The Insurance Corp. of British Columbia (ICBC) is introducing an Enhanced Care program for vehicle insurance this month that will eliminate the tort-based system of settlements for accidents and replace it with a system of care and recovery benefits. One of the results is lower premiums for drivers. Nicolas Jimenez, CEO of ICBC, discussed the changes with BIV for our daily podcast at biv.com/video. Here is an excerpt of the conversation, edited for space and clarity.
The two principal criticisms of our insurance system are always: costs too much, provides too little. Why are these new benefits better?
Jimenez: In the tort model, you can have two people in the same vehicle, one driver, one passenger, same injuries if there’s a crash, and there are vastly different experiences and outcomes associated with how they get treated, what benefits they have access to, etc. The enhanced care model says, “Look, it doesn’t matter who caused that crash, the most important thing is that we put everybody on a path to recovery, and then everybody gets this thing.” What’s especially true in our new model is that the benefits that are going to be on the table available to you are vastly superior to what existed today, your entitlement practice and benefits instead of $300,000. In the future, it’s essentially unlimited, so whatever you need, depending on your circumstance, you will have available to you. But the reality is, the system is in every single respect better. Really, we’re talking about injured customers, because you know, the vehicle damage, our businesses are going to be largely the same. So for the 50,000 or so people who get injured in a crash every year, this system is going to be so much better. And I don’t think you’re giving up anything.
Is there any place left now in the system for personal injuries lawyers?
Jimenez: Outside of the auto space, they’ll continue to work … anywhere that’s not at work or not in a vehicle. But as it relates to the vehicle part of it, no. You’re still going to be subject to court if you are involved in a crash you’ve caused in B.C. There are certain instances in the legislation that provide for people to seek other damages … if there is a criminal conviction involved in the person who hits you. Or if there’s some kind of liability – someone designed the bridge, and that bridge collapsed, and you feel like there’s some punitive damages.
How long before the system truly transforms into this new one?
Jimenez: That’s a good question. There are a lot [of cases remaining], probably about 80,000 or 90,000 left to settle. And while that may not sound like a lot, the value of those claims is around $10 billion. And so, you know, we see that happening over a five-to-seven-year time frame.
When a system confers more benefits, it usually comes with more cost. How did you get at the cost side?
Jimenez: You’re going to have access to a whole range of benefits and at higher levels than you did. What’s going to go down substantially is the litigation costs associated with hiring lawyers. We spent about $170 million a year on defence counsel. And then there’s all the cost just involved in the legal process, and payments, you know, the contingency fees that go not the customers but to their plaintiff’s counsel. So those parts are being pulled out of the system. And that’s where largely the savings are being derived from.
You’re going into a system that isn’t adversarial and has more clarity about outcomes now. What does that do in terms of the culture that you as a CEO have to then work with internally in order to change the channel a little bit?
Jimenez: I think it’s a fair question. I mean, the tort system drives a certain behaviour, right? I’ll tell you, most of our people breathe a sigh of relief.… [It was] very stressful, you know, and for a large percentage of customers, our staff were never able to interact, because there was always an intermediary. So you never got a chance to kind of begin a relationship around [the] care journey. It was really beginning a relationship around a lawsuit. So there’s a big sigh of relief, I think, from our folks, that, you know, this model is not going to be focused on conflict, but one focused on recovery and care. And this is a new muscle coming into the company with a new mindset. •