Safe drivers subsidize bad

Older, safer drivers are paying hundreds more in ICBC premiums to subsidize younger, riskier drivers, a new study reveals.

Drivers in B.C. pay higher auto insurance rates in part because ICBC doesn’t fully account for age and uses driver premiums to pay for non-insurance costs, the Fraser Institute study finds.

In August, the province announced changes to lower insurance for good drivers by up to $100 and raise costs for drivers with poor records.

“The government’s recent changes are welcome, but they don’t go far enough to fix our fundamentally flawed system that punishes safer drivers with higher rates to subsidize riskier drivers,” says John Chant, author of the study and professor emeritus of economics at Simon Fraser University.

ICBC has a monopoly on mandatory basic insurance, but does not base its rates on age or gender.

Because of this, all drivers under 35 pay less than if rates reflected anticipated accident experience – and drivers 16 to 24 pay more than $800 less than they would otherwise. 

Conversely, drivers between 55 and 64 pay $228 more per year due to ICBC’s rate structure.

Non-insurance costs such as driver testing, driver and vehicle licensing, and fine collection are also paid through insurance premiums, adding an estimated $50 to every driver’s policy.

“It’s important that B.C. drivers understand why basic auto insurance is so expensive in this province as reforms are proposed and introduced," says Chant.

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