Vancouver-based ICBC has reported net income of $164 million for the first half of 2005, down from $167 million for the same period last year. Claims and related costs for the first six months of 2005 were $1.34 billion, which is six per cent higher than the first six months of 2004.
“The average cost of injury claims continues to be an area of concern,” said Paul Taylor, ICBC’s president and CEO. “It is too early to say if the increase in overall claims and related costs marks a changing trend, but it is an example of the volatility of the costs of claims and their impact on ICBC’s bottom line.”
The overall number of claims in the first half of 2005 is slightly lower than claims for the same time period in 2004. The number of comprehensive claims has declined by 3.7 per cent compared to the first half of last year. Auto theft had been a growing cost for ICBC policyholders, but the success of the Bait Car program, along with the efforts of police, community groups, commercial property owners and individual vehicle owners, have shown how a concerted effort can drive down the cost of that category.
Insurance premiums earned in the first half of 2005 were $1.54 billion, which compares to $1.48 billion for the same period in 2004. This increase is primarily due to increased sales of optional coverage and an increase in the number of vehicles on BC’s roadways.
ICBC has reportedly continued to keep controllable costs, or overhead, low for the benefit of customers.
ICBC’s investments made a significant contribution to net income in the first six months of 2005, increasing to $255 million from $215 million for the same period in 2004.
“ICBC’s net income stays in the company as retained earnings to absorb unexpected spikes in claims costs or unanticipated declines in investment income,” said Taylor.
“ICBC invests its retained earnings and reserves to help keep insurance rates low and stable. In 2004, income from investments resulted in an average premium that is $140 lower than it would have been otherwise.”
In June, ICBC announced $100 million in optional rate reductions for more than 1.6 million BC motorists and more than $30 million in refunds. If trends justify, ICBC will look at further rewarding its better-risk customers.
ICBC’s rates for basic coverage are regulated by the BC Utilities Commission. ICBC recently indicated that its filing with the BCUC later this summer will propose no change to its basic insurance rates for 2006. After a public process, the BCUC will determine if basic rates should remain the same, increase or decrease.
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