AUTOMOTIVES
Why the huge

jump in

B.C.

auto premiums?

WHAT MOST motorists
had been expecting came
about last month — a huge
jump in B.C. auto in-
surance premiums.

This is the first of a number of
articles which will review the
details behind the headlines to ex-
plain why premiums are going up
and how they will impact
motorists across B.C.

This week, a look at ICBC's fi-
nances — where the money comes
from and where it goes.

Almost 80% of ICBC’s funds
come from premiums motorists
pay for coverages they purchase.
The rest is earned through in-
vestments, driver point premiums
and the sale of salvage.

Settling claims accounts for
about 85% of ICBC’s expenses.
Administration costs, commissions
to brokers and the provincial gov-
ernment premium tax make up the
rest.

The ‘investments’? mentioned
above involve ICBC’s reserves.
What they are and how they are
used have been the subject of
some misunderstandings of late.

When someone reports a claim,
ICBC sets aside or ‘‘reserves’’
some of its income to pay for it.
The $2 billion reserved for these
unsettled claims is committed and
cannot be used to cover other ex-
penses.

However, until these claims are
settled, we invest this money and
put the proceeds back into the
Autoplan Fund. Each dollar earn-
ed is a dollar motorists do not
have to pay for insurance.

ICBC also has cash reserves,
totalling over $300 million at the
beginning of 1991, which have
resulted from past year-end
surpluses. As a non-profit cor-
poration 1CBC aims to balance

Ken

Hardie

INSURANCE
CORPORATION

OF BRITISH COLUMBIA
AUTOTOPIC

income and expenses; however,
when a surplus occurs it is set
asice for a number of purposes.

The ‘‘Rate-Stabilization
Reserve’’ is used to offset year-
end deficits. The ‘Catastrophe
Reserve’ is protection against a
major loss such as an earthquake
while the ‘‘Adverse Claims
Reserve’’ covers any settlements
that exceed the amount set aside
for them.

ICBC’s investments have often
yielded enough money to at least
pay all non-claims expenses and
in some years even claims as well.
However, 1991 interest rates fell
sharply while both the number
and cost of claims rose. In addi-
tion, the premium increase for
1991 was limited to 444% when a
7% % rise was indicated.

As a result, ICBC’s 1991 deticit
was about $90 million. Even with
a 19% rise in premium income we
are stili forecasting a further $100
million shorifall this year which
will further deplete our cash
reserves.

While there are still ample
funds to compensate accident vic-
tims, the current trends clearly in-
dicate trouble ahead. Next week,
more on this issue and some
details on how the announced in-
crease will affect B.C. motorists.

Includes
Taxes

CARTON CANADIAN CIGARETTES
COMPLETE SELECTION OF
CANADIAN & AMERICAN CIGARETTES

DOLLARTON
SMOKE SHOP

3168 DOLLARTON, N. VAN

8 AM - 7 PM — 7 DAYS / WEEK

Friday, January 3, 1992 - North Shere News - 17

MOST FLEXIBLE
PURCHASE PLAN

* Based on 48 month open ended tease, OAC, INCLUDES treight & PDi, taxes extra.
Vehicles may not be exactly as illustrated

CUSTOM LEASE,

VEHICLE LEASING SPECIALISTS
AND SALES

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NORTH VANCOUVER

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