The Insurance Corporation of British Columbia (ICBC) is using its monopoly might over basic auto insurance to muscle out competition to its optional insurance business. After posting record profits for the second year in a row, ICBC handed out some hefty bonuses to staff and then announced that it will reduce premiums for optional insurance customers. The only bone given to the 2.8 million policy holders that are forced to patronize ICBC was the promises that premiums won't go up next year.

ICBC's decision to give its optional insurance customers a break has been heavily criticized even by its most dogmatic supporters. But the announcement was not altogether surprising. The 2003 annual reports states, "The Corporation's strategy will be to increase retained earnings for the optional business in the future."

Since 2002, the government monopoly has raked in $751.5 million in profits or what it calls "retained earnings." And, in keeping with its strategy to increase its optional business it reduced the rates for its target market: the optional insurance customer.

As a government run and protected monopoly, ICBC has a statutory guarantee that if you drive an insured vehicle in the province of British Columbia, you have to purchase their basic insurance. The monopoly also occupies 85 per cent of the optional insurance market. As a result, drivers are left with no choice for compulsory coverage and very few options in the optional insurance market.

As a natural monopoly operator ICBC is uncomfortable competing and its latest announcement was as much of a poke in the eye to the provincial government as it was the drivers that are told to buy their insurance or walk.

Back in 2003, former ICBC president and CEO Nick Geer noted in the crown corporation's annual report that new legislation had been introduced "with the aim of providing for a more level playing field for optional insurance."

However, Geer neglected to mention that the provisions that would have actually ensured a level playing field for private insurers in the optional market were never actually proclaimed or enacted into law. So, ICBC has free reign over how it uses its protected, monopoly position to lure, attract and maintain customers to its optional insurance.

But how much blame can be heaped on ICBC The crown monopoly is performing within its operational and regulatory framework; technically it's not doing anything wrong. But, it's unlikely that the provincial government would condone such anti-competitive behaviour in the private sector. Nonetheless, by failing to proclaim the level playing field sections into law the provincial government gave the ol' wink and nod to ICBC to do what it pleases with the mandatory and optional side of its business.
Where does that leave consumers in BC

With no choice but to hand over their hard earned dollars to a government monopoly so it can line the pockets of its staff and executive and offer rewards to the only customers it has to compete to get.

ICBC has little to do with insurance; it doesn't try to pool risk or set rates according to the likelihood of a claim payout. It's pilfers money from good drivers, to subsidize high risk ones and squeezes out any competition to its optional insurance business.

The ball is now in the government's court: do nothing and condone ICBC's anti-competitive behaviour or proclaim the level playing field provisions and ensure some degree of competition and choice.

In 2001 the Campbell Liberals campaigned on a promise to "introduce greater competition in auto insurance, to create increased choice and reduce motor vehicle premiums." It's 2005, how much longer will consumers have to wait before they have any real choice