Optional insurance customers to receive refunds

VANCOUVER, April 13, 2014 /CNW/ - As part of the move to a new computer system for our insurance business, ICBC identified less than five per cent of our optional insurance customers have an incorrect description assigned to their vehicle which impacts what they pay for their optional insurance.

Based on analysis to date, ICBC estimates on average 1.8 per cent or 40,000 optional insurance customers per year had an incorrect vehicle description which resulted in an overpayment on a portion of their optional insurance. The average overpayment per year was $21. ICBC also estimates on average 2.7 per cent or 58,000 optional insurance customers underpaid on a portion of their optional insurance per year. The average underpayment per year was $34.

"We are going to ensure all of our customers who overpaid on their optional insurance over the last six years receive full refunds with interest," said Mark Blucher, president and CEO. "The modernization of our systems will ensure this doesn't happen in the future and we sincerely apologize for any inconvenience this has caused our customers."

ICBC is working on the five principles outlined by Transportation Minister Todd Stone including:

  • the error will not result in higher premiums;
  • all overpayments will be repaid with interest;
  • customers who were undercharged are not to be billed retroactively;
  • the problem will be fixed; and
  • the board will appoint an outside auditor to review this issue.

ICBC is committed to having this issue resolved within 90 days.

"ICBC's first responsibility is to our customers," said Jatinder Rai, chair of ICBC's board. "The board and management have been working to identify and resolve this complex issue as a priority."

Updates to vehicle descriptions will be made in the coming months. New technology will use the vehicle identification number (VIN) provided by the vehicle's manufacturer to automatically capture the vehicle description (make/model/type). Today, this process is done manually.

ICBC is working to update vehicle descriptions for affected customers, including looking back over the last six years to July 1, 2008, to reimburse customers who paid too much for their optional insurance. Customers who underpaid will not be charged the difference for prior years. ICBC is going as far back as its insurance system is able to accurately recalculate historical premiums for our customers.

WHAT CUSTOMERS NEED TO KNOW

  • The vast majority of our customers (95.5 per cent or approximately 3 million) are not affected.
  • Within 90 days, we will be able to tell you if you've paid too much or too little. Work continues to check vehicle descriptions for all customers and determine individual impacts. 
  • In July 2014, letters will be sent to optional insurance customers who have an incorrect vehicle description which resulted in a financial impact. Cheques, including interest, will be sent along with the letters if you paid too much for your optional insurance.
  • If you have paid too little you will not be charged the difference for prior years.
  • We are looking back six years – to July 1, 2008 – to check vehicle descriptions, including the customer's current insurance policy up until its expiration date. ICBC is going as far back as our legacy insurance computer system is able to accurately recalculate historical premiums for customers.
  • Customers will receive their full entitled refund in July 2014.
  • You do not need to visit your Autoplan Broker as your insurance remains valid. Vehicle descriptions for affected customers will automatically be updated when you renew your insurance, starting in July.
  • Vehicle descriptions apply only to optional insurance and will have no impact on rates.

Backgrounder

Estimates based on analysis to date

How many customers overpaid?

On average per year

  • On average 40,000 (1.8 per cent) optional insurance customers per year overpaid on a portion of their optional insurance.

Over six years

  • Approximately 240,000 optional insurance customers over the last six years had an incorrect vehicle description in ICBC's system which resulted in an overpayment on a portion of their optional insurance.

Average cost per customer per year

  • The average refund per customer is approximately $21 per year.

Total cost of refunds

  • ICBC anticipates the cost to refund customers who overpaid over the six years will be approximately $36 million plus an additional $3 million in interest, based on the B.C. Supreme Court interest schedule.

How many customers underpaid?

On average per year

  • On average 58,000 (2.7 per cent) optional insurance customers each year underpaid on a portion of their optional insurance.

Over six years

  • Approximately 350,000 of optional insurance customers over the last six years had an incorrect vehicle description in ICBC's system which resulted in an underpayment on a portion of their optional insurance.

Average cost per customer per year

  • The average underpayment per customer is approximately $34 per year. They will not be charged the difference for prior years.

Total cost of underpayments

  • ICBC anticipates the cost of underpayments over the six years was approximately $71 million.

How many customers are not affected?

  • Approximately 95.5 per cent of customers (approximately 3 million) are not affected.
    • ICBC had more than three million optional insurance customers over the last six years.
  • The average annual premium for basic and optional is $1,100.

SELECTING A VEHICLE DESCRIPTION

The first time a customer visits an Autoplan broker to register and insure a new vehicle, the broker selects the vehicle's description (make/model/type) from a dropdown menu. Based on this selection, the system groups vehicles together based on factors like body style, horsepower, costs of repairs and vehicle price.

Each group of vehicles is then assigned a vehicle identification code (VIC) which helps to calculate a portion of what each customer pays for their optional insurance. The system is manual but requires detailed information which was sometimes difficult to identify. One vehicle model may have 10 to 15 different types of trim levels from very basic to a luxury or hybrid model.  It is sometimes difficult for brokers to select the correct vehicle make/model using the limited information available to them from the customer and vehicle manufacturer.

Incorrectly selecting the vehicle make/model/type may lead to a vehicle being placed in the wrong group and the customer potentially being charged the wrong amount on a portion of their optional insurance. There is no impact to their basic insurance. Even while working with an aging system, the vast majority of customers have been paying the correct insurance premium.

OPTIONAL INSURANCE PRODUCTS IMPACTED

Your vehicle identification code (VIC) is used to help calculate a portion of your optional insurance premium on the following products:

  • Collision coverage
  • Comprehensive coverage
  • Specified perils
  • New Vehicle Replacement Plus (NVR+)
  • Replacement Cost Endorsement
  • Limited Depreciation Policy

NEW INSURANCE SYSTEM

Many of ICBC's key systems are at the end of their life and the difficulties brokers have experienced with the current insurance system are a clear example of why they need to be upgraded. That's why, over the last few years, ICBC has been investing in much-needed systems upgrades including a new insurance management system, scheduled to be complete in 2015.

SOURCE ICBC

For further information: Media contacts: Kate Best: kate.best@icbc.com