The CEO of ICBC has resigned after the B.C. government said it is revoking the Crown corporation’s licence to overspend.
Jon Schubert announced he will step aside as CEO, following the release of a damning Ministry of Finance report that orders ICBC to rein in spending.
A government review of the Crown corporation was ordered after ICBC announced that it would have to increase basic rates by 11.2% in 2012, due to rising claims costs.
Prior to that, the average ICBC premium increases have been slightly less than 1% for the last decade.
The government review concluded that ICBC has become top heavy and careless with spending.
“From 2007 to 2011, ICBC experienced a 32% increase in management positions across the organization, while union positions declined by 1%,” the review states. “The total compensation cost for the management and confidential employees increased 50% during the last five years, compared with a 9% increase for the bargaining unit for the same period.
“Bonuses paid to management have been generous with easily met criteria resulting in almost all staff receiving them. In addition to ICBC management being among the highest paid within the British Columbia public sector, benefits and perquisites provided to senior management have generally exceeded the rest of the sector.”
Finance Minister Kevin Falcon said in a press release, “ICBC has provided good value for its customers over the last 10 years and kept premium increases low.
“But our government expects ICBC will make every effort to keep costs to a minimum. That is why ICBC has been directed to bring compensation more in line with the public sector and develop clear measures for cost containment.”
The review lays out 24 recommendations to cut spending by $50 million by the end of 2013. ICBC has agreed to implement all 24 recommendations, and has already implemented five.
Schubert is not the only ICBC executive who will be leaving. One of the review’s recommendations for cutting costs is reducing management by 12%. Over the next two years, ICBC will lay off between 165 and 195 employees, mostly in management.
B.C. lawyers may benefit from ICBC’s belt-tightening, as one of the recommendations is to outsource more of its legal work.
ICBC’s legal costs increased from $134 million in 2000 to $279 million in 2011. ICBC uses its own internal counsel for 20% of the legal work related to claims.
“Given these increasing costs, ICBC should review the utilization of internal versus external counsel for potential efficiencies,” the government review recommends.
