February 21, 2008 British Columbia Utilities Commission Sixth Floor - - PDF document

building trust. driving confidence. February 21, 2008 British Columbia Utilities Commission Sixth Floor 900 Howe Street Vancouver, BC V6Z 2N3 Attention:

• Ms. Erica M. Hamilton, Commission Secretary

Re: ICBC's Februarv 20. 2008 Worksho~ Presentation on ICBC's 2007 Reaional Claim Centres Allocation Filinq Dear Ms. Hamilton: Please find attached a copy of ICBC's presentation on ICBC's 2007 Regional Claim Centres Allocation Filing presented at the BCUC public workshop on February 20, 2008. Yours truly, June Elder Manager, Regulatory Affairs CC: Doug Chong, Senior Financial Analyst Philip Nakoneshny, Director Bill Grant, Consultant Registered Intervenors Attachment

151 West Esplanade I North Vancouver British Columbia I V7M 3H9 1 604-661-2800

B-6

ICBC 2007 ALLOCATION REVIEW PROCESS

EXHIBIT

Regional Claim Centres Allocation

Presentation to British Columbia Utilities Commission Staff and Intervenors February 20, 2008

Presented by: Darcy Gorchynski Director Claim s Field Services Anw ar Chaudhry Corporate Controller

2

Introduction

Purpose of Workshop

– Overview of Regional Claim Centres and changes since 2005 – Review updated work effort study – Provide Background information for Negotiated Settlement Process commencing February 20, 2008 – Answer any questions regarding the Regional Claim Centres and the allocation of the costs of these centres

3

Agenda

• Regional Claim Centres
• How I CBC Handles Claim s
• Transaction Costing
• Allocation Model Review 2 0 0 6
• Updating W ork Effort 2 0 0 7
• Allocating betw een Basic and

Optional I nsurance

• Conclusion

4

ICBC Claims Handling

Specialized Claims Handling 11,645 1% Total Paid $657,050,846 Regional Claim Centres 533,649 54% Total Paid $1,496,601,508 Telephone Claims Department 446,816 45% Total Paid $402,344,863

2 0 0 7

Focus of the filing and this workshop/ NSP is the Regional Claim Centres

5

Regional Claim Centres

Regional Claim Centres consist of:

• 38 claim centres
• 4 claims handling departments
• Organized into 4 Regions

(Appendix A of Filing)

6

Regional Claim Centres

Basic insurance includes compulsory coverages:

– Accident Benefits – Third Party Legal Liability coverage ($200,000) – Unidentified/ Uninsured motorist protection

Optional insurance includes:

– Collision coverage – Comprehensive coverage – Extension Third Party Legal Liability coverage (> $200,000) – Other optional purchased coverages

Claims handled by Regional Claim Centres:

– Bodily Injury (BI) claims less than the $200,000 compulsory insurance limit – Material Damage (MD) claims; comprehensive and collision, including contentious liability

7

Regional Claim Centres

1 ,7 3 6 $ 1 3 5 ,1 7 8 $ 5 ,0 0 0 $ 1 4 ,5 1 1 $ 1 1 5 ,6 6 7 2 0 0 7 1 ,7 2 5 1 ,7 4 0 1 ,7 2 5 FTEs $ 1 3 0 ,6 2 4 $ 1 2 9 ,1 5 0 $ 1 2 8 ,2 1 5 Total Operating Costs ($000) $ 4 ,9 8 9 $ 4 ,8 4 3 $ 5 ,0 5 3 Other Operating Costs ($000) $ 1 3 ,0 6 3 $ 1 3 ,4 4 3 $ 1 2 ,9 3 2 Facilities Costs

($000)

$ 1 1 2 ,5 7 2 $ 1 1 0 ,8 6 4 $ 1 1 0 ,2 3 0 Com pensation

($000)

2 0 0 6 2 0 0 5 2 0 0 4

Operating costs to be allocated:

8

Regional Claim Centres

1,736 1,725 1,740 1,725

Total

287 286 293 290

Material Dam age Adjuster

555 548 550 545

Bodily I njury Adjuster / Exam iner

267 276 283 284

Estim ator

404 398 397 402

Office Assistant / Claim s Support Assistant

223 217 217 204

Manager / Supervisor

2 0 0 7 2 0 0 6 2 0 0 5 2 0 0 4 Job Category

Full Tim e Equivalents

9

Overall Regional Claim Centres Allocation

Key impacts to Regional Claim Centres Allocation since the 2005 review:

– Success of programs directed at handling of Material Damage claims – Focus on handling Bodily Injury claims – Changes to staff mix

Allocation is impacted by work effort as well as changes to staffing mix and compensation

10

Agenda

• Regional Claim Centres
• How I CBC Handles Claim s
• Transaction Costing
• Allocation Model Review 2 0 0 6
• Updating W ork Effort 2 0 0 7
• Allocating betw een Basic and

Optional I nsurance

• Conclusion

11

How ICBC Handles Claims

Customer reports by Phone or Web Customer Appointment

Regional Claim Centres

Material Damage Bodily Injury Adjuster Adjuster Estimator Specialized Claims Handling Claim Transfers Express Repair Estimate

• r

Claim Centre Estimate Telephone Claims Dept

12

How ICBC Handles Claims

Job Categories

• Manager / Supervisor
• Office Assistant / Claims Support Assistant
• Estimator
• Bodily Injury Adjuster / Examiner
• Material Damage Adjuster

13

How ICBC Handles Claims

Managers

• Claim Centre Manager / Claims Managers / Administration

Manager / Material Damage Manager / Supervisors

• Oversees Administration, Training / Development and

Performance of staff

• Technical experts who develop claims handling strategies

and ensure compliance to claims handling policies

• Reviews files and authorizes settlement authority
• Chairs Risk Assessment and Low Velocity Impact committees
• Deals with customer issues and supplier relations

14

How ICBC Handles Claims

Office Assistants / Claims Support Assistants

• Customer Appointments / Glass Claims / General enquiries
• Telephone Claims Department tasks / enquiries
• Arranges towing of vehicles and documents for total loss

vehicles

• Responds to medical service provider enquiries on treatment

dates and payments

• Arranges Independent Medical appointments and notifies

claimants

• Prepares bodily injury correspondence
• Completes data entry / General office support

15

How ICBC Handles Claims

Estimators

• Completes all types of vehicle damage estimates
• Approves Express Repair estimates
• Negotiates and settles total loss vehicles
• Assists with liability assessments through damage review and

vehicle match-ups

• Completes Low Velocity Impact damage protocols
• Attends body shops for quality reviews and repair issues
• Authorizes payments to body shops and subrogation claims

16

How ICBC Handles Claims

Material Damage Adjusters

• Verifies coverage and investigates loss
• Takes statements, contacts witnesses and police
• Investigates and approves total theft claims
• Researches legislation, case law and other precedents
• Negotiates and resolves liability
• Documents Low Velocity Impact claims
• Handles Accident Benefits claims and some minor bodily injury

claims

• Instructs defence counsel on Small Claims Court actions

17

Bodily Injury Adjusters

• Verifies coverage and investigates loss
• Takes statements, contacts witnesses and police
• Obtains wage and medical information for defence of injury

claims

• Researches legislation, case law and other legal precedents
• Evaluates facts and theories of defence to assess liability and

injury settlements

• Negotiates and settles injury claims with claimants and

plaintiff counsel

• Instructs defence counsel on legal actions

How ICBC Handles Claims

18

Material Damage vs. Bodily Injury Claims

Material Damage

• 50 new claims per month per adjuster
• On average MD claims take 52 days to settle

Bodily Injury

• 10 new claims per month per adjuster
• On average BI claims take 416 days to settle

How ICBC Handles Claims

19

Coquitlam Claim Centre

20

Coquitlam Claim Centre

Claim Centre Manager (1) Administrative Manager (1) Administrative Supervisor (1) Material Damage Manager (1) Material Damage Supervisor (1) Office Assistants (21) Estimators (10) Claims Managers (5) Bodily Injury Adjusters (30) Material Damage Adjusters (15)

15 30 10 21 10 86

MD Adjusters BI Adjusters Estim ators Office Assistants Managers / Supervisors Total Staff

21

Coquitlam Claim Centre

Claim Centre Manager Claims Manager Claims Manager Claims Manager Claims Manager Claims Manager Bodily Injury Adjuster

(8)

Bodily Injury Adjuster

(8)

Bodily Injury Adjuster

(8)

Bodily Injury Adjuster

(6)

Material Damage Adjuster

(3)

Material Damage Adjuster

(12)

22

Agenda

• Regional Claim Centres
• How I CBC Handles Claim s
• Transaction Costing
• Allocation Model Review 2 0 0 6
• Updating W ork Effort 2 0 0 7
• Allocating betw een Basic and

Optional I nsurance

• Conclusion

23

Transaction Costing

The allocation of Regional Claim Centres costs must recognize:

1. Different types of claims handled in Regional Claim Centres 2. Different types of claims require different skill levels 3. Different types of claims require different amounts of staff time (work effort) to resolve them 4. Different numbers of staff in different job categories 5. Different levels of compensation in different job categories

Transaction costing is the methodology used for Regional Claim Centres

24

Transaction Costing

Work Effort is the time spent by the:

• 5 categories of employees
• n
• 10 types of claims transactions handled in

Regional Claim Centres (6 MD / 4 BI)

Work effort percentages are established by experienced claims handling personnel

25

Job Categories

For the work effort study the Regional Claim Centres staff are categorized into 5 job categories

1. Manager / Supervisor 2. Office Assistant / Claims Support Assistant 3. Estimator 4. Bodily Injury Adjuster / Examiner 5. Material Damage Adjuster

26

Transaction Types

For the work effort study the Regional Claim Centre work is categorized into 10 transaction types based on similar claims handling

Six are Material Damage (MD) based:

Allocation X X MD Files – Other X MD Files – Comprehensive Other X MD Files – Comprehensive Theft X X MD Files – Collision & Property Damage (PD) X X MD Files – Customer Care X MD Files – Glass Optional Basic Transaction Type

27

Transaction Types

For the work effort study the Regional Claim Centre work is categorized into 10 transaction types based on similar claims handling

Four are Bodily Injury (BI) based:

Allocation X X BI Exposures – Litigated X X BI Exposures – Represented X BI Exposures – Non-Represented X BI Exposures – Low Velocity Impact (LVI) Optional Basic Transaction Type

28

Transaction Costing

Transaction Costing Methodology (Refer to handout)

Step 1 – Identify job categories (5)

Manager Work Effort %'s by trx type Manager Compensation $'s by trx type Office Assistant Work Effort %'s by trx type Office Assistant Compensation $'s by trx type Estimator Work Effort %'s by trx type Estimator Compensation $'s by trx type Adj - Bodily Injury Work Effort %'s by trx type Adj - Bodily Injury Compensation $'s by trx type Adj - MD Work Effort %'s by trx type Adj - MD Compensation $'s by trx type

Job Categories and Compensation

1

29

Transaction Costing

Step 2 – Identify transaction types (6 MD / 4 BI)

Transaction Types 1 MD Files - Glass 2 MD Files - Customer Care 3 MD Files - Collision & P/ Damage 4 MD Files - Comprehensive Theft 5 MD Files - Comprehensive Other 6 MD Files - Other 7 BI Exposures - LVI 8 BI Exposures - Non-Represented 9 BI Exposures - Represented 10 BI Exposures - Litigated

2

30

Transaction Costing

Step 3 – Determine work effort percentages

Manager Work Effort %'s by trx type

Transaction Types 1 MD Files - Glass 0.5% 2 MD Files - Customer Care 2.0% 3 MD Files - Collision & P/ Damage 19.5% 4 MD Files - Comprehensive Theft 7.5% 5 MD Files - Comprehensive Other 4.5% 6 MD Files - Other 1.0% 7 BI Exposures - LVI 7.0% 8 BI Exposures - Non-Represented 30.0% 9 BI Exposures - Represented 9.0% 10 BI Exposures - Litigated 19.0% Total 100.0%

3

31

Transaction Costing

Step 4 – Distribute compensation to each transaction type

Manager Work Effort %'s by trx type Manager Compensation $'s by trx type Office Assistant Work Effort %'s by trx type Office Assistant Compensation $'s by trx type

Transaction Types 1 MD Files - Glass 0.5% 56,747 4.6% 526,407 2 MD Files - Customer Care 2.0% 226,990 19.5% 2,222,609 3 MD Files - Collision & P/ Damage 19.5% 2,213,148 15.4% 1,754,691 4 MD Files - Comprehensive Theft 7.5% 851,211 4.1% 467,918 5 MD Files - Comprehensive Other 4.5% 510,726 2.1% 233,959 6 MD Files - Other 1.0% 113,495 1.5% 175,469 7 BI Exposures - LVI 7.0% 794,463 1.0% 116,979 8 BI Exposures - Non-Represented 30.0% 3,404,843 23.6% 2,690,526 9 BI Exposures - Represented 9.0% 1,021,453 10.8% 1,228,284 10 BI Exposures - Litigated 19.0% 2,156,400 17.4% 1,988,650 Total 100.0% 11,349,476 100.0% 11,405,492

Job Categories and Compensation

4

= X = X

32

Transaction Costing

Step 5 – Total compensation for each transaction type

Manager Work Effort %'s by trx type Manager Compensation $'s by trx type Office Assistant Work Effort %'s by trx type Office Assistant Compensation $'s by trx type

Total Transaction Types

+ =

1 MD Files - Glass 0.5% 56,747 4.6% 526,407 639,209 2 MD Files - Customer Care 2.0% 226,990 19.5% 2,222,609 7,216,096 3 MD Files - Collision & P/ Damage 19.5% 2,213,148 15.4% 1,754,691 15,406,080 4 MD Files - Comprehensive Theft 7.5% 851,211 4.1% 467,918 4,551,144 5 MD Files - Comprehensive Other 4.5% 510,726 2.1% 233,959 2,445,248 6 MD Files - Other 1.0% 113,495 1.5% 175,469 1,341,365 7 BI Exposures - LVI 7.0% 794,463 1.0% 116,979 6,815,591 8 BI Exposures - Non-Represented 30.0% 3,404,843 23.6% 2,690,526 16,703,764 9 BI Exposures - Represented 9.0% 1,021,453 10.8% 1,228,284 6,863,244 10 BI Exposures - Litigated 19.0% 2,156,400 17.4% 1,988,650 12,218,688 Total 100.0% 11,349,476 100.0% 11,405,492 74,200,428

Job Categories and Compensation

5

33

Transaction Costing

Step 6 – Allocation of compensation costs to Basic and Optional Insurance

Total Basic Optional Transaction Types 1 MD Files - Glass 639,209 0% 100% 2 MD Files - Customer Care 7,216,096 22% 78% 3 MD Files - Collision & P/ Damage 15,406,080 35% 65% 4 MD Files - Comprehensive Theft 4,551,144 0% 100% 5 MD Files - Comprehensive Other 2,445,248 0% 100% 6 MD Files - Other 1,341,365 10% 90% 7 BI Exposures - LVI 6,815,591 100% 0% 8 BI Exposures - Non-Represented 16,703,764 100% 0% 9 BI Exposures - Represented 6,863,244 95% 5% 10 BI Exposures - Litigated 12,218,688 95% 5% Total 74,200,428 % Allocation

6

34

Transaction Costing

Step 7 – Basic / Optional Costs

Total Basic Optional Basic Optional Transaction Types 1 MD Files - Glass 639,209 0% 100%

• 639,209

2 MD Files - Customer Care 7,216,096 22% 78% 1,591,925 5,624,171 3 MD Files - Collision & P/ Damage 15,406,080 35% 65% 5,391,791 10,014,289 4 MD Files - Comprehensive Theft 4,551,144 0% 100%

• 4,551,144

5 MD Files - Comprehensive Other 2,445,248 0% 100%

• 2,445,248

6 MD Files - Other 1,341,365 10% 90% 133,701 1,207,664 7 BI Exposures - LVI 6,815,591 100% 0% 6,815,591

• 8

BI Exposures - Non-Represented 16,703,764 100% 0% 16,703,764

• 9

BI Exposures - Represented 6,863,244 95% 5% 6,520,081 343,162 10 BI Exposures - Litigated 12,218,688 95% 5% 11,607,753 610,934 Total 74,200,428 48,764,607 25,435,821 65.72% 34.28% X = % Allocation Cost Allocation

7

35

Transaction Costing

Step 8 – Regional Allocation of Total Operating Costs

Region LOB CC LOB DESC Sum of Total $ Sum of Basic % Sum of Opt % Sum of Basic $ Sum of Opt $ South 126000 S. Interior Examiner 434,927 100.00% 0.00% 434,927

• Lower Mainland

171310 Burnaby Claims Centre 6,063,791 65.72% 34.28% 3,985,130 2,078,660 Lower Mainland 171316 Kingsway Claim Centre 6,957,769 65.72% 34.28% 4,572,654 2,385,115 Lower Mainland 171317 South Vancouver 764,587 65.72% 34.28% 502,488 262,100 Lower Mainland 171318 Richmond Claim Centre 7,778,352 65.72% 34.28% 5,111,942 2,666,410 Lower Mainland 171319 Surrey Claims Centre 6,834,246 65.72% 34.28% 4,491,475 2,342,772 Lower Mainland 171320 Newton Claims Centre 6,717,965 65.72% 34.28% 4,415,054 2,302,911 Lower Mainland 171321 Coquitlam Claims Centre 6,130,162 65.72% 34.28% 4,028,750 2,101,412 Lower Mainland 171322 Abbotsford 6,051,456 65.72% 34.28% 3,977,024 2,074,432 Lower Mainland 171323 Langley Claims Centre 5,978,549 65.72% 34.28% 3,929,109 2,049,440 Lower Mainland 171324 Chilliwack 2,677,504 65.72% 34.28% 1,759,659 917,845 Lower Mainland 171327 Lake City Claims Centre 2,569,522 65.72% 34.28% 1,688,693 880,829 Lower Mainland 171328 BI Litigation Unit 1,578,397 65.72% 34.28% 1,037,324 541,073 Lower Mainland 171337 Specialty Veh. Appr. 523,760 65.72% 34.28% 344,215 179,544 Southern Interior 171352 Nelson Claims Centre 408,812 59.34% 40.66% 242,593 166,218 Northern Interior 171354 Smithers Claims Centre 783,302 58.22% 41.78% 456,050 327,253 Northern Interior 171355 Prince Rupert 388,523 58.22% 41.78% 226,203 162,319 Vancouver Island 171357 Powell River 238,100 66.10% 33.90% 157,374 80,726

8

36

Transaction Costing

Step 9 – Aggregate Regional Totals to determine Basic versus Optional insurance allocation

Region LOB CC LOB DESC Sum of Total $ Sum of Basic % Sum of Opt % Sum of Basic $ Sum of Opt $ Southern Interior 171547 Trail Claims Centre 1,224,527 59.34% 40.66% 726,647 497,879 Southern Interior 171548 Cranbrook Claims Centre 1,648,850 59.34% 40.66% 978,445 670,405 Southern Interior 171549 Vernon Claims Centre 1,734,459 59.34% 40.66% 1,029,247 705,213 Northern Interior 171550 Frt. St. John 1,127,498 58.22% 41.78% 656,445 471,053 Northern Interior 171553 Quesnel Claims Centre 712,895 58.22% 41.78% 415,058 297,837 Southern Interior 171558 Salmon Arm 861,434 59.34% 40.66% 511,184 350,250 Southern Interior 171559 Interior Clms Alloc. 29 59.34% 40.66% 17 12 Lower Mainland 173621 New Westminster 4,732,277 65.72% 34.28% 3,110,058 1,622,219 Lower Mainland 175600 Maple Ridge 3,338,184 65.72% 34.28% 2,193,858 1,144,326 Lower Mainland 176900 Central Exp. Rep.-GV 866,363 65.72% 34.28% 569,375 296,988 Lower Mainland 177200 Lower Mainland Express Re 896,361 65.72% 34.28% 589,090 307,272 Grand Total 130,623,842 64.61% 35.39% 84,392,764 46,231,078 Basic Optional Final Allocation 64.61% 35.39% Divide by total costs to establish overall % split

9

+ = + =

37

Agenda

• Regional Claim Centres
• How I CBC Handles Claim s
• Transaction Costing
• Allocation Model Review 2 0 0 6
• Updating W ork Effort 2 0 0 7
• Allocating betw een Basic and

Optional I nsurance

• Conclusion

38

Allocation Model Review - 2006

The review consisted of:

• Reviewing the Kind of Loss (KOL) codes to ensure all

types of claims are being captured in the model

• Identify any new job categories and transaction types

that might be required

• Updating the descriptions of each transaction type, job

category and their associated activities

• Determining if a separate transaction type for File

Initiation was required

39

Conclusions from the 2006 review were:

– No substantial changes were required

• Added Claims Support Assistant to the Office Assistant job

category

• Added negated BI exposures to BI Exposures – Low Velocity

Impact transaction type

– The 10 transaction types reflect the work in Regional Claim Centres – No separate File Initiation transaction type was required – Model is flexible enough to accommodate business changes

Allocation Model Review - 2006

40

Agenda

• Regional Claim Centres
• How I CBC Handles Claim s
• Transaction Costing
• Allocation Model Review 2 0 0 6
• Updating W ork Effort 2 0 0 7
• Allocating betw een Basic and

Optional I nsurance

• Conclusion

41

Updating Work Effort - 2007

Experienced claims handling personnel reviewed work effort percentages

• Personnel consisted of seven Front-Line Managers,

seven Mid-Level Managers and one Director, plus support personnel (Appendix C of Filing)

• Assessed impacts of business changes, volume

changes and regional differences

• 66 revisions made to work effort percentages across

all regions (Refer to handout)

42

Updating Work Effort - 2007

Key business changes affecting work effort percentages:

• Glass Express - centralized in the Lower Mainland region
• Increase volume of claims proceeding through Glass Express

Lower Mainland GV FV LM GV FV LM GV FV LM GV FV LM GV FV LM Transaction Type 2004 2004 2007 2004 2004 2007 2004 2004 2007 2004 2004 2007 2004 2004 2007 MD Files - Glass 1.5% 1.5% 0.5% 7.0% 7.0% 4.5% 1.0% 1.0% 0.5% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% MD Files - Cust Care 2.0% 2.0% 2.0% 22.0% 22.0% 19.0% 40.0% 40.0% 41.5% 0.0% 0.0% 0.0% 1.0% 1.0% 1.0% MD Files - Collision/PD 21.0% 21.0% 19.5% 15.0% 15.0% 15.0% 32.0% 31.0% 33.0% 4.5% 4.5% 4.5% 55.0% 52.0% 56.5% MD Files - Comp Theft 10.0% 10.0% 7.5% 5.0% 5.0% 4.0% 10.0% 12.0% 9.0% 0.0% 0.0% 0.0% 20.0% 23.0% 19.5% MD Files - Comp Other 4.5% 4.5% 4.5% 2.0% 2.0% 2.0% 5.0% 5.0% 5.0% 0.0% 0.0% 0.0% 10.0% 10.0% 10.0% MD Files - Other 1.0% 1.0% 1.0% 1.5% 1.5% 1.5% 2.0% 2.0% 2.0% 0.5% 0.5% 0.5% 5.0% 5.0% 6.0% BI Exp - LVI 7.0% 7.0% 7.0% 1.0% 1.0% 1.0% 10.0% 9.0% 9.0% 15.0% 15.0% 15.0% 5.0% 5.0% 5.0% BI Exp - Non Rep 28.0% 28.0% 30.0% 21.0% 21.0% 23.0% 0.0% 0.0% 0.0% 35.0% 35.0% 36.0% 2.0% 2.0% 2.0% BI Exp - Rep 7.0% 7.0% 9.0% 8.0% 8.0% 10.5% 0.0% 0.0% 0.0% 16.0% 16.0% 16.0% 0.0% 0.0% 0.0% BI Exp - Litigated 18.0% 18.0% 19.0% 15.0% 15.0% 17.0% 0.0% 0.0% 0.0% 27.0% 27.0% 28.0% 0.0% 0.0% 0.0% MD Adj Manager OA/CSA Estimator BI Adj

43

Updating Work Effort - 2007

Key business changes affecting work effort percentages:

• Express Estimating - volume increase

Lower Mainland GV FV LM GV FV LM GV FV LM GV FV LM GV FV LM Transaction Type 2004 2004 2007 2004 2004 2007 2004 2004 2007 2004 2004 2007 2004 2004 2007 MD Files - Glass 1.5% 1.5% 0.5% 7.0% 7.0% 4.5% 1.0% 1.0% 0.5% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% MD Files - Cust Care 2.0% 2.0% 2.0% 22.0% 22.0% 19.0% 40.0% 40.0% 41.5% 0.0% 0.0% 0.0% 1.0% 1.0% 1.0% MD Files - Collision/PD 21.0% 21.0% 19.5% 15.0% 15.0% 15.0% 32.0% 31.0% 33.0% 4.5% 4.5% 4.5% 55.0% 52.0% 56.5% MD Files - Comp Theft 10.0% 10.0% 7.5% 5.0% 5.0% 4.0% 10.0% 12.0% 9.0% 0.0% 0.0% 0.0% 20.0% 23.0% 19.5% MD Files - Comp Other 4.5% 4.5% 4.5% 2.0% 2.0% 2.0% 5.0% 5.0% 5.0% 0.0% 0.0% 0.0% 10.0% 10.0% 10.0% MD Files - Other 1.0% 1.0% 1.0% 1.5% 1.5% 1.5% 2.0% 2.0% 2.0% 0.5% 0.5% 0.5% 5.0% 5.0% 6.0% BI Exp - LVI 7.0% 7.0% 7.0% 1.0% 1.0% 1.0% 10.0% 9.0% 9.0% 15.0% 15.0% 15.0% 5.0% 5.0% 5.0% BI Exp - Non Rep 28.0% 28.0% 30.0% 21.0% 21.0% 23.0% 0.0% 0.0% 0.0% 35.0% 35.0% 36.0% 2.0% 2.0% 2.0% BI Exp - Rep 7.0% 7.0% 9.0% 8.0% 8.0% 10.5% 0.0% 0.0% 0.0% 16.0% 16.0% 16.0% 0.0% 0.0% 0.0% BI Exp - Litigated 18.0% 18.0% 19.0% 15.0% 15.0% 17.0% 0.0% 0.0% 0.0% 27.0% 27.0% 28.0% 0.0% 0.0% 0.0% MD Adj Manager OA/CSA Estimator BI Adj

44

Updating Work Effort - 2007

Key business changes affecting work effort percentages:

• Total Theft claims – volume changes

Lower Mainland GV FV LM GV FV LM GV FV LM GV FV LM GV FV LM Transaction Type 2004 2004 2007 2004 2004 2007 2004 2004 2007 2004 2004 2007 2004 2004 2007 MD Files - Glass 1.5% 1.5% 0.5% 7.0% 7.0% 4.5% 1.0% 1.0% 0.5% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% MD Files - Cust Care 2.0% 2.0% 2.0% 22.0% 22.0% 19.0% 40.0% 40.0% 41.5% 0.0% 0.0% 0.0% 1.0% 1.0% 1.0% MD Files - Collision/PD 21.0% 21.0% 19.5% 15.0% 15.0% 15.0% 32.0% 31.0% 33.0% 4.5% 4.5% 4.5% 55.0% 52.0% 56.5% MD Files - Comp Theft 10.0% 10.0% 7.5% 5.0% 5.0% 4.0% 10.0% 12.0% 9.0% 0.0% 0.0% 0.0% 20.0% 23.0% 19.5% MD Files - Comp Other 4.5% 4.5% 4.5% 2.0% 2.0% 2.0% 5.0% 5.0% 5.0% 0.0% 0.0% 0.0% 10.0% 10.0% 10.0% MD Files - Other 1.0% 1.0% 1.0% 1.5% 1.5% 1.5% 2.0% 2.0% 2.0% 0.5% 0.5% 0.5% 5.0% 5.0% 6.0% BI Exp - LVI 7.0% 7.0% 7.0% 1.0% 1.0% 1.0% 10.0% 9.0% 9.0% 15.0% 15.0% 15.0% 5.0% 5.0% 5.0% BI Exp - Non Rep 28.0% 28.0% 30.0% 21.0% 21.0% 23.0% 0.0% 0.0% 0.0% 35.0% 35.0% 36.0% 2.0% 2.0% 2.0% BI Exp - Rep 7.0% 7.0% 9.0% 8.0% 8.0% 10.5% 0.0% 0.0% 0.0% 16.0% 16.0% 16.0% 0.0% 0.0% 0.0% BI Exp - Litigated 18.0% 18.0% 19.0% 15.0% 15.0% 17.0% 0.0% 0.0% 0.0% 27.0% 27.0% 28.0% 0.0% 0.0% 0.0% MD Adj Manager OA/CSA Estimator BI Adj

45

Updating Work Effort - 2007

Key business changes affecting work effort percentages:

• Focus on bodily injury claims

Lower Mainland GV FV LM GV FV LM GV FV LM GV FV LM GV FV LM Transaction Type 2004 2004 2007 2004 2004 2007 2004 2004 2007 2004 2004 2007 2004 2004 2007 MD Files - Glass 1.5% 1.5% 0.5% 7.0% 7.0% 4.5% 1.0% 1.0% 0.5% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% MD Files - Cust Care 2.0% 2.0% 2.0% 22.0% 22.0% 19.0% 40.0% 40.0% 41.5% 0.0% 0.0% 0.0% 1.0% 1.0% 1.0% MD Files - Collision/PD 21.0% 21.0% 19.5% 15.0% 15.0% 15.0% 32.0% 31.0% 33.0% 4.5% 4.5% 4.5% 55.0% 52.0% 56.5% MD Files - Comp Theft 10.0% 10.0% 7.5% 5.0% 5.0% 4.0% 10.0% 12.0% 9.0% 0.0% 0.0% 0.0% 20.0% 23.0% 19.5% MD Files - Comp Other 4.5% 4.5% 4.5% 2.0% 2.0% 2.0% 5.0% 5.0% 5.0% 0.0% 0.0% 0.0% 10.0% 10.0% 10.0% MD Files - Other 1.0% 1.0% 1.0% 1.5% 1.5% 1.5% 2.0% 2.0% 2.0% 0.5% 0.5% 0.5% 5.0% 5.0% 6.0% BI Exp - LVI 7.0% 7.0% 7.0% 1.0% 1.0% 1.0% 10.0% 9.0% 9.0% 15.0% 15.0% 15.0% 5.0% 5.0% 5.0% BI Exp - Non Rep 28.0% 28.0% 30.0% 21.0% 21.0% 23.0% 0.0% 0.0% 0.0% 35.0% 35.0% 36.0% 2.0% 2.0% 2.0% BI Exp - Rep 7.0% 7.0% 9.0% 8.0% 8.0% 10.5% 0.0% 0.0% 0.0% 16.0% 16.0% 16.0% 0.0% 0.0% 0.0% BI Exp - Litigated 18.0% 18.0% 19.0% 15.0% 15.0% 17.0% 0.0% 0.0% 0.0% 27.0% 27.0% 28.0% 0.0% 0.0% 0.0% MD Adj Manager OA/CSA Estimator BI Adj

46

Updating Work Effort - 2007

Updated Work Effort percentages reflect:

– Success of programs directed at handling

• f Material Damage claims

– Focus on handling of Bodily Injury claims – Changes to Total Theft volumes

47

Com fort Break

The presentation will resume in 15 minutes… …

48

Agenda

• Regional Claim Centres
• How I CBC Handles Claim s
• Transaction Costing
• Allocation Model Review 2 0 0 6
• Updating W ork Effort 2 0 0 7
• Allocating betw een Basic and

Optional I nsurance

• Conclusion

49

Allocating between Basic insurance and Optional insurance

5 of 10 Transaction Types are allocated directly to Basic insurance or Optional insurance (No change from 2005 Review)

1 0 0 % 1 0 0 % Basic Optional 1 0 0 % 1 0 0 % 1 0 0 %

Allocation

BI Exposures – Non-Represented BI Exposures - LVI MD Files – Com prehensive Other MD Files – Com prehensive Theft MD Files - Glass

Transaction Type

50

Allocating between Basic insurance and Optional insurance

5 of 10 Transaction Types are allocated to both Basic insurance and Optional insurance

9 5 % 9 5 % 1 0 % 3 5 % 2 2 % Basic Optional 5 % 5 % 9 0 % 6 5 % 7 8 %

Allocation

BI Exposures – Litigated BI Exposures – Represented MD Files – Other MD Files – Collision / Property Dam age MD Files – Custom er Care

Transaction Type

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MD Files – Other

MD Files – Other: Unidentified Motorist (hit-and-run) and Uninsured Motorist property damage files

• Prior allocation done by percentage of policies purchased with:
• No Collision coverage / Collision deductible < $750 or > $750
• 2005 Review resulted in an allocation of 37% Basic / 63% Optional
• Proposed change to use hit-and-run claims recorded
• Allocation based on 2006 data - 1 0 % Basic / 9 0 % Optional

MD Files – Other represents $2.3 million or 2% of overall 2006 Regional Claim Centres operating costs

• Proposed change results in an increased allocation to Optional

insurance of $618,681

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MD Files – Collision/ Property Damage (PD)

16,603 16,603 N 318 318 Y Single Vehicle Collision KOL 01 Optional Basic Total KOL Count 2006 Transfer (Y/ N) Coverage 16,422 16,422 N 9,714 9,714 Y No Collision Coverage KOL 37

Vehicle Collision claims paid directly on Collision coverage (Optional) or transferred to a Property Damage coverage (Basic) as a result of a liability assessment.

• Figure 17, page 49 of Filing

64,752 64,752 N 38,643 38,643 38,643 Y Multi - Vehicle Collision KOL 02 65% 35% Basic / Optional % Split 120,316 64,779 Total

53

MD Files – Collision/ Property Damage (PD)

16,603 16,603 N 318 318 Y Single Vehicle Collision KOL 01 Optional Basic Total KOL Count 2006 Transfer (Y/ N) Coverage

• Vehicle carries ICBC collision coverage
• Work effort primarily vehicle damage
• Little work effort to determine liability (Non-contentious)
• Attribute fully to Optional insurance

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Multi Vehicle Collision – Contentious Liability

Statement of Driver Passenger Witness Contact Police Attend Accident Scene Research Liability Material Damage Adjuster Estimator Estimate Vehicle Verify damage consistent with loss Review damage to assist liability assessment Perform match- up if required Involved if adjusters cannot resolve Deal with customers who dispute liability Refer customers to internal appeal Manager

Vehicle 1

Statement of Driver Passenger Witness Contact Police Attend Accident Scene Research Liability Material Damage Adjuster Estimator Estimate Vehicle Verify damage consistent with loss Review damage to assist liability assessment Perform match- up if required Involved if adjusters cannot resolve Deal with customers who dispute liability Refer customers to internal appeal Manager

Liability Resolved

Vehicle 2

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MD Files – Collision/ Property Damage (PD)

Optional Basic Total KOL Count 2006 Transfer (Y/ N) Coverage 64,752 64,752 N 3 8 ,6 4 3 3 8 ,6 4 3 38,643 Y Multi - Vehicle Collision KOL 02

• Vehicles carry ICBC collision coverage
• Work effort for vehicle damage
• Work effort for resolving contentious liability
• Double the work effort required for these claims
• No Transfer attribute to Optional insurance
• With Transfer attribute fully to Basic and Optional insurance

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MD Files – Collision/ Property Damage (PD)

Optional Basic Total KOL Count 2006 Transfer (Y/ N) Coverage 16,422 16,422 N 9,714 9,714 Y No Collision Coverage KOL 37

• Vehicle carries no ICBC collision coverage
• Work effort for vehicle damage
• Work effort may include contentious liability
• Attribute fully to Basic insurance

57

MD Files – Collision/ Property Damage (PD)

16,603 16,603 N 318 318 Y Single Vehicle Collision KOL 01 Optional Basic Total KOL Count 2006 Transfer (Y/ N) Coverage 16,422 16,422 N 9,714 9,714 Y No Collision Coverage KOL 37

Vehicle Collision claims paid directly on Collision coverage (Optional) or transferred to a Property Damage coverage (Basic) as a result of a liability assessment.

• Figure 17, page 49 of Filing

64,752 64,752 N 38,643 38,643 38,643 Y Multi - Vehicle Collision KOL 02 65% 35% Basic / Optional % Split 120,316 64,779 Total

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Methodology same as used in 2005 review with one change:

• 2005 review used corporate KOL counts and resulted in an allocation
• f 34% Basic / 66% Optional
• 2007 review uses only Regional Claim Centre KOL counts and based
• n 2006 data results in an allocation of 3 5 % Basic / 6 5 % Optional

MD Files – Collision/ Property Damage (PD) represents $27 million or 21% of overall 2006 Regional Claim Centres operating costs

• Proposed change results in an increased allocation to Basic

insurance of $270,676

MD Files – Collision/ Property Damage (PD)

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MD Files – Customer Care

Optional Basic Total KOL Count 2006 Coverage 78% 22% Basic / Optional % Split 90,767 25,692 Total 765 765 KOL 22 without Payment 568 568 KOL 22 with Payment 11,559 1,280 12,839 Hit and Run 31,251 31,251 Comprehensive 157 157 Glass 23,079 23,079 23,079 Collision – With Transfer 24,721 24,721 Collision – No Transfer

Material Damage claims handled through the Telephone Claims Department and vehicle damage estimated by Regional Claim Centre staff.

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MD Files – Customer Care

Uses same methodology as 2005 Review with one exception:

– Hit and Run count to use the same proposed allocation as MD - Other

• 2005 Review resulted in an allocation of 25% Basic / 75% Optional
• Allocation based on 2006 data - 2 2 % Basic / 7 8 % Optional

MD Files – Customer Care represents $13.2 million or 10% of overall 2006 Regional Claim Centres operating costs

• Proposed change results in an increased allocation to Optional

insurance of $395,963

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BI Exposures – Represented and BI Exposures - Litigated

Two of the four BI transaction types handled in Regional Claim Centres:

• Allocated 95% to Basic and 5% to Optional
• $200,000 Basic insurance limit is exclusive of legal costs

and interest

• In 2006 - 99.83% of BI exposures settled in the Regional

Claim Centres under the $200,000 Basic insurance limit

• In 2006 - 0.17% of BI exposures settled in the Regional

Claim Centres above the $200,000 Basic insurance limit

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• In 2006 - 1266 claims (2.1% ) were transferred to Head

Office Claims from Regional Claim Centres as it was anticipated the injury claims will exceed the $200,000 Basic insurance limit

• In 2006 - 0.4% of claims in the Regional Claim Centres

resolved on an aggregated, per policy basis in excess of the $200,000 Basic insurance limit

BI Exposures – Represented and BI Exposures - Litigated

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ICBC maintains that the 5% attributed to Optional is reasonable in light of:

• ICBC has a duty to defend all claims.
• The small number of claims that resolve in excess of

$200,000.

• The $200,000 Basic insurance limit is exclusive of interest and

costs

• Transfers to Head Office Claims are allocated to Optional

insurance and not adjusted on a pro rata basis with the first $200,000 allocated to Basic and the balance allocated to Optional insurance

BI Exposures – Represented and BI Exposures - Litigated

64

Facilities Allocation

Regional Claim Centres Facilities costs in 2006 were approximately $13 million or 10% of overall Regional Claim Centres operating costs In the 2005 Review, facilities costs were allocated by applying the compensation based Basic / Optional percentage split to the Facilities costs.

65

Facilities Allocation

ICBC believes the allocation used in the 2005 Review for facilities costs remains valid because:

– ICBC operates on an integrated basis and the facilities are used for both Basic and Optional insurance work – The allocation of Regional Claim Centres is based on how staff spend their time (work effort) and it is appropriate to apply that methodology to the facilities costs that were incurred in support of the work effort – The methodology is sufficiently flexible to adapt to business changes that are accounted for when updating work effort

• No changes are proposed to the allocation of facilities costs

66

Other Operating Costs Allocation

Other Operating costs in the Regional Claim Centres in 2006 were approximately $5 million or 4% of overall Regional Claim Centres operating costs

– Other Operating costs represent the cost of computers, office supplies, training etc.

• These costs are allocated by applying the compensation

based Basic / Optional percentage split

• No changes are proposed to the allocation of Other

Operating Costs

67

Overall Regional Claim Centres Allocation

The overall Regional Claim Centres allocation is:

• 2006 data - 64.6% Basic / 35.4% Optional
• 2007 data - 64.4% Basic / 35.6% Optional

68

Agenda

• Regional Claim Centres
• How I CBC Handles Claim s
• Transaction Costing
• Allocation Model Review 2 0 0 6
• Updating W ork Effort 2 0 0 7
• Allocating betw een Basic and

Optional I nsurance

• Conclusion

69

Overall Regional Claim Centres Allocation

The overall Regional Claim Centres allocation reflects:

– Success of programs directed at handling of Material Damage claims – Focus on handling Bodily Injury claims – Changes to staff mix and compensation

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Overall Regional Claim Centres Allocation

$ 2 7 .0 8

64.6% 3,116 $130,624 $46,231 $84,393

2 0 0 6

$ 2 7 .0 0 $ 2 6 .8 7 $ 2 7 .3 8

Regional Claim Centres Basic Cost / Policy 64.4% 63.1% 62.9% Basic Portion of Costs 3,225 3,033 2,947 Number of Policies

(000)

$135,178 $129,150 $128,215 Total Costs ($000) $48,096 $47,647 $47,521 Optional Costs

($000)

$87,802 $81,503 $80,694 Basic Costs ($000)

2 0 0 7 2 0 0 5 2 0 0 4 Costs per Basic Policy

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Regional Claim Centres Allocation

Questions?