff. private passenger vehicle means a vehicle that is registered and licenced under the Motor Vehicle Act as a private passenger motor vehicle. rate class means the rate class for a vehicle determined in accordance with Schedule B. shock loss means a claim payment including reserves for a vehicle that is part of a fleet in an amount that is (a) greater than $7,500, and (b) at least double the amount of the next largest claim payment including reserves for any vehicle in the same fleet within the applicable scan period. short term certificate means (a) a certificate that is issued for a term of less than 11 months plus one day but does not include a certificate issued (i) for a vehicle rated in vehicle rate class 800, 900, 901, 902, 903, 904, 905 or 906, or (ii) in conjunction with a quarterly licence under section 5.02 of the Commercial Transport Regulations (2005) under the Commercial Transport Act (b) a certificate in respect of a vehicle in a fleet under Part 12 of the IVR and under 2.D. of this Basic Insurance Tariff, the

Commission Secretary:__________________________

Insurance Corporation of British Columbia Basic Insurance Tariff Definitions Page 3 Effective: June 1, 2007

Accepted: October 25, 2007 Accepted:__________________________ Effective: June 1, 2007

term of which is determined under section 162(1.1) of the IVR, and (c) a special coverage form that is determined to be eligible for short term status in accordance with Table 1 of Schedule Q (Short Term Certificates – Special Coverages) of this Basic Insurance Tariff and that has an expiry date set out in column C, D or F, or Schedule 7 of the IVR (Expiry Dates of Special Coverage Certificates). trailer means a trailer as defined in the Motor Vehicle Act. vehicle means a motor vehicle or trailer.

Order No. G-57-07 Commission Secretary:__________________________

Insurance Corporation of British Columbia Basic Insurance Tariff Basic Insurance Premiums Page 33 First Revision Effective: January 1, 2008

Amended effective January 1, 2008 Accepted:__________________________

2.G. Premium Payable for Driver’s Certificates 2.G.1 Premium Payable for Driver’s Certificate The annual premium payable by a person for a driver’s certificate issued pursuant to section 43

• f the IVR is the total of:

(a) the greater of: (i) the point penalty premium calculated in accordance with Section 2 of Schedule E, and

C

(ii) the driver risk premium calculated in accordance with Section 3 of Schedule E, and

N

(b) the multiple crash premium calculated in accordance with Schedule F. 2.G.2. Application of Other Basic Insurance Tariff Provisions and IVR Sections Section 2.K of this Basic Insurance Tariff and section 15.7 of the IVR apply in respect of premium payable for driver’s certificates.

Commission Secretary:__________________________

C Insurance Corporation of British Columbia Basic Insurance Tariff Schedule E: Driver Penalty Point Premium and Driver Risk Premium Page 1 First Revision Effective: January 1, 2008

Amended effective January 1, 2008 Accepted:__________________________ Commission Secretary:__________________________

SCHEDULE E C N DRIVER PENALTY POINT PREMIUM AND DRIVER RISK PREMIUM 1. Definitions In this Schedule: “10 point MVA Conviction” means a conviction for any offence under the Motor Vehicle Act that is listed in Table 4 set out in the Schedule to Division 28 of the Motor Vehicle Act Regulation, BC Reg 26/58 as amended from time to time, “Contravention” means any: (a) 10 point MVA Conviction, (b) Criminal Code of Canada Conviction, (c) Conviction for Excessive Speed, or (d) Roadside Suspension, “Conviction for Excessive Speed” means a conviction for an offence under section 148 of the Motor Vehicle Act, “Criminal Code of Canada Conviction” means a conviction for any driving offence under the Criminal Code of Canada that is listed in Table 4 set out in the Schedule to Division 28 of the Motor Vehicle Act Regulation, BC Reg 26/58 as amended from time to time, “MVA Conviction” means any conviction for an offence under the Motor Vehicle Act or the Motor Vehicle Act Regulation that (a) arises directly or indirectly out of the use or operation by the offender of a vehicle

• ther than a cycle, or

(b) is committed while the offender is using or operating a vehicle except a cycle, and a conviction will be considered to meet the requirements of subsection (a) or (b) of this definition if a notation appears on the violation ticket issued in respect of the offence indicating that the offence was committed while driving, “one-year scan period”, in respect of a person, means the 12 month period starting 17 months before the anniversary of the person's birth date, N “Roadside Suspension” means a suspension pursuant to section 90.3 or 215 of the Motor Vehicle Act, “three-year scan period” in respect of a person, means the 36 month period starting 41 months before the anniversary of the person’s birth date, but does not include any portion of that 36 month period before January 1, 2008.

C Insurance Corporation of British Columbia Basic Insurance Tariff Schedule E: Driver Penalty Point Premium and Driver Risk Premium Page 2 First Revision Effective: January 1, 2008

Amended effective January 1, 2008 Accepted:__________________________ Commission Secretary:__________________________

2. Penalty Point Premium 2.1 For the purpose of this section 2, the classes of drivers set out in Table 1 of this Schedule are established. 2.2 A person falls within a class of drivers established under subsection 2.1, if the total of the following equals the number of point penalties that in column A of Table 1 identifies that class: (a) the number of point penalties recorded by ICBC against the driving record of that person for offences committed during the one-year scan period; and (b) the number of point penalties recorded by ICBC, since the date of the last assessment, against the driving record of that person for offences committed before the one-year scan period. 2.3 The annual point penalty premium payable by a person for a driver's certificate is the amount shown in column B of Table 1 opposite the number of point penalties that, in column A

• f that Table, identifies the person's class.

C Insurance Corporation of British Columbia Basic Insurance Tariff Schedule E: Driver Penalty Point Premium and Driver Risk Premium Page 3 First Revision Effective: January 1, 2008

Amended effective January 1, 2008 Accepted:__________________________ Commission Secretary:__________________________

TABLE 1 – Penalty Point Premium Column A Column B Class of Drivers by Number of Point Penalties Annual Premium ($) 0-3 nil 4 175 5 230 6 300 7 415 8 520 9 640 10 905 11 1 080 12 1 260 13 1 680 14 1 920 15 2 160 16 2 480 17 2 800 18 3 120 19 3 440 20 3 760 21 4 160 22 4 560 23 4 960 24 5 360 25 5 760 26 6 240 27 6 720 28 7 200 29 7 680 30 8 160 31 8 720

C Insurance Corporation of British Columbia Basic Insurance Tariff Schedule E: Driver Penalty Point Premium and Driver Risk Premium Page 4 First Revision Effective: January 1, 2008

Amended effective January 1, 2008 Accepted:__________________________ Commission Secretary:__________________________

32 9 280 33 9 840 34 10 480 35 11 120 36 11 760 37 12 400 38 13 040 39 13 680 40 14 560 41 15 360 42 16 160 43 16 960 44 17 760 45 18 560 46 19 520 47 20 480 48 21 440 49 22 400 50 or more 24 000

C Insurance Corporation of British Columbia Basic Insurance Tariff Schedule E: Driver Penalty Point Premium and Driver Risk Premium Page 5 First Revision Effective: January 1, 2008

Amended effective January 1, 2008 Accepted:__________________________ Commission Secretary:__________________________

3. Driver Risk Premium 3.1 The annual driver risk premium payable by a person for a driver’s certificate is determined with reference to the Contraventions recorded by ICBC in respect of that person during the three-year scan period and is the total of the amounts set out in Column B of each of Tables 2, 3 and 4 that correspond to the number and type of Contraventions referred to in each Table. TABLE 2 – Driver Risk Premium for Criminal Code Convictions and 10 Point MVA Convictions Driver Risk Premium Schedule Column A Column B Number of Contraventions: Criminal Code

• f Canada

Conviction or 10 point MVA Conviction Premium 1 $ 905 2 $ 3,760 3 $ 8,160 4 $ 14,560 5 $ 24,000 6 $ 24,000 7 $ 24,000 8 $ 24,000 9 $ 24,000 10 $ 24,000 11 $ 24,000 12 $ 24,000 13 $ 24,000 14 $ 24,000 15 $ 24,000 16 $ 24,000 17 $ 24,000 18 $ 24,000 19 $ 24,000 20 $ 24,000 21 $ 24,000 22 $ 24,000 N

C Insurance Corporation of British Columbia Basic Insurance Tariff Schedule E: Driver Penalty Point Premium and Driver Risk Premium Page 6 First Revision Effective: January 1, 2008

Amended effective January 1, 2008 Accepted:__________________________ Commission Secretary:__________________________

23 $ 24,000 24 $ 24,000 25 $ 24,000 26 $ 24,000 27 $ 24,000 28 $ 24,000 29 $ 24,000 30 $ 24,000 31 $ 24,000 32 $ 24,000 33 $ 24,000 34 $ 24,000 35 $ 24,000 36 $ 24,000 37 $ 24,000 38 $ 24,000 39 $ 24,000 40 $ 24,000 41 $ 24,000 42 $ 24,000 43 $ 24,000 44 $ 24,000 45 $ 24,000 46 $ 24,000 47 $ 24,000 48 $ 24,000 49 $ 24,000 50 $ 24,000 TABLE 3 – Driver Risk Premium for Roadside Suspensions Driver Risk Premium Schedule Column A Column B Number of Contraventions: Roadside Suspension Premium 1 $ 0 2 $ 370 3 $ 430 4 $ 490 N

C Insurance Corporation of British Columbia Basic Insurance Tariff Schedule E: Driver Penalty Point Premium and Driver Risk Premium Page 7 First Revision Effective: January 1, 2008

Amended effective January 1, 2008 Accepted:__________________________ Commission Secretary:__________________________

5 $ 560 6 $ 640 7 $ 740 8 $ 850 9 $ 980 10 $ 1,130 11 $ 1,300 12 $ 1,500 13 $ 1,730 14 $ 1,990 15 $ 2,290 16 $ 2,630 17 $ 3,020 18 $ 3,470 19 $ 3,990 20 $ 4,590 21 $ 5,280 22 $ 6,070 23 $ 6,980 24 $ 8,030 25 $ 9,230 26 $ 10,610 27 $ 12,200 28 $ 14,030 29 $ 16,130 30 $ 18,550 31 $ 20,000 32 $ 20,000 33 $ 20,000 34 $ 20,000 35 $ 20,000 36 $ 20,000 37 $ 20,000 38 $ 20,000 39 $ 20,000 40 $ 20,000 41 $ 20,000 42 $ 20,000 43 $ 20,000 44 $ 20,000 45 $ 20,000 46 $ 20,000 47 $ 20,000 48 $ 20,000 N

C Insurance Corporation of British Columbia Basic Insurance Tariff Schedule E: Driver Penalty Point Premium and Driver Risk Premium Page 8 First Revision Effective: January 1, 2008

Amended effective January 1, 2008 Accepted:__________________________ Commission Secretary:__________________________

N 49 $ 20,000 50 $ 20,000 TABLE 4 – Driver Risk Premium for Convictions for Excessive Speed Driver Risk Premium Schedule Column A Column B Number of Contraventions: Convictions for Excessive Speed Premium 1 $ 320 2 $ 370 3 $ 430 4 $ 490 5 $ 560 6 $ 640 7 $ 740 8 $ 850 9 $ 980 10 $ 1,130 11 $ 1,300 12 $ 1,500 13 $ 1,730 14 $ 1,990 15 $ 2,290 16 $ 2,630 17 $ 3,020 18 $ 3,470 19 $ 3,990 20 $ 4,590 21 $ 5,280 22 $ 6,070 23 $ 6,980 24 $ 8,030 25 $ 9,230 26 $ 10,000 27 $ 10,000 28 $ 10,000

C Insurance Corporation of British Columbia Basic Insurance Tariff Schedule E: Driver Penalty Point Premium and Driver Risk Premium Page 9 First Revision Effective: January 1, 2008

Amended effective January 1, 2008 Accepted:__________________________ Commission Secretary:__________________________

29 $ 10,000 30 $ 10,000 31 $ 10,000 32 $ 10,000 33 $ 10,000 34 $ 10,000 35 $ 10,000 36 $ 10,000 37 $ 10,000 38 $ 10,000 39 $ 10,000 40 $ 10,000 41 $ 10,000 42 $ 10,000 43 $ 10,000 44 $ 10,000 45 $ 10,000 46 $ 10,000 47 $ 10,000 48 $ 10,000 49 $ 10,000 50 $ 10,000 N C 4. Refunds 4.1 In the circumstances described in column A of Table 5 of this Schedule E and subject to the minimum time requirements set out in column B of Table 5 and the additional requirements set

• ut in column C of Table 5, ICBC shall, on application, refund to a person named on a driver’s

certificate or his personal representative that part of the premium, calculated according to section 2.H of this Basic Insurance Tariff, paid for the period the driver’s certificate is not in use

• r for the term of the driver’s certificate remaining unexpired on the day it is surrendered.

C 4.2 Notwithstanding anything in section 4.1 of this Schedule E, if a person who has applied for and been granted a refund in accordance with section 4.1 is, during the term of the driver’s certificate for which the refund has been granted: N (a) convicted of an offence listed in Tables 2, or 4 of this Schedule or convicted of any MVA Conviction, or receives a roadside suspension, or (b) involved in a motor vehicle crash while driving a motor vehicle, the person must repay the amount of the refund paid by ICBC as premium.

C Insurance Corporation of British Columbia Basic Insurance Tariff Schedule E: Driver Penalty Point Premium and Driver Risk Premium Page 10 First Revision Effective: January 1, 2008

Amended effective January 1, 2008 Accepted:__________________________ Commission Secretary:__________________________

C TABLE 5 — Refund of Driver Penalty Point Premium Column A Circumstances Column B Minimum Time Requirements Column C Additional Requirements Suspension 60 days or more Motor Vehicle Branch confirmation on suspensions before 1982. Voluntary surrender 30 days or more Motor Vehicle Branch confirmation Out of province for part or whole period covered in billing 30 days or more written confirmation of issue date, or photocopy of new drivers licence Not in Canada or U.S.A. for part

• r whole period

covered in billing 30 days or more photocopies of passport date stamp confirming out

• f country dates

Incarceration 30 days or more letter from prison authorities, confirming dates of incarceration and that there were no out privileges when driver's licence could have been used Medical reason 30 days or more physician's letter confirming that person is unable to drive no evidence of driving, e.g. points or claim on driving record * Minimum time requirement refers to a continuous period of time.

ERICA M. HAMILTON COMMISSION SECRETARY

Commission.Secretary@bcuc.com web site: http://www.bcuc.com

VIA EMAIL

kathy.pars/ow@icbc.com rega//airs@icbc.com

• Ms. Kathy Parslow

Director, Regulatory Affairs and Planning Insurance Corporation of British Columbia Suite 333 - 151 West Esplanade North Vancouver, BC V7M 3H9 Dear Ms. Parslow: August 28, 2008 Re: Insurance Corporation of British Columbia

SIXTH flOOR, 900 HOWE STREET, BOX 250 VANCOUVER, B.C. CANAOA V6Z 2N3 TELEPHONE: (604) 660-4700 BC TOLL FREE: 1-800-663-1385 FACSIMILE: (604) 660-1102

Log No. 25891, 26621

Amendment of Basic Insurance Tariff for Implementation of Driver Risk Premium Further to your June 27, 2008, and August 22, 2008 (amended) proposed changes to the Basic Insurance Tariff concerning the Driver Risk Premium program, please find enclosed Order G-125-08 and one duly executed set of Tariffs. emh Enclosure

InProg/ICBC_Amend Basic TarifCDRP

Yours truly, Erica M . Hamilton

BRITISH COLUMBIA UTILITIES COMMISSION ORDER NUMBER

G-12S-08

SIXTH FLOOR, 900 HOWE STREET, BOX 2S0 VANCOUVER, B.C. V6Z 2N3 CANADA

web site: http://www.bcuc.com

TELEPHONE: (604) 660-4700 BC TOLL FREE: 1-Boo-663-1385 FACSIMILE: (604) 660-1102

BEFORE: WHEREAS: IN THE MAnER OF the Utilities Commission Act, R.S.B.C. 1996, Chapter 473 and A Proposal by the Insurance Corporation of British Columbia ("ICBC) for Amendment of Its Basic Insurance Tariff for Implementation of Driver Risk Premium L.F. Kelsey, Commissioner P.E. Vivian, Commissioner

ORDER

August 28, 2008 A. On March 29, 2007 ICBC submitted to the Commission its first Application Respecting Rate Design for Basic Insurance (the "Rate Design Application" or "RDN'). The RDA presented a multi-year plan to replace the ICBC Driver Penalty Point premium ("DPP") program with a Driver Risk Premium ("DRP") program; and

B.

By letter dated July 20, 2007 ICBC proposed amendments to the Basic Insurance Tariff (the "Tariff") with respect to implementation of the DRP; and

C.

The ICBC 2007 Rate Design Hearing commenced on July 30,2007, and concluded on August 2, 2007. The Commission Panel determined that approval of DRP is necessary and in the public interest; and

• D. On October 19, 2007 the Commission issued Order G-126-07, and Reasons for Decision, approving the DRP

program for ICBC in advance of the general Rate Design Application Decision; and

E.

By letter to the Commission dated March 17, 2008 ICBC advised of its intention to delay the implementation of the "fourth category" of DRP: three or more convictions for any motor vehicle offence. Instead of the three-year scan period for the fourth category starting at January 1, 2008, it will commence at January 1, 2009; instead of fourth category-based premiums commencing at January 1, 2009, they will commence at January 1, 2010; and

F.

By letter to the Commission dated June 27, 2008, ICBC proposes (the "Proposal") certain Tariff amendments related to the implementation of DRP; and

.. ./2

2

BRITISH COLUMBIA UTILITIES COMMISSION ORDER NUMBER

G-12S-08

• G. The Proposal recommends modifying Tariff Schedule E

to include driver roadside suspensions for inclusion in ORP. ICBC states that non-inclusion of roadside suspensions in the Tariff pages submitted as part of the

ROA filing was an omission. Roadside suspensions were part of the research behind ORP, are included in

the program description submitted for the ROA, and should have been included in the Tariff; and

• H. The Proposal recommends modifying the definition of "MVA Convictions" in Tariff Schedule E. The existing

definition refers to specific sections of the Motor Vehicle Act and the Motor Vehicle Act Regulations. The Proposal recommends a more general definition: "any driving-related offence, for which a police officer issues a ticket, and indicates that the offence was committed while the person was operating a motor vehicle other than a cycle." The purpose is to make the definition consistent with the research on which the

ORP program is based. ICBC states that the amended definition will not affect the expected number of

drivers that will be subject to ORP; and

I.

Included with the Proposal are revised Tariff pages, incorporating the recommended modifications and reflecting the delayed implementation of the fourth category of ORP; and

J.

The Commission Panel has reviewed and considered the amendments described in the ICBC Proposal.

NOW THEREFORE the Commission orders as follows:

• 1. The proposed amendment to the ICBC Basic Insurance Tariff, Schedule E, to include Roadside Suspensions,

is approved. 2.

The proposed amendment to the ICBC Basic Insurance Tariff, Schedule E, concerning the definition of MVA Conviction, is approved. 3. The proposed delay in implementation of the fourth category of offences for driver inclusion in ORP is

• approved. The scan period for driver inclusion into ORP will commence at January 1, 2009. Orivers

amassing three offences in the fourth category will be included into ORP commencing January 1, 2010. DATED at the City of Vancouver, in the Province of British Columbia, this

Order/G-125-08_ICBC_Amendment Basic Insurance

Len Kelsey Commissioner day of August 2008.

4. SCHEDULES

A. Territories B. Vehicle Rate Classes C. Schedule of Basic Insurance Premiums D. Claim-Rated Scale Insurance Corporation of British Columbia Basic Insurance Tariff Index Page 4 First Revision Effective: January 1, 2008 E. Driver Penalty Point Premium and Driver Risk Premium F. Multiple Crash Premium G. Disability Discount H. ICBC Payment Plan Agreement

I.

Fleet Discounts and Fleet Surcharges J. Fleet Premium Adjustment Agreement - Plan A K. Fleet Premium Adjustment Agreement - Plan B L. Garage Policy Premiums M. Garage Policy - Plate Points N. Garage Policy - Employee Points O. Garage Policy - Business Codes P. Transitioned Vehicles

Q.

Short Term Certificates R. Temporary Operation Permit and Owner's Certificate of Insurance Premiums S. Minimum and Retained Premiums

Amended effective January 1, 2008 Accepted:

AUG 2

8 2008

S12SUS

Commission Secretary: ~.8MJ=.

~

Order No

............................. .

IC

Insurance Corporation of British Columbia Basic Insurance Tariff Definitions Page 1 First Revision Effective: January 1, 2008

• 1. DEFINITIONS

Note: Unless otherwise noted in this Basic Insurance Tariff, terms defined in the Insurance (Vehicle) Act or the Insurance (Vehicle) Regulation have the same meaning when used in this Basic Insurance Tariff. base rate premium Basic insurance business code certificate Commission disability discount driver risk premium means the premium for a vehicle determined in accordance with Schedule C before applying discounts and surcharges. means universal compulsory vehicle insurance coverage as defined in section 1 of the Insurance (Vehicle) Act. means the number corresponding to a garage operator's business determined in accordance with Schedule O. unless otherwise specified, includes an owner's certificate, a garage policy, coverage under a temporary operating permit and a special coverage policy. means the British Columbia Utilities Commission. means a discount applied to a base rate premium in accordance with Schedule G. means a premium calculated in accordance with Section 3 of Schedule E. Fleetplan means the method of calculation of the premium payable for coverage provided for a fleet. fleet discount means the discount described in Section 2.0.3 of this Basic Insurance Tariff. fleet surcharge means the surcharge described in Section 2.0.4 of this Basic Insurance Tariff. garage policy means a garage vehicle certificate established under section 149(1 )(k) of the Insurance (Vehicle) Regulation. ICA means the Insurance Corporation Act as amended from time to time. ICBC means the corporation defined in section 1 of the Insurance (Vehicle) Act. IVA means the Insurance (Vehicle) Act as amended from time to time.

Amended effective January 1, 2008 Accepted:

AUG 2

8 2008

Commission Secretary: 1lkA'\/'\~

r

'1~5U1

Q,der No ............................ ..

Insurance Corporation of British Columbia Basic Insurance Tariff Definitions Page 2 First Revision Effective: January 1, 2008 IVR means the Insurance (Vehicle) Regulation as amended from time to time. light commercial vehicle means a commercial vehicle with a GVW of 5,000kg or less. motor vehicle means a motor vehicle as defined in the Motor Vehicle Act. multiple crash premium means a premium calculated in accordance with Schedule F. point penalties means point penalties that may be recorded against the driving record of a driver under the Motor Vehicle Act and Motor Vehicle Act Regulations. point penalty premium premium payable means a premium calculated in accordance with Section 2 of Schedule E. means the premium determined in accordance with Section 2.C., 2.0, 2.E, 2.F, 2.G or 2.N of this Basic Insurance Tariff. private passenger vehicle means a vehicle that is registered and licenced under the Motor Vehicle Act as a private passenger motor vehicle. rate class

shock loss

short term certificate

Amended effective January 1, 2008

G125U9

'Jrder No . ............................. .

means the rate class for a vehicle determined in accordance with Schedule B. means a claim payment including reserves for a vehicle that is part of a fleet in an amount that is (a) greater than $7,500, and (b) at least double the amount of the next largest claim payment including reserves for any vehicle in the same fleet within the applicable scan period. means (a) a certificate that is issued for a term of less than 11 months plus one day but does not include a certificate issued (i) for a vehicle rated in vehicle rate class 800, 900, 901,902,903,904,905 or 906, or (ii) in conjunction with a quarterly licence under section 5.02 of the Commercial Transporl Regulations (2005) under the Commercial Transporl Act (b) a certificate in respect of a vehicle in a fleet under Part 12 of the IVR and under 2.0. of this Basic Insurance Tariff, the

Accepted:-----",-,AU=-=-G=-2 _8

_200_8 _

Commission Secretary: z4:k)1)1- ~

IC

trailer vehicle

Accepted: October 25, 2007 Effective: June 1, 2007

I nsurance Corporation of British Columbia Basic Insurance Tariff Definitions Page 3 Effective: June 1, 2007 term of which is determined under section 162(1.1) of the IVR, and (c) a special coverage form that is determined to be eligible for short term status in accordance with Table 1 of Schedule Q (Short Term Certificates - Special Coverages) of this Basic Insurance Tariff and that has an expiry date set out in column C, D or F, or Schedule 7 of the IVR (Expiry Dates of Special Coverage Certificates). means a t~ailer as defined in the Motor Vehicle Act. means a motor vehicle or trailer.

Accepted:---tt.AU

___

G .=-2

.=-8

=...::.20-=:.....;08_ Order No. G-57-07) G

1 25 'Q8

Commission Secretary: ~A1kQb

2.G. Premium Payable for Driver's Certificates 2.G.1 Premium Payable for Driver's Certificate Insurance Corporation of British Columbia Basic Insurance Tariff Basic Insurance Premiums Page 33 First Revision Effective: January 1, 2008 The annual premium payable by a person for a driver's certificate issued pursuant to section 43

• f the IVR is the total of:

(a) the greater of:

I

(i) the point penalty premium calculated in accordance with Section 2 of Schedule E C and (ii) the driver risk premium calculated in accordance with Section 3 of Schedule E,

I

N and (b) the multiple crash premium calculated in accordance with Schedule F. 2.G.2. Application of Other Basic Insurance Tariff Provisions and IVR Sections Section 2.K of this Basic Insurance Tariff and section 15.7 of the IVR apply in respect of premium payable for driver's certificates.

Amended effective January 1, 2008

Accepted:_

AU

_G

_2

8~20_08_

G125U8

Commission Secretary: ~I\.J-".~ Order No ............................. .

Insurance Corporation of British Columbia Basic Insurance Tariff Schedule E: Driver Penalty Point Premium and Driver Risk Premium Page 1 I C First Revision Effective: January 1, 2008 SCHEDULE E DRIVER PENAL TV POINT PREMIUM AND DRIVER RISK PREMIUM 1. Definitions In this Schedule: "10 point MVA Conviction" means a conviction for any offence under the Motor Vehicle Act that is listed in Table 4 set out in the Schedule to Division 28 of the Motor Vehicle Act Regulation, BC Reg 26/58 as amended from time to time, "Contravention" means any: (a) 10 point MVA Conviction, (b) Criminal Code of Canada Conviction, (c) Conviction for Excessive Speed, or (d) Roadside Suspension, "Conviction for Excessive Speed" means a conviction for an offence under section 148 of the Motor Vehicle Act, "Criminal Code of Canada Conviction" means a conviction for any driving offence under the Criminal Code of Canada that is listed in Table 4 set out in the Schedule to Division 28 of the Motor Vehicle Act Regulation, BC Reg 26/58 as amended from time to time, "MVA Conviction" means any conviction for an offence under the Motor Vehicle Act or the Motor Vehicle Act Regulation that (a) arises directly or indirectly out of the use or operation by the offender of a vehicle

• ther than a cycle, or

(b) is committed while the offender is using or operating a vehicle except a cycle, and a conviction will be considered to meet the requirements of subsection (a) or (b) of this definition if a notation appears on the violation ticket issued in respect of the offence indicating that the offence was committed while driving, "one-year scan period", in respect of a person, means the 12 month period starting 17 months before the anniversary of the person's birth date, "Roadside Suspension" means a suspension pursuant to section 90.3 or 215 of the Motor Vehicle Act, "three-year scan period" in respect of a person, means the 36 month period starting 41 months before the anniversary of the person's birth date, but does not include any portion of that 36 month period before January 1, 2008.

Amended effective January 1, 2008

AUG 28 2008

Accepted: _________ _ Commission secretary:_C-'-"-'~b'_"'"'"

• ",-,,-,'

'-'-&"'-'-~"-'-

__

_

£1125'08

Order No ............................. .

IC

N N

Insurance Corporation of British Columbia Basic Insurance Tariff Schedule E: Driver Penalty Point Premium and Driver Risk Premium Page 2 I C First Revision Effective: January 1, 2008

2.

Penalty Point Premium 2.1 For the purpose of this section 2, the classes of drivers set out in Table 1 of this Schedule are established. 2.2 A person falls within a class of drivers established under subsection 2.1, if the total of the following equals the number of point penalties that in column A of Table 1 identifies that class: (a) the number of point penalties recorded by ICBC against the driving record of that person for offences committed during the one-year scan period; and (b) the number of point penalties recorded by ICBC, since the date of the last assessment, against the driving record of that person for offences committed before the one-year scan period. 2.3 The annual point penalty premium payable by a person for a driver's certificate is the amount shown in column B of Table 1 opposite the number of point penalties that, in column A

• f that Table, identifies the person's class.

Amended effective January 1, 2008

AUG 28 2008

Accepted: ______

• -:-__

_ Commission secretary:_t:.l.,.LA1-".L.\,.<j~1.v.:M,-"-,U.Lb,-I-,_

G 1 L 5 '08

Order No ............................. .

Insurance Corporation of British Columbia Basic Insurance Tariff Schedule E: Driver Penalty Point Premium and Driver Risk Premium Page 3 I C First Revision Effective: January 1, 2008 TABLE 1 - Penalty Point Premium ColumnA Column B Class of Drivers by Number of Annual Premium ($) Point Penalties 0-3 nil 4 175 5 230 6 300 7 415 8 520 9 640 10 905

11

1 080 12 1 260 13 1680 14 1 920 15 2160 16 2480 17 2800 18 3120 19 3440 20 3760

21

4160 22 4560 23 4960 24 5360 25 5760 26 6240 27 6720 28 7200 29 7680 30 8160

31

8720

Amended effective January 1, 2008 Accepted: __

A_U_G_2_g_2_0_08_

G125'08

Order No ............................. . Commission secretary:_Zf-7"-·lbf,-~I&·

"I:;."'.u.A

.....

lt,A.A

~J~l,.L'

L_1

• -"-_

Insurance Corporation of British Columbia Basic Insurance Tariff Schedule E: Driver Penalty Point Premium and Driver Risk Premium Page 4 I C First Revision Effective: January 1, 2008 32 9280 33 9840 34 10480 35

11 120

36

11 760

37 12400 38 13040 39 13680 40 14560 41 15360 42 16160 43 16960 44 17760 45 18560 46 19520 47 20480 48 21440 49 22400 50 or more 24000

Amended effective January 1. 2008 Accepted: __

A_U_G_2_B_2_O_O_8_

1312.5'01

Order No ............................ ..

Commission secretary:_Z-,-"-1h.....,......ll-441....,M"",,,-Q>6Ab_

1

• ----=--__

Insurance Corporation of British Columbia Basic Insurance Tariff Schedule E: Driver Penalty Point Premium and Driver Risk Premium Page 5 I C First Revision Effective: January 1, 2008

3.

Driver Risk Premium 3.1 The annual driver risk premium payable by a person for a driver's certificate is determined with reference to the Contraventions recorded by ICBC in respect of that person during the three-year scan period and is the total of the amounts set out in Column B of each of Tables 2, 3 and 4 that correspond to the number and type of Contraventions referred to in each Table. TABLE 2 - Driver Risk Premium for Criminal Code Convictions and 10 Point MVA Convictions Driver Risk Premium Schedule ColumnA Column B Number of Contraventions: Criminal Code

• f Canada

Premium Conviction or 10 point MVA Conviction 1

$

905 2

$

3,760 3

$

8,160 4

$

14,560 5

$

24,000 6

$

24,000 7

$

24,000 8

$

24,000 9

$

24,000 10

$

24,000

11

$

24,000 12

$

24,000 13

$

24,000 14

$

24,000 15

$

24,000 16

$

24,000 17

$

24,000 18

$

24,000 19

$

24,000 20

$

24,000 21

$

24,000 22

$

24,000 Amended effective January 1, 2008 Accepted:_A_U_G_2_8_20_0-=-..8 _ Commission secretary:_ZJ...L{4,wb.l.L?u1.'-"..Lf\

......

,L,l"'-'<U;;,...ba..,

_.L-.._

b125'08

No, ..•..•.••••••••••••••••••••••

N

Insurance Corporation of British Columbia Basic Insurance Tariff Schedule E: Driver Penalty Point Premium and Driver Risk Premium Page 6 I C First Revision Effective: January 1, 2008 23

$

24,000 24

$

24,000 25

$

24,000 26

$

24,000 27

$

24,000 28

$

24,000 29

$

24,000 30

$

24,000

31

$

24,000 32

$

24,000 33

$

24,000 34

$

24,000 35

$

24,000 36

$

24,000 37

$

24,000 38

$

24,000 39

$

24,000 40

$

24,000 41

$

24,000 42

$

24,000 43

$

24,000 44 $ 24,000 45

$

24,000 46

$

24,000 47

$

24,000 48 $ 24,000 49

$

24,000 50

$

24,000 TABLE 3 - Driver Risk Premium for Roadside Suspensions Driver Risk Premium Schedule Column A Column B Number of Premium Contraventions: Roadside Suspension 1

$

2

$

370 3

$

430 4

$

490

Accepted: __

A_U_G_2_t1_2_0_08_

Amended effective January 1, 2008 Commission secretary:_7--,-",-1blL'

<",AM-"'-1.-\:;)'-'A~.z:AJ-,-<

__

_

~lZ5'08

)rder No . .........................

N

Insurance Corporation of British Columbia Basic Insurance Tariff Schedule E: Driver Penalty Point Premium and Driver Risk Premium Page 7 I C First Revision Effective: January 1, 2008 5

$

560 6

$

640 7

$

740 8

$

850 9

$

980 10

$

1,130

11

$

1,300 12

$

1,500 13

$

1,730 14

$

1,990 15

$

2,290 16

$

2,630 17

$

3,020 18

$

3,470 19

$

3,990 20

$

4,590 21

$

5,280 22

$

6,070 23

$

6,980 24

$

8,030 25

$

9,230 26

$

10,610 27

$

12,200 28

$

14,030 N 29

$

16,130 30

$

18,550 31

$

20,000 32

$

20,000 33

$

20,000 34

$

20,000 35

$

20,000 36

$

20,000 37

$

20,000 38

$

20,000 39

$

20,000 40

$

20,000 41

$

20,000 42

$

20,000 43

$

20,000 44

$

20,000 45

$

20,000 46

$

20,000 47

$

20,000 48

$

20,000

Amended effective January 1, 2008

AUG 282008

Accepted:, ________ _ Commission secretary:_-1:~,.Ll\7J~M/t~&t:l.(1b=-t-~-:_

G 1 £::? '08

Order No ............................ ..

Insurance Corporation of British Columbia Basic Insurance Tariff Schedule E: Driver Penalty Point Premium and Driver Risk Premium Page 8 I C First Revision Effective: January 1, 2008 49 20,000 I 50 20,000 TABLE 4 - Driver Risk Premium for Convictions for Excessive Speed Driver Risk Premium Schedule ColumnA Column B Number of Contraventions: Convictions for Premium Excessive Speed 1

$

320 2

$

370 3

$

430 4

$

490 5

$

560 6

$

640 7

$

740 8

$

850 N 9

$

980 10

$

1,130

11

$

1,300 12

$

1,500 13

$

1,730 14

$

1,990 15

$

2,290 16

$

2,630 17

$

3,020 18

$

3,470 19

$

3,990 20

$

4,590 21

$

5,280 22

$

6,070 23

$

6,980 24

$

8,030 25

$

9,230 26

$

10,000 27

$

10,000 28

$

10,000 Amended effective January 1

, 2008 AcePted:_-=A-=-=U=-:G-=2~8=-=20=O~8

Commission secretary:_&fIk4:

w

'" 1L.

.

.uJ~hl,;,~b.t!/"'.:Qb.:.d.-j

• -=-__

Gl~S'08

Order No ............................. .

Insurance Corporation of British Columbia Basic Insurance Tariff Schedule E: Driver Penalty Point Premium and Driver Risk Premium Page 9 I C First Revision Effective: January 1, 2008 29

$

10,000 30

$

10,000

31

$

10,000 32

$

10,000 33

$

10,000 34

$

10,000 35

$

10,000 36

$

10,000 37

$

10,000 38

$

10,000 39

$

10,000 N 40

$

10,000 41

$

10,000 42

$

10,000 43

$

10,000 44

$

10,000 45

$

10,000 46

$

10,000 47

$

10,000 48

$

10,000 49

$

10,000 50

$

10,000

4.

Refunds

IC

4.1 In the circumstances described in column A of Table 5 of this Schedule E and subject to the minimum time requirements set out in column B of Table 5 and the additional requirements set C

• ut in column C of Table 5, ICBC shall, on application, refund to a person named on a driver's

certificate or his personal representative that part of the premium, calculated according to section 2.H of this Basic Insurance Tariff, paid for the period the driver's certificate is not in use

• r for the term of the driver's certificate remaining unexpired on the day it is surrendered.

4.2 Notwithstanding anything in section 4.1 of this Schedule E, if a person who has applied for and been granted a refund in accordance with section 4.1 is, during the term of the driver's certificate for which the refund has been granted: (a) convicted of an offence listed in Tables 2, or 4 of this Schedule or convicted of any MVA Conviction, or receives a roadside suspension, or (b) involved in a motor vehicle crash while driving a motor vehicle, the person must repay the amount of the refund paid by ICBC as premium.

Amended effective January 1 , 2008

Gl(5U8

• No. ,~ ••••••••••••••••••••••••

'

• Accepted: __

A_U_G_2_'

8_2_0_08_

r:::L . flJ

Commission secretary:_~",-,-,-<.:.><:e"-'->.l.~=-'-"-_

N

Insurance Corporation of British Columbia Basic Insurance Tariff Schedule E: Driver Penalty Point Premium and Driver Risk Premium Page 10 I C First Revision Effective: January 1, 2008 TABLE 5 - Refund of Driver Penalty Point Premium

...

• "'~,~-"

.......... ''' .............. ''''''-........ ''''

..

Column A Column B Column C Circumstances Minimum Time Additional Requirements Requirements

r--

,

, Suspension Voluntary surrender Out of province for part or whole period covered in billing Not in Canada or U.S.A. for part

• r whole period

covered in billing 60 days or more

I 30 days or more

I

,

30 days or more

I

, 30 days or more

I

Motor Vehicle Branch confirmation on suspensions

! before 1982.

Motor Vehicle Branch confirmation

I

written confirmation of issue date, or photocopy of

I

new drivers licence

I

!

photocopies of passport date stamp confirming out lof country dates

I

i

!

I

l

t·'""-'

Incarceration 30 days or more letter from prison authorities, confirming dates of

I

incarceration and that there were no out privileges I

("'o~o ......

~o._o~_._ .... o. __ .L .... _ .. _____._o .... _._.

__ ...... __ 'T~e~_dri~nc.: .. ~_oU_'~v~n

.~ed

~ ____

J

Medical reason

_JO~

days or more I physician's letter confirming that person is unable to I drive no evidence of driving, e.g. points or claim on I

I

driving record

I

r.---....

~-.-~-.

....

~-"'"

.

.,.,J

* Minimum time requirement refers to a continuous period of time.

!

____

.. _____________

~

____________________

.J

Amended effective January 1, 2008 Accepted: __

A_U_6_2_8_200_8

Gll5'OS

)rder No . ................

Commission secretary:_CC-ulAuCLw.;

.\.Ll.LJA!\c.>.J.!cili~

....

1 h,,---=-_

IC

November 7, 2008 British Columbia Utilities Commission Sixth Floor 900 Howe Street Vancouver, BC V6Z 2N3 Attention:

• Ms. Erica M. Hamilton, Commission Secretary

building trust. driving confidence.

Re: Implementation of the Driver Risk Premium - Phase Two Dear Ms. Hamilton: This letter is to provide the Commission with an update regarding the status of ICBe's Driver Risk Premium CDRP) and to notify the Commission of ICBe's intention to make amendments to the DRP that will result in delaying implementation of Phase Two. In ICBC's original plan for the DRP, premiums were to be charged to drivers who, over a period of three years, had accumulated:

• 1. At least one motor vehicle related Criminal Code of Canada conviction, or 10

point Motor Vehicle Act conviction.

• 2. At least two roadside suspensions, under section 90.3 or 215 of the Motor Vehicle

Act.

• 3. At least one conviction for Excessive Speed, under section 148(1) of the Motor

Vehicle Act.

• 4. At least three convictions for any motor vehicle offence under the Motor Vehicle

Act, the Motor Vehicle Act Regulations, Criminal Code of Canada convictions, Excessive speed convictions, and roadside suspensions. On March 17, 2008, ICBC provided an update on the DRP (as well as Other Operator). ICBC indicated that as a result of customer and stakeholder feedback arising from ICBe's communications surrounding the DRP, ICBC intended on taking a phased approach to implementation of the DRP. In the first phase, ICBC would begin using the first three contraventions categories (as listed above) and commence charging the DRP starting on January 1, 2009. In the second phase, ICBe's intent was to begin scanning for convictions

• f violations contained in the fourth category (three or more convictions) beginning on

January 1, 2009 and to commence charging the DRP starting in January 2010. ICBC also indicated that prior to initiation of the second phase of the DRP, ICBC would undertake additional customer and stakeholder consultations. In the Commission's May 12, 2008 response to ICBC, the Commission agreed with lCBe's proposed change for implementation of the DRP. Furthermore, ICBC was directed to apply to the Commission for approval should there be any changes to the form of the DRP.

. . ./2

151 West Esplanade I North Vancouver I British Columbia I V7M 3H9 I 604-661-2800 I regaffairs@icbc.com

• 2 -

ICBC is pleased to indicate that the implementation of Phase One is proceeding as planned with the systems changes being made in the coming weeks and the program going live on January 1, 2009. ICBC recently completed analysis of the customer feedback and consultation with respect to Phase Two. General customer perception indicates ICBC must ensure that the contraventions selected under Phase Two better align with customers' perception of higher risk driving behaviours and that the associated premiums reinforce the goal of increasing driver accountability by charging premiums that reflect an individual motorist's risk. In light of this feedback, ICBC intends to apply for adjustments to the DRP in respect to the fourth category of violations. The proposed adjustments will refine the DRP with the intent that the contraventions that are included in this category take into account customer feedback. In accordance with the Commission's direction contained in its letter of May 12, 2008, ICBC will apply to the Commission for approval of its planned changes to DRP. ICBe anticipates filing this application in mid 2009 as ICBe wants to have a number of months experience with Phase One DRP operation in case it raises other new considerations for Phase Two. As a result, implementation of Phase Two will need to be delayed until after ICBC receives the Commission's Decision on ICBe's planned changes to the DRP. Kathy Parslow Director, Regulatory Affairs and Planning Cc: Donnie Wing, CA, Chief Financial Officer, ICBe

151 West Esplanade I North Vancouver I British Columbia I V7M 3H9 I 604-661-2800 I regaffairs@icbc.com

From: van Grondelle, Alex To: "tony.roberts@bcuc.com" Cc: Elder, June; Parslow, Kathy Subject: Impact of the delay in implementing Phase 2 of the DRP Date: Thursday, December 11, 2008 4:06:48 PM Attachments: Table with effect of delay in phase 2.doc

Hi Tony, Further to our telephone conversation this afternoon with June, please find attached a table summarizing the dollar impact arising from delaying Phase 2 of the DRP, as was discussed in your email of July 22, 2008 and ICBC's letter of August 1, 2008. Sincerely,

. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Alex van Grondelle, FCI P

Regulatory Advisor Regulatory Affairs I CBC building trust. driving confidence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . # 340 - 151 W. Esplanade North Vancouver | British Columbia | V7M 3H9 telephone: 604 - 443 - 7345 cell : 604 - 250 - 2387 facsim ile : 604 - 982 - 7209

The following table provides the projected DRP and DPP revenues for both the original proposal (including the 4th category) and the projected revenues that are expected by delaying implementation of Phase II of the DRP until December 31, 2008.

* The Gross written premium is the amount that is projected to be billed. * Net written premium includes provision for bad debt, prorating (surrendering one’s driver’s licence), and reinstatement of DPP and DRP.

Sum m ary:

• The projected impact in Year 1 (2009) of the delay of Phase II of the DRP is $6.4 million in gross written premium and

$4.8 million in net written premium.

• The projected impact over the four year period from 2009-2012 of the delay of Phase II of the DRP is $45.5 million in

gross written premiums and $34.7 million in net written premium.

• As a result of the delay in phasing in DRP II, retirement of the DPP will be delayed one year from December 31, 2010 to

December 31, 2011. 2008 2009 2010 2011 2012 2013

Original Proposal

Gross Written Premiums* $ 17,143,981 $ 26,037,045 $ 51,630,975 $ 76,296,430 $ 80,896,100 $ 82,043,605 Net Written Premiums* $ 15,601,023 $ 22,299,565 $ 42,486,244 $ 61,029,514 $ 64,708,790 $ 65,626,680

One Year DRP Phase I I Delay

Gross Written Premiums $ 17,143,981 $ 19,638,570 $ 32,342,695 $ 59,157,870 $ 78,170,610 $ 82,058,650 Net Written Premiums $ 15,601,023 $ 17,467,401 $ 27,308,658 $ 48,502,762 $ 62,528,671 $ 65,638,714

Total Change in Prem ium

Change in Gross Written Premiums (Millions) $ - $ 6.4 $ 19.3 $ 17.1 $ 2.7 $ (0.0) Change in Net Written Premiums (Millions) $ - $ 4.8 $ 15.2 $ 12.5 $ 2.2 $ (0.0)

From: Roberts, Tony BCUC:EX To: van Grondelle, Alex Cc: Elder, June; Parslow, Kathy Subject: RE: Impact of the delay in implementing Phase 2 of the DRP Date: Friday, December 12, 2008 10:33:41 AM

Hi Alex, There is one additional set of figures that would complete the package: the number of affected drivers associated with the dollar figures. Can you send that as well? Thanks, Tony Tony Roberts, 604-660-4755 From: van Grondelle, Alex [mailto:Alex.Vangrondelle@icbc.com] Sent: Thursday, December 11, 2008 4:07 PM To: Roberts, Tony BCUC:EX Cc: Elder, June; Parslow, Kathy Subject: Impact of the delay in implementing Phase 2 of the DRP Hi Tony, Further to our telephone conversation this afternoon with June, please find attached a table summarizing the dollar impact arising from delaying Phase 2 of the DRP, as was discussed in your email of July 22, 2008 and ICBC's letter of August 1, 2008. <<Table with effect of delay in phase 2.doc>> Sincerely,

. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Alex van Grondelle, FCI P

Regulatory Advisor Regulatory Affairs I CBC building trust. driving confidence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . # 340 - 151 W. Esplanade North Vancouver | British Columbia | V7M 3H9 telephone: 604 - 443 - 7345 cell : 604 - 250 - 2387 facsim ile : 604 - 982 - 7209

This email and any attachments are intended only for the named recipient and may contain confidential and/ or privileged material.

Any unauthorized copying, dissemination or other use by a person other than the named recipient of this communication is

• prohibited. If you received this in error or are not named as a recipient, please notify the sender and destroy all copies of this email

immediately.

From: van Grondelle, Alex To: "tony.roberts@BCUC.com" Cc: Elder, June; Parslow, Kathy Subject: Delay of Phase 2 DRP with affected drivers Date: Tuesday, December 16, 2008 11:30:31 AM Attachments: Table re delay in phase 2 with drivers.doc

Hi Tony, Further to your email of December 12, please find attached a revised table that includes the number of affected drivers (highlighted in grey). Regards,

. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Alex van Grondelle, FCI P

Regulatory Advisor Regulatory Affairs I CBC building trust. driving confidence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . # 340 - 151 W. Esplanade North Vancouver | British Columbia | V7M 3H9 telephone: 604 - 443 - 7345 cell : 604 - 250 - 2387 facsim ile : 604 - 982 - 7209

The following table provides the projected DRP and DPP revenues for both the original proposal (including the 4th category) and the projected revenues that are expected by delaying implementation of Phase II of the DRP until December 31, 2008. 2008 2009 2010 2011 2012 2013 Original Proposal

Predicted DPP customers

41,095 30,890 23,142

Predicted DRP customers

29,222 86,510 150,625 158,874 161,184

Gross W ritten Prem ium s

$ 17,143,981 $ 26,037,045 $ 51,630,975 $ 76,296,430 $ 80,896,100 $ 82,043,605

Net W ritten Prem ium s

$ 15,601,023 $ 22,299,565 $ 42,486,244 $ 61,029,514 $ 64,708,790 $ 65,626,680

One Year DRP Phase I I Delay

Predicted DPP customers

41,095 39,149 30,387 23,091

Predicted DRP customers

8,373 41,148 97,648 153,925 161,197

Gross W ritten Prem ium s Total

$ 17,143,981 $ 19,638,570 $ 32,342,695 $ 59,157,870 $ 78,170,610 $ 82,058,650

Net W ritten Prem ium s

$ 15,601,023 $ 17,467,401 $ 27,308,658 $ 48,502,762 $ 62,528,671 $ 65,638,714

Total Change in Prem ium

Change in Gross Written Premiums (Millions)

$ - $ 6.4 $ 19.3 $ 17.1 $ 2.7 $ (0.0)

Change in Net Written Premiums (Millions)

$ - $ 4.8 $ 15.2 $ 12.5 $ 2.2 $ (0.0) * The Gross written premium is the amount that is projected to be billed. * Net written premium includes provision for bad debt, prorating (surrendering one’s driver’s licence), and reinstatement of DPP and DRP.

Sum m ary:

• The projected impact in Year 1 (2009) of the delay of Phase II of the DRP is $6.4 million in gross written premium

and $4.8 million in net written premium.

• The projected impact over the four year period from 2009-2012 of the delay of Phase II of the DRP is $45.5 million

in gross written premiums and $34.7 million in net written premium.

• As a result of the delay in phasing in DRP II, retirement of the DPP will be delayed one year from December 31,

2010 to December 31, 2011.

From: Roberts, Tony BCUC:EX To: van Grondelle, Alex Cc: Elder, June; Parslow, Kathy Subject: RE: Delay of Phase 2 DRP with affected drivers Date: Tuesday, December 16, 2008 11:33:46 AM

Hi Alex, Thanks for putting together the information. Regards, Tony Tony Roberts, 604-660-4755 From: van Grondelle, Alex [mailto:Alex.Vangrondelle@icbc.com] Sent: Tuesday, December 16, 2008 11:31 AM To: Roberts, Tony BCUC:EX Cc: Elder, June; Parslow, Kathy Subject: Delay of Phase 2 DRP with affected drivers Hi Tony, Further to your email of December 12, please find attached a revised table that includes the number of affected drivers (highlighted in grey). <<Table re delay in phase 2 with drivers.doc>> Regards,

. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Alex van Grondelle, FCI P

Regulatory Advisor Regulatory Affairs I CBC building trust. driving confidence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . # 340 - 151 W. Esplanade North Vancouver | British Columbia | V7M 3H9 telephone: 604 - 443 - 7345 cell : 604 - 250 - 2387 facsim ile : 604 - 982 - 7209

This email and any attachments are intended only for the named recipient and may contain confidential and/ or privileged material. Any unauthorized copying, dissemination or other use by a person other than the named recipient of this communication is

• prohibited. If you received this in error or are not named as a recipient, please notify the sender and destroy all copies of this email

immediately.

ERICA M . HAMILTON COMMISSION SECRETARY

Commission.Secretary@bcuc.com web site: http://www.bcuc.com

VIA E-MAil

• kathy. parslow@icbc.com

regaffairs@icbc.com

• Ms. Kathy Parslow

Director, Regulatory Affairs and Planning Insurance Corporation of British Columbia Suite 333 - 151 W. Esplanade North Vancouver, BC V7M 3H9 Dear Ms. Parslow: January 26, 2009

Re: Insurance Corporation of British Columbia ("ICBC") LETTER No. L-60-08

SIXTH flOOR, 900 HOWE STREET, BOX 250 VANCOUVER, B.C. CANADA V6Z 2N3 TELEPHONE: (604) 660-4700 BC TOLL FREE: 1-800-663-1385 FACSIMILE: (604) 660-1102

Log No. 28272

Divergence of Initial versus Detailed Cost Estimates of the Impact of Delayed Implementation of the Fourth Category of the Driver Risk Premium ("DRP") Program The Insurance Corporation of British Columbia ("ICBC"), by several submissions to the British Columbia Utilities Commission (the "Commission") dated between March 17, 200S and June 27, 200S, proposed, amongst other matters, to amend its Tariff to delay the implementation of the fourth category of DRP offences. During July 200S, there was additional correspondence between the Commission and ICBC staff on the matter. At that time, ICBC was asked for, and produced, an initial estimate of the delay in fourth category DRP

• implementation. ICBC estimated that it would affect between 1,500 and 2,000 drivers, and that the revenue

impact would be a decrease of $1.0 million. In a letter to the Commission, dated August 1, 200S, ICBC stated that "With respect to determining the dollar impact on DRP premiums of the delay in implementation of the fourth category of DRP offences, this involves undertaking detailed analysis and we anticipate this analysis to be completed in the Fall 2008." In August 200S, the Commission issued Order G-125-0S approving ICBC's request for a delay in implementation

• f the fourth category of DRP. The approval was based on the initial estimates provided.

On December 11, 200S, ICBC submitted its detailed estimate of the impact of the delayed implementation of the fourth category of DRP. The detailed estimate indicated that the delay will reduce gross written premiums by $6.4 million in 2009, and by $19.3 million in 2010; reduce net written premiums by $4.S million in 2009 and by $15.2 million in 2010. The detailed estimate shows that 20,000 fewer drivers in 2009, and 40,000 during 2010, will be included in DRP versus the original proposal. This is a non-trivial difference between the initial and the detailed estimates provided by ICBC.

... /2

LeneR No. L-60-08 2 The Commission directs ICBC to submit a calculation of the expected rate impacts associated with the detailed estimates within 30 days of the date of this letter. The Commission directs ICBC to include a description of the means it proposes to use for the recovery of the revenue differential as part of the filing of its next revenue requirements. The Commission recognizes the complexity of ICBC's operations, the number of data elements and sources, and variety of information systems that may be called upon to produce a particular estimate. Further, we acknowledge the effort ICBC is currently engaged in to update its various information systems. Nonetheless, the Commission wishes to remind ICBC of the need for accurate information, including those situations where ad hoc estimates are requested. Yours truly, TR/yl

ICBC/Cor/L-60-08_Delay Fourth Category DRP

building trust. driving confidence.

February 6, 2009 Sritish Columbia Utilities Commission Sixth Floor 900 Howe Street Vancouver, SC V6Z 2N3 Attention:

• Ms. Erica M. Hamilton, Commission Secretary

Re: Proposal for Implementation of Flat Rate Non-insurance Costs in Coordination with the Multi-Year Plan Pursuant to BCUC Order No. G-155-0S Dear Ms. Hamilton: On December 10, 2008 ICSC received Order No. G-155-08 from the SC Utilities Commission (the Commission) in which the Commission directed ICSC to submit by February 6, 2009: ... a detailed proposal of how it will implement flat rate [Non-insurance costs] in coordination with the Multi-year Plan, as described in the [Rate Design Application]. The proposal should include a timeline for implementation. This letter is ICSe's proposal in response to the Commission's directive. As discussed in its July 9, 2008 Filing and September 9, 2008 Letter, ICSe believes that it is best to implement flat rate equal payment of Non-insurance costs as it implements a driver- record rating model (the DRM) for its personal and non-fleet rated commercial customers under its Multi-year Plan for Rate Design (the Plan). Managing implementation of flat rate equal payment of Non-insurance costs along with the rate design and system changes contemplated by the Plan will enable ICSC to control the perverse impact on rates that would result from implementation in advance of the Plan. It will also allow ICSC to avoid making system changes that may become redundant as ICSC proceeds with the Plan. The Plan includes implementation of a number of short-term plans in advance of the DRM, as outlined in Chapter 16.1 of ICSC's Rate Design Application on March 29, 2007 (the RDA). As such, in this letter ICSC discusses the status of these short-term plans. ICSC then discusses the timeline for implementation of flat rate equal payment of Non-insurance costs in coordination with the DRM. As detailed below, ICSC currently plans to file its next rate design application, which will address the DRM and implementation of flat rate equal payment of Non-insurance costs, in mid-2010. In advance of the DRM, ICSe's upcoming application on the rating structure for commercial vehicles insured under a fleet (Fleetplan) will include a proposal to implement flat rate equal payment of Non-insurance costs for Fleetplan customers. ICSe provides additional details about the upcoming Fleetplan Application below.

. . ./2

151 West Esplanade I North Vancouver I British Columbia I V7M 3H9 I 604-661-2800 I regaffairs@icbc.com

• 2 -

ICSC's Multi-Year Plan for Rate Design As set out in the RDA, in the short-term (up to 2009) the Plan includes: the Driver Risk Premium (DRP), the Other Operator rating variable (00), rate class/territory adjustments, and changes to commercial fleets. For the long-term (post-2009) it includes unwinding the Claim-Rated Scale (the CRS) and developing and implementing the DRM. The overall goal is to have Sasic insurance premiums better reflect the risk of causing crashes and the associated financial implications. ICSC formulated the Plan within a legislative framework that includes the Government directive of January 31, 2007 with respect to Rate Design approved by Order in Council No. 39/07, February 2, 2007 (the January 2007 Government Directive on Rate Design), which directed ICSC to address the issue of high-risk drivers as a new rate design element beginning in the 2008 rate year (DRP is a response to this directive). The January 2007 Government Directive on Rate Design also directs ICSC to retain until at least the 2011 rate year the CRS, rate territories and their boundaries, and existing rate classes. As detailed in Chapter 16.2 of the RDA and the July 9, 2008 Filing, implementation of the changes contemplated by the Plan must be sequenced in a logical, gradual, and phased manner to ensure their effective, efficient, and successful implementation. The complexity and interdependency of ICSe's systems necessitate a highly-disciplined approach to implementing rate design change because of the widespread impacts, and will involve a synchronized set of activities across several business areas. The Plan includes implementation of a number of short-term plans, including 00 and DRP, in advance of the DRM. 00 allows ICSC to collect the necessary data to structure the unwinding of the CRS and development of the DRM. DRP increases the direct accountability

• f drivers by requiring that high-risk drivers who have convictions pay more premium

dollars to cover anticipated claims costs. Since March 2007, the timelines for 00 and DRP as set out in the RDA have changed.' For 00, ICSC is awaiting amendments to the Insurance (Vehicle) Regulation. Implementation of 00 will proceed after the amendments are brought into force. For DRP, substantial customer feedback on ICSC communications in late 2007 caused ICSC to propose that further public and stakeholder communication and feedback was warranted prior to implementation of the fourth category of DRP.2 With the changed timeline for 00 and given the customer feedback on DRP, ICSC is now in the early stages of planning for development of the DRM. Development of the DRM under the Multi-Year Plan Development of the DRM will involve a number of phases. Each phase is currently estimated to take approximately six months to a year to complete, with some overlap between them. The phases include:

• Detailed design including analysis of factors and variables.
• Development of a transition strategy to deal with dislocation resulting from the move

from the CRS to the DRM.

• Determination of business and technical requirements.

1 ICBC's March 17, 2008 letter updated the Commission on the status of 00 and DRP.

2 DRP includes four categories of offences. For the first three categories DRP is being implemented as proposed in

the RDA and approved by the Commission in its January 2008 Rate Design Decision.

. . ./3

151 West Esplanade I North Vancouver I British Columbia I V7M 3H9 I 604-661-2800 I regaffairs@icbc.com

• 3 -
• Application to the Commission for approval of the DRM.
• Design and build of the technical infrastructure to implement the new model.

Part of the planning for the DRM will include determining how the implementation of flat rate equal payment of Non-insurance costs will be optimally integrated with the DRM. Given the possible rate dislocation between the CRS and the DRM and the dislocation that will result from implementation of flat rate equal payment of Non-insurance costs, development

• f a transition strategy to deal with the rate dislocation will be of key importance to ensure

the effective integration of flat rate equal payment of Non-insurance costs with the DRM. Of the phases above, in the first half of 2009 ICBC will focus on the design of the DRM. Given the current stage of planning for the DRM, the specific timing and details of how ICBC will implement flat rate equal payment of Non-insurance costs along with the DRM have not yet been determined. At this time ICBC is able to provide a general indication of timing for the implementation of flat rate equal payment of Non-insurance costs. ICBC expects that as information becomes available in 2009 from the initial planning for the DRM that ICBC will be in a position to provide further information about the DRM and the associated timeline for implementation of flat rate equal payment of Non-insurance costs closer to the end of 2009. Given the significant nature of the changes contemplated by the DRM from a customer, employee, and systems standpoint, the 2009 planning work is critical to providing certainty to the timeline. Consequently, the multi-year DRM plan is subject to revision as a result of the 2009 planning currently underway. ICBC currently intends to file an application addressing the DRM, including implementation

• f flat rate equal payment of Non-insurance costs, in mid-2010.

Implementation of the DRM will then be phased in over a period of time so as to manage the change and avoid rate shock. In the shorter term and in advance of the DRM, as discussed below, ICBC intends to implement flat rate equal payment of Non-insurance costs for its Fleetplan customers. FleetDlan and Flat Rate Equal Payment Df Non-insurance Costs Commercial vehicles defined as a fleet are rated according to ICBC's Fleetplan. As ICBC advised in the RDA, ICBC will file a separate application on the rating structure for Fleetplan

• vehicles. Fleets constitute a small but important component of Basic insurance customers.

Rating under Fleetplan is different from the CRS, and is technical and complex. However, like the DRM, the objective of the new Fleetplan rating structure is to have rates more reflective of claims history and to make drivers and fleet operators more accountable for driving behaviour. ICBC's experience with 00 and DRP has demonstrated the importance of stakeholder feedback and public consultation in developing and implementing rate design changes. In

• rder to allow time for obtaining this feedback, to ensure ICBC has available capacity, and

to allow for planning to manage the aSSOCiated changes, ICBC is planning on filing the Fleetplan Application in fall 2009. Currently, ICBC is in the process of developing the new loss rating algorithm and analyzing the dislocation that will occur on implementation of the new Fleetplan. ICBC has planned to undertake consultations with stakeholders and the public as part of the development of the Fleetplan Application.

.../4

151 West Esplanade I North Vancouver I British Columbia I V7M 3H9 I 604-661-2800 I regaffairs@icbc.com

• 4 -

As part of the new Fleetplan, Non-insurance costs will be flat-rated, which will cause rate dislocation that ICBC will need to manage as part of implementation. ICBC's July 9, 2008 Filing discussed the dislocation that would occur if flat rate equal payment of Non-insurance costs was implemented for Fleetplan together with all other Basic insurance customers. For Fleetplan customers, the rate dislocation resulting from implementation of flat rate equal payment of Non-insurance costs will be managed together with any dislocation resulting from the new rating methodology and will involve limiting the degree of premium increases and decreases to specified percentages over a period of time. The way in which ICBC proposes to manage this dislocation will be addressed in the Fleetplan Application in fall 2009. Subject to the Commission's review and approval of the Fleetplan Application, ICBC currently plans to implement the new Fleetplan rating algorithm beginning in early 2011. Conclusion Given the current status of the DRM and the expectation that additional information will become available in 2009 from the initial planning for the DRM, ICBC proposes: first, to proceed with planning for the implementation of flat rate equal payment of Non-insurance costs for Fleetplan customers as part of the Fleetplan Application, currently anticipated to be filed in fall 2009; and second, to provide the Commission with an update in late 2009 on further developments on the details and timing of implementation of flat rate equal payment

• f Non-insurance costs for non-Fleet Basic insurance policyholders.

Yours truly,

~/~.

Kathy Parslow Director, Regulatory Affairs and Planning Cc: Doug Chong, Director Strategic Services, BC Utilities Commission Tony Roberts, Senior Economist, BC Utilities Commission Donnie Wing, CA, Senior Vice President, Insurance, Marketing and Underwriting, ICBC

151 West Esplanade I North Vancouver I British Columbia I V7M 3H9 I 604-661-2800 I regaffairs@icbc.com

building trust. driving confidence.

February 25, 2009 British Columbia Utilities Commission Sixth Floor 900 Howe Street Vancouver, BC V6Z 2N3 Attention:

• Ms. Erica M. Hamilton, Commission Secretary

Re: Divergence of Initial versus Detailed Cost Estimates

• f the Impact of Delayed Implementation of the Fourth Category
• f the Driver Risk Premium (DRP) Program

Dear Ms. Hamilton: This letter is in response to the Commission's Letter No. L-60-08, dated January 26, 2009. In that letter the Commission directed ICBC to:

.. .submit a calculation of the expected impacts associated with the detailed

estimates within 30 days of the date of this letter. The Commission directs ICBC to include a description of the means it proposes to use for the recovery

• f the revenue differential as part of the filing of its next revenue

requirements. ICBC understands the Commission's directive as requiring ICBC to provide a calculation detailing the rate impacts arising from the delay of implementing the fourth category of the Driver Risk Premium (DRP) program (Phase Two) using the detailed cost estimates that were provided to the Commission on December 11, 2008 (see Appendix A). ICBC also understands the Commission's directive as requiring ICBC to provide in its next revenue requirements application a description of the measures that ICBC proposes to undertake in

• rder to replace the DRP revenue that will not be collected as a result of the delayed

implementation of Phase Two of the DRP program. In addition to providing the information regarding the impact associated with the delay of implementing Phase Two of the DRP program, ICBC is also including in this reply an explanation about what it believes led to the divergence between the Commission's understanding of the estimated financial impact of delayed implementation of Phase Two of the DRP program provided by ICBC in July 2008 and the detailed estimate provided in December 2008. ICBC will provide further details on how it proposes to replace the DRP revenue in its next revenue requirements application.

. . ./2

151 West Esplanade I North Vancouver I British Columbia I V7M 3H9 I 604-661-2800 I regaffairs@icbc.com

• 2 -

Expected Rate Impacts Arising from the Delayed Implementation of the Fourth Category of the DRP Program Expected DRP premiums have not been taken into account in past revenue requirements analysis because DRP has only just been implemented in 2009. lCBC will include the anticipated DRP premiums in all future revenue requirements analyses. The most significant factor that impacts the analysis of future revenue requirements is the expected claims

• costs. Other factors including investment returns, lCBe's capital levels and the provisions

under the approved Basic Insurance Capital Management Plan, and estimated DRP/Driver Penalty Point CDPP) revenue are all considered in the actuarial analysis of Basic insurance rate indications. The revised DRP revenue, as indicated in Figure 1, is only one of the factors in the determination of future Basic insurance revenue requirements. Figure 1 - Estimated Impact on Revenue Requirements - DRP Fully Implemented vs Impact of One Year Delay of Phase Two (2009 -2012)

Rate

Revenue

Rate Revenue

Impact Impact DRP fully +$6.7 m

• 0.3%

+$26.9

• 1.3%

+$45.4 m

• 2.3%

+$49.1 m implemented [a] +$1.9 m

• 0.1%

+$11.7

• 0.6%

+$32.9 m

• 1.6%

+$46.9 m m

Figure 2 - Estimated Impact of the One Year Delay of Phase Two

Net Rate Net Rate Net Rate Net Revenue Impact Revenue Impact Revenue Impact Revenue Impact from one year delay [boa] (Change in net

• $4.8 m

+0.2%

• $15.2 m

+0.7%

• $12.5 m

+0.7

• $2.2 m

written premium - Appendix A) Assumptions: Rate

Impact

• 2.5%
• 2.4%

Rate Impact

+0.1% [x] ~ net written DPP+DRP (see Appendix A attached) - $15.6 m (net written DPP assuming no DRP

program).

[y] ~

• [x]/{[P]*(1+[rJ)}, where

Projected premium (millions) [P] $1,930 March 16, 2007 Revenue Requirements Application Exhibit A.O.O Rate change

[r] +3.3% effective May 1, 2007

Calendar year rate impacts are equivalent to a January - December policy year. Rounding may affect totals and percentages.

If the DRP program had been fully implemented, the complete DRP-related revenue would

have been realized in 2012. However, under the scenario of a one year delay in implementing Phase Two of the DRP program, that now does not occur until 2013. As a

.. ./3

151 West Esplanade I North Vancouver I British Columbia I V7M 3H9 I 604-661-2800 I regaffairs@icbc.com

• 3 -

result, a difference is present between the fully implemented DRP projections and ICBe's current projections (DRP Phase One only) in each of four consecutive years. Figure 1 above documents ICBe's current projection of the miscellaneous revenue associated with DRP under the full implementation and phased scenarios. Figure 2 represents the revenue difference of the delayed implementation in each of the four affected

• years. These differences are the rate impact of the delay (i.e., the incremental effect of this

item in isolation). Further, one should not accumulate these effects as they strictly represent the impact on that single year and no adjustment is made to future premium based on these calculations. The amount of the difference is quite small in 2009 as the scan period is relatively short under both scenarios. The difference increases as the scan period continues to approach the target three years under both scenarios in 2010 and 2011. In 2012, the difference decreases as the full DRP implementation scenario scan period does not grow at all, while the phased scenario scan period increases to the target three years. Finally, there is no difference in these two scenarios in 2013, as in both cases the scan period has reached

• maturity. As a result, the one year delay in the implementation of Phase Two will not impact

rates past these first few years. As indicated in ICBe's letter to the Commission dated November 7, 2008, general customer perception arising from customer feedback and consultations regarding Phase Two of the DRP program indicated that ICBC must ensure that the contraventions under the DRP program align with customers' perception of high risk driving behaviors and that the associated premiums reinforce the goal of increasing driver accountability by charging premiums that reflect an individual motorist's risk. Based upon this feedback, ICBC is reviewing Phase Two of the program and determining its next steps on how it will address changes to the program and will be applying to the Commission for approval of its planned changes later this year. Differences between the July and December 2008 Estimates In its January 26, 2009 letter, the Commission commented upon the divergence between the initial estimate that ICBC provided in July 2008 during discussions with Commission staff, and the detailed estimates that were provided on December 11, 2008, and reminded ICBC of the need to provide accurate information. ICBC wishes to reassure the Commission that ICBC makes every effort to provide the Commission with the most accurate information (including ad hoc estimates) based on the most current information, assumptions, and forecasts available at a given point in time. Unfortunately, in respect of the DRP-related estimates, there appears to have been a misunderstanding as to what was represented by the preliminary estimate that was provided in July 2008. The misunderstanding occurred during a telephone discussion with Commission staff on July 22, 2008 regarding the impacts of 1) the proposed amendment to the definition of "MVA Conviction" and 2) the delay of the fourth category of the DRP program. During that discussion, ICBC staff noted that the amendment to the definition of "MVA Conviction" would result in a decrease in the number of tickets that ICBC had originally estimated in its analysis of the DRP program that was used its original March 29, 2007 Rate Design

• Application. It was in this context that ICBC provided its estimate indicating that the

amendment to the definition would cause approximately 1,500 - 2,000 fewer drivers to be .. ./4

151 West Esplanade I North Vancouver I British Columbia I V7M 3H9 I 604-661-2800 I regaffairs@icbc.com

• 4 -

affected, and this would result in decrease of approximately $1 million in DRP revenues. ICBC also indicated during the telephone discussion that an estimate of the second item, the impact of the delay in implementing Phase Two, could not be provided at that time. It appears what was intended as an initial estimate of the impact of the first item was mistaken as an initial estimate of the impact of the second item. ICBC acknowledges it received an email message from Commission staff summarizing the July 22, 2008 telephone discussion in which the estimate ICBC provided as the impact arising from the amendment to the definition of "MVA Conviction" was described as ICBe's initial estimate of the impact of the delay of the fourth category of the DRP program. ICBC regrets that it did not recognize that the subject matter of the estimate had been misinterpreted and did not reply correcting the description. ICBC apologizes for the resulting misunderstanding. ICBC trusts that the foregoing meets the requirements of the Commission's January 26, 2009 letter. Please contact me if you have any questions. Yours truly,

5r

'

• )

'/

, ~J

uu---tJatf

clot- Kathy Parslow

Director, Regulatory Affairs and Planning Cc: Donnie Wing, CA, Senior Vice President, Insurance, Marketing and Underwriting, ICBC Attachment

151 West Esplanade I North Vancouver I British Columbia I V7M 3H9 I 604-661-2800 I regaffairs@icbc.com

Appendix A – Projected DRP and DPP revenues – Original Proposal and One Year Delay of Phase Tw o The following table provides the projected DRP and DPP revenues for both the original proposal (including the 4th category) and the projected revenues that are expected by delaying implementation of Phase II of the DRP until December 31, 2008. 2008 2009 2010 2011 2012 2013

Original Proposal

Gross Written Premiums* $ 17,143,981 $ 26,037,045 $ 51,630,975 $ 76,296,430 $ 80,896,100 $ 82,043,605 Net Written Premiums* $ 15,601,023 $ 22,299,565 $ 42,486,244 $ 61,029,514 $ 64,708,790 $ 65,626,680

One Year DRP Phase I I Delay

Gross Written Premiums $ 17,143,981 $ 19,638,570 $ 32,342,695 $ 59,157,870 $ 78,170,610 $ 82,058,650 Net Written Premiums $ 15,601,023 $ 17,467,401 $ 27,308,658 $ 48,502,762 $ 62,528,671 $ 65,638,714

Total Change in Prem ium

Change in Gross Written Premiums (Millions) $ - $ 6.4 $ 19.3 $ 17.1 $ 2.7 $ (0.0) Change in Net Written Premiums (Millions) $ - $ 4.8 $ 15.2 $ 12.5 $ 2.2 $ (0.0) * The Gross written premium is the amount that is projected to be billed. * Net written premium includes provision for bad debt, prorating (surrendering one’s driver’s licence), and reinstatement of DPP and DRP.

Sum m ary:

• The projected impact in Year 1 (2009) of the delay of Phase II of the DRP is $6.4 million in gross written premium and

$4.8 million in net written premium.

• The projected impact over the four year period from 2009-2012 of the delay of Phase II of the DRP is $45.5 million in

gross written premiums and $34.7 million in net written premium.

• As a result of the delay in phasing in DRP II, retirement of the DPP will be delayed one year from December 31, 2010 to

December 31, 2011.

May 1, 2009 British Columbia Utilities Commission Sixth Floor 900 Howe Street Vancouver, BC V6Z 2N3 Attention:

• Ms. Erica M. Hamilton, Commission Secretary

building trust. driving confidence.

Re: Update on Other Operator and Year 2 Rate Design Adjustments Dear Ms. Hamilton: The purpose of this letter is to provide the Commission with an update on the Other Operator (00) initiative in accordance with the Commission's directive in its May 12, 2008

letter to ICBe. In addition, ICBC is providing an update on the year 2 rate design adjustments to the base rates of certain rate class/territory customer groups. In ICBe's March 17, 2008 letter to the CommisSion, ICBC advised that it was awaiting the enactment of necessary amendments to the Insurance (Vehicle) Regulation with respect to the other operator rating variable before it could move forward with implementing 00. At this time, the amendments have not been enacted. If the status of the proposed amendments changes, ICBC will advise the Commission and provide an update on the implementation of 00. As indicated in ICBe's letter to the Commission dated February 6, 2009, 00 is one of the components necessary to enable the unwinding of the Claim-Rated Scale (CRS) and development of a driver record rating model (DRM). ICBC is currently undertaking the detailed design of DRM and will address the implementation of 00 within the context of the

• verall DRM planning. This also applies to implementation of changes to the DRP program

that take into account customer and stakeholder feedback, and that ICBC intends to file with the Commission in mid-2009. Given the current status of 00 and DRP, ICBC must contemplate and evaluate the most effective design and approach to implement the DRM. With the significant design work that is being undertaken on the transition from the CRS to the DRM, ICBC will also have to carefully manage the impact that these changes will have upon its customers, brokers, employees, and stakeholders. In the regulatory proceeding on ICBe's March 29, 2007 Rate Design Application (the Rate Design Application), ICBC proposed base rate adjustments by rate class and territory in

• rder to move each customer group toward their actuarially indicated base rates over a

three year period. The selected adjustments were limited to 6% per annum in order to limit the impact that any individual policyholder may face (due to the adjustment) and overall were revenue neutral. The Commission's January 2008 Decision on Rate Design approved ICBe's proposed plan to adjust the Basic insurance rates of certain rate class/territory combinations for year 1 and directed ICBC to apply to the Commission for approval of any further changes to ICBC's rates. The year 1 rate design adjustment process was performed in 2008 and approved by the Commission on April 15, 2008 to be effective May 1, 2008.

151 West Esplanade I North Vancouver I British Columbia I V7M 3H9 I 604-661-2800 I regaffairs@icbc.com

• 2 -

As indicated in the Rate Design Application, 80% of the personal rate classes were brought within their actuarially indicated rate level by the year 1 rate adjustments that were adopted in 2008. The remaining 20% of personal rate classes would require further rate adjustments of approximately -0.3% on average, (representing a decrease of approximately $2 per policy on average) to bring their base rates to the actuarially indicated rate levels.

In contrast, 72% of commercial rate classes were brought within their actuarially indicated rate level by the year 1 rate adjustments, with the remaining 28% of commercial rate classes requiring further rate adjustments

• f approximately

+2.0%

• n

average (representing an increase of approximately $22 per policy on average) to bring their base rates to the actuarially indicated rate levels. However, the deterioration in the economy appears to be affecting ICBC customers to varying degrees, with certain commercial rate classes such as those related to the delivery of goods impacted. In particular, with regard to the delivery rate class policies, there are early indications of a decline in expected claims

• costs. The year 2 rate adjustments as filed in the Rate Design Application would increase

the rates of these delivery rate classes, and in some cases a full 6%, whereas the early indication of a decline in claims costs suggests that an increase in those rates may no longer be appropriate. Given that the majority of personal rate classes are already at or near their 2007 indicated rate level and that certain commercial rate classes appear to be shifting away from their 2007 indicated rate level, and given there is still significant uncertainty about how changes in the economy will influence claims costs, ICBC does not believe it is appropriate to proceed with the rate adjustments as set out in the Rate Design Application. In order to provide rate stability which is in the best interest of Basic insurance policyholders, ICBC proposes to forego further rate design adjustments for both commercial and personal rate classes until at least 2010 when the economic situation may settle. This will provide rate stability to ICBe's customers during this period of difficult economic uncertainty and also allow ICBC the time to observe changes in the economy and to determine the need for and extent of future rate adjustments for all business segments. ICBC proposes to submit an application to the Commission for future rate design adjustments, as directed in the Commission's January 2008 Decision on Rate Design, in mid-2010. Yours truly, June Elder, Manager, Regulatory Affairs, ICBC Cc: Doug Chong, Director, Strategic Services, BC Utilities Commission Donnie Wing, CA, Senior Vice PreSident, Insurance, Marketing and Underwriting, ICBC

151 West Esplanade I North Vancouver I British Columbia I V7M 3H9 I 604-661-2800 I regaffairs@icbc.com

ERICA M. HAMILTON COMMISSION SECRETARY

Commlssion.Secretary@bcuc.com web site: http://www.bcuc.com VIA E-MAIL

regaffairs@icbc.com june.elder@icbc.com

• Ms. June Elder

Manager, Regulatory Affairs Insurance Corporation of British Columbia 339 - 151 W. Esplanade North Vancouver, B.C. V7M 3H9 Dear Ms. Elder: June 11, 2009 Re: Insurance Corporation of British Columbia ("ICBC") LETTER No. L-39-09

SIXTH FLOOR, 900 HOWE STREET, BOX 250 VANCOUVER, B.C. CANADA V6Z 2N3 TELEPHONE: (604) 660-4700 BC TOLL FREE: 1-800-663-1385 FACSIMILE: (604) 660-1102

Log No. 29368

Letter of July 9, 2008 - Update on Other Operator and Year 2 Rate Design Adjustments The British Columbia Utilities Commission received a letter from ICBC, dated May I, 2009 (the "Update Letter"), concerning the status of the Other Operator initiative, and implementation of the second year of adjustments to the base rates of certain rate class/territory customer groups (the "Year 2 Adjustments"). By letter to the Commission dated March 17,2008, ICBC had advised that enactment of necessary amendments to the Insurance (Vehicle) Regulation were required before Other Operator could be implemented. In the Update Letter, ICBC advised that those amendments have yet to be enacted. The Update Letter states that if the status of the proposed amendments changes ICBC will advise the Commission, and provide an update on the implementation of Other Operator. The Commission considers this an appropriate course of action, as the necessary regulation is not yet in place. Regarding the Year 2 Adjustments, the Update Letter proposes that implementation not proceed. ICBC gives several reasons: the majority of personal rate classes are already at or near their 2007 indicated rate level; certain commercial rate classes appear to be shifting away from their 2007 indicated rate level; there is significant uncertainty about how changes in the economy will influence claims costs. The Commission does not accept the proposal that ICBC not proceed with implementation of the Year 2 Adjustments. The Commission is not persuaded that the Rate Design Decision, dated January 9, 2008, and accompanying Order G-4-08, should effectively be reconsidered. ICBC is to proceed with the directives in the Decision regarding the Year 2 Adjustments. TR/yl cc:

• Mr. Donnie Wing, CA

Senior Vice PreSident, Insurance, Marketing and Underwriting Insurance Corporation of British Columbia (Via Email: donnie.wing@icbc.com)

ORDERS/L-39-09_ICBC Year 2 Update

March 15, 2010 British Columbia Utilities Commission Sixth Floor 900 Howe Street Vancouver, BC V6Z 2N3 Attention:

• Ms. Erica M. Hamilton, Commission Secretary

building trust. driving confidence.

Re: ICSC Rate Design Update Dear Ms. Hamilton: lCBC is writing to provide the Commission with an update on its rate design initiatives. On March 29, 2007, lCBC filed its inaugural Basic insurance Rate Design Application, which set out a Multi-year Plan for making substantial changes to lCBC's rate design that would be phased in over a number of years. The changes included introduction of the Other Operator rating variable (00), the Driver Risk Premium program (DRP), and rate class and territory rate adjustments. ICBC also proposed to bring forward in the shorter term a separate Fleetplan application. Longer term plans included moving from the Claim-rated Scale (the CRS) model towards a more driver-based system (a driver record rating model (DRM)), followed by a review of territory and rate class rating variables. lCBC has now implemented DRP Phase 1, completed two years of rate class and territory rate adjustments, and filed its Fleetplan Application on January 28, 2010. Progress has been made in planning for a DRM to replace the CRS. However, some shorter-term rate design commitments, in particular 00 and DRP Phase 2, are still outstanding.

In the March 2007 Rate Design Application, lCBC recognized that attempting to change its existing rate structure quickly would be impractical and very disruptive to Basic insurance customers, brokers, and employees. Since 2007, customer feedback on DRP has demonstrated that lCBC will need to do considerably more change management work with its customers, brokers, and employees to foster acceptance of these changes than it

• riginally anticipated. Also, in ongoing consultations with customers and brokers, concerns

have been expressed about the magnitude of the upcoming change and the need to proceed carefully when moving forward. In addition, the fundamental rate design changes contemplated by the Multi-year Plan will require substantial modifications to or outright replacement of lCBC's current systems. Changing ICBC's legacy systems in advance of DRM would also result in duplication of work where any changes made in the short term would soon need to be programmed and tested for new systems. With major rate design change and other overall business systems renewal occurring at the same time in the upcoming years, ICBC has the opportunity to be efficient and effective in coordinating the rate design changes with the systems renewal.

151 West Esplanade I North Vancouver I British Columbia I V7M 3H9 I 604-661-2800 I regaffairs@icbc.com

• 2 -

On February 25, 2010, ICBC received a letter from the Government (the Government Letter) regarding its Basic insurance rate design, in particular DRP and 00. The Government Letter acknowledges the customer feedback received to date, the need for ICBC to take a coordinated approach to its rate design initiatives in light of its current DRM planning, and ICBe's systems capabilities, and provides some direction as to how ICBC should proceed. Given the feedback from customers received to date, the need for further customer consultation and communication before implementing DRM, the need to plan carefully for DRM, and consistent with the direction contained in the Government Letter, ICBC now anticipates filing its DRM Application in 2011. The application will include a proposal for a revised approach to the DRP program and an examination of alternative methods for capturing the concept of 00 and accounting for other drivers in its Basic insurance rate design. This letter provides the Commission with an update on ICBe's rate design plans for DRP,

00, and DRM, and discusses some of the challenges posed by ICBe's current systems.

The Government Letter The Government Letter is attached to this update and addresses DRP and 00. In regard to DRP, the Government notes the feedback from customers and stakeholders after implementation of the first phase of DRP and the suggestion that DRP should provide incentives for low-risk driving behaviour in addition to providing negative consequences for high-risk driving behaviour. The Government states that ICBC should reassess DRP in light

• f this feedback before proceeding with the second phase of DRP. If as a result of this

assessment ICBC determines a new approach is required for dealing with convictions, that approach should be included as part of the DRM application. The Government also goes on to say that any plan to implement a more driver-based rate design structure must take into account ICBe's current business plans and system capabilities. For 00, the Government states that it wants to ensure that alternative approaches to 00 have been fully considered before proceeding with amendments to the Insurance (Vehicle) Regulation (IVR). Given that an assessment of DRP will be undertaken, Government encourages ICBC to look at alternative methods for capturing the concept of 00 and accounting for other drivers for submission to the Commission in its DRM Application in 2011. Driver Risk Premium Program When ICBC filed its Multi-year Plan for rate design in March 2007, which included ORP as a step towards a more driver-based rating model, it believed that its customers and brokers would accept the degree of change contemplated by the Multi-year Plan and that its systems could handle the changes required to support ORP and the other initiatives. However, ICBe's current rating structure and supporting systems are vehicle-based and have remained substantially unchanged over the past 25 years. Since 2007 it has become clear that ICBC underestimated the scale of change required of its customers, brokers, and systems to move from the current vehicle-based model to a driver-based model. As ICBC has previously communicated to the Commission, customers provided feedback regarding ORP, in particular Phase 2 (the implementation of the fourth category involving three or more convictions). In customer consultations in 2008 and 2009, customers agreed that high-risk drivers should be held accountable for their behaviour and should pay higher

151 West Esplanade I North Vancouver I British Columbia I V7M 3H9 I 604-661-2800 I regaffairs@icbc.com

• 3 -
• premiums. Customers further believe that those who drive responsibly and safely, without

having crashes, should be rewarded with lower rates. However, some customers have expressed concern about the type of convictions that should be included in DRP and disbelief that traffic convictions increase the likelihood of getting into a crash. ICBC has successfully implemented the first phase of DRP. In 2009, over 7,300 invoices were issued to collect approximately $2.6 million in DRP premiums. Driver Penalty Point (DPP) premiums are still being billed for Motor Vehicle Act and Motor Vehicle Act Regulation violations and where the premium for a specific driver is higher than the indicated DRP premium. In 2009 ICBC also issued over 36,000 DPP invoices to collect approximately $13.8 million in DPP premiums. DRP Phase 1 has not given rise to any new issues for

• customers. ICBC believes this is because most customers can intuitively understand that

those who are convicted of serious types of offences are higher risk drivers. However, work is needed to close the gap between customers' beliefs that high-risk driving behaviours should impact premiums and their reaction to DRP. In advance of DRM, ICBC has been consulting with its customers and will continue to do so going forward. Based on these consultations, a comprehensive plan will be developed to assist in transition, including advertising and education about the upcoming changes. The pace of rate design change must also allow ICBC to maintain overall stability and predictability of its rates and provide customers and brokers with opportunity to absorb upcoming change. Given the feedback from customers received to date, the need for further customer consultation and communication, and consistent with the direction contained in the Government Letter, ICBC will put forward a proposal for a revised approach to the DRP program for approval by the Commission with its DRM Application in 2011. Other Operator In order to implement 00 as approved by the Commission in its January 2008 Decision on Rate Design, an amendment to the IVR is required to impose a requirement that an 00 be declared upon application for an insurance policy. The Government Letter states that the Government wants to ensure that alternative approaches have been fully considered before proceeding with amendments to the IVR. In the absence of the amendment to the IVR, ICBC has been considering alternative methods for capturing the concept of 00 and accounting for other drivers in its Basic insurance rate design and will bring forward a submission in this regard with its DRM Application in 2011. Flat Rate Equal Payment of Non-insurance Costs On February 6, 2009 ICBC submitted a proposal to the Commission regarding flat rate equal payment of Non-insurance costs. At the time of the proposal, ICBC antiCipated filing an application on DRM (including implementation of flat rated Non-insurance costs) in mid- 2010 and implementing a new Fleetplan rating algorithm including flat-rated Non-insurance costs in early 2011. The DRM Application is now antiCipated to be filed in 2011 and a Fleetplan Application for a new rating algorithm after that. ICBC recognizes that flat rate equal payment of Non-insurance costs is an important issue to the Commission and will file further information regarding implementation of flat rate equal payment of Non-insurance costs shortly.

151 West Esplanade I North Vancouver I British Columbia I V7M 3H9 I 604-661-2800 I regaffairs@icbc.com

• 4 -

Planning for a Driver Record Rating Model In the Multi-year Plan ICSC outlined its longer term rate design plans, which include moving from the CRS model towards a more driver-based system (referred to as DRM). ICSC advised of its intention to shift towards a more driver record rating model that better reflects the years licensed, at-fault claims history, and driving convictions for all drivers on a

• vehicle. ICSC discussed the significant scope of the change from CRS, the aSSOCiated risks,

and the need to transition from CRS in a smooth and transparent manner that is not overly disruptive to policyholders and brokers. During 2009 preliminary planning was completed for the design of DRM. In planning, ICSe has been considering how to translate its objective of a driver-based Basic insurance rate structure into a workable and coherent model. It has been examining potential options and has discovered that challenges and complications arise when trying to formulate a model using seemingly simple rating variables (i.e., at-fault crashes, convictions, other operators, and years licensed) when that model will be applied to a wide range of real-life situations and customers. Whereas insurance companies in competitive markets have the option of declining risks that are particularly high or complex, ICBC does not have this option. ICBC must take all-comers and thus must account for all possible scenarios. These scenarios must then be translated into business rules to be inputs into its systems, which then must work together to ensure that customers are being charged the appropriate rates. In developing a model, ICBC must ensure that any changes it makes will not have unintended consequences, inadvertently send the wrong messages to customers, or create loopholes that could potentially be exploited for the benefit of a small set of customers to the detriment of all. ICSC needs to be sure that it is reducing any opportunity for fraud and breaches and not unintentionally creating new ones. Further, decisions and the design of DRM must ensure that rate stability and predictability will be maintained in the transition from the CRS to DRM. In 2010, ICSC will continue working on the design of DRM, which will include reassessment of DRP and an examination of alternative methods for capturing the concept of 00 and accounting for other drivers. Systems ICBe's core Insurance application systems have been in place for 25 years or more and support its vehicle-based rate structure. The current systems were built on the expectation that ICSC would rate the vehicle rather than underwrite the driver. As a result, the vehicle and policy are synonymous in ICSC's systems to the point that a vehicle's license plate number is also the customer's policy number. Over time, the systems have been modified through multiple add-ons and enhancements, resulting in a complex design with a high level

• f integration across application systems. For example, when the Insurance systems were

built it was expected that they would be separate from the Claims and Finance systems. Linkages between the systems have been built over the years (e.g., to implement the monthly Payment Plan), but limitations and further complexity have arisen because these systems were meant to stand alone and were not originally designed to be integrated with each other. The application systems in place today are consistent with and suitable to the needs and purpose for which they were originally designed. However, they are not designed to undertake the fundamental rate design changes contemplated by the Multi-year Plan. As such, these changes will require substantial modifications to or outright replacement of ICBe's current systems. Making changes now to ICSe's legacy systems would also result in duplication of work where any changes implemented in the short term would then also need

151 West Esplanade I North Vancouver I British Columbia I V7M 3H9 I 604-661-2800 I regaffairs@icbc.com

• 5 -

to be programmed and tested for new systems in the upcoming years. With major rate design change and other overall business systems renewal occurring at the same time in the upcoming years, lCBC will take advantage of the opportunity to be efficient and effective in coordinating its upcoming rate design change with its upcoming systems changes. This is also consistent with the direction contained in the Government Letter that any plan to implement a more driver-based system must take into account lCBe's current business plans and systems capabilities. Conclusion lCBC anticipates filing its DRM Application in 2011 that will address its outstanding commitments regarding DRP and 00. Given the feedback from customers received to date, the need for further customer consultation and communication, the need to carefully plan for DRM, and consistent with the direction contained in the Government Letter, lCBC expects to put forward a proposal for a revised approach to the DRP program to the Commission for approval at that time. ICBC will also at that time bring forward a submission for the Commission's consideration regarding alternative methods for capturing the concept of 00 and accounting for other drivers in its Basic insurance rate design. Yours truly,

~

Manager, Regulatory Affairs Cc: Doug Chong, Director, Strategic Services, BC Utilities Commission

Bill Grant, Consultant, BC Utilities Commission

Donnie Wing, CA, Senior Vice President, Corporate Affairs, lCBC

151 West Esplanade I North Vancouver I British Columbia I V7M 3H9 I 604-661-2800 I regaffairs@icbc.com

FEB 25 2010

• Mr. T. Richard Turner

Chair, Board of Directors

BRITISH COLUMBIA

Insurance Corporation of British Columbia Room 517 - 151 West Esplanade North Vancouver BC V7M 3H9 Dear Mr. Turner: I am writing you this letter regarding the ]nsurance Corporation of British Columbia's (ICBC) basic insurance rating structure, in particular two of ICBC's rate design initiatives, the Driver Risk Premium (DRP) program and Other Operator rating variable. This letter is further to the Government Directi ve of January 31, 2007 with respect to ICBC's rate design approved by Order in Council No. 39/07, February 2, 2007. Government believes that ICBC must take a coordinated approach to its rate design initiatives in light of its current planning for a more driver based rate design structure (which ]CBC now refers to as its driver record rating model). Government remains committed to dealing with the issue of high-risk driving. We recognize ICBC has taken steps on the aggressive driving issue through implementation of the first phase

• f the DRP. However, as noted by ICBC, feedback from customers and stakeholders after

implementation of the first phase of DRP has indicated that customers do not understand the link between convictions and crashes. It has also been suggested that DRP should provide incentives for low-risk driving behaviour in addition to providing negative consequences for high-risk driving behaviour. C;ovcrnment agrees that ICBC should reassess the DRP program in light of this customer feedback before proceeding with the second phase of DRP. This assessment should take into account feedback from policyholders and should help ensure ICBC continues to move toward a driver-based rate design structure in a gradual, systematic and . integrated manner without undermining historical stability and predictability, as per the January 31 , 2007 Government Directive. If, as a result of this assessment, ICBC determines a

Ministry of Public Safety and Solicitor General Office of the Minister Mailing Address: PO Box 9053 Stn Prov Govt Vicroria Be V8W 9E2

..

.12

• Mr. T. Richard Turner

Page 2 new approach is required for dealing with convictions, ICBC should include that new approach as part of its application and plan to be submitted to the British Columbia Utilities Commission (BCUC) for a driver record rating model. Any plan to implement a more driver-based rate design structure must take into account rCBC's current business plans and system capabilities, as well as be coordinated with government plans for addressing high-risk driving behaviour. In addition, the BCUC approved the introduction of an Other Operator rating variable to the basic insurance rating structure in January 2008. Government wants to ensure alternative approaches have been fu lly considered before proceeding with amendments to the Insurance

(Vehicle) Regulation. Given that an assessment of DRP will be undertaken, government is

encouraging ICBC to also look at alternative methods for capturing the concept of Other Operator and accounting for other drivers in its basic insurance rate design, for submission to BCUC when it brings forward its application on its driver record rating model in 2011. Kash Heed Solicitor General