ICBC’s Specialty Plates for 2010 Winter Olympics

1. CIA CONFERENCEVANCOUVERInsurance Corporation of British Columbia:From Then to NowCamille MinogueJune 2007

3. ICBC’s Specialty Plates for 2010 Winter Olympics

4. Outline • Background • ICBC Today • The Road Traveled • Products and Services • Oversight and Regulation • Actuarial Road • Rate Design • Revenue Requirements • Capital Management Plan • Scenic Tour • Bait Car Program • Road Safety Programs

5. Auto Insurance in Canada

6. ICBC Today Canada’s largest Auto insurer • $ 3.4 billion in written premium • $ 9.0 billion in assets • $ 5.4 billion in unpaid claims liabilities • $ 1.5 billion in retained earnings

7. ICBC Service Delivery Network 2006 Highlights 950,000 claims 3.2million policies ($3.4 B written premium) 900Independent Brokers ($262 M commission payments) Road Safety & Loss Management Programs ($48 M) Material damage payments $1.0 B 1,000,000 driver licences transactions400,000driver exams Injury Payments $1.3 B Driver& Vehicle Licence fees & fines collected on behalf of Government ($496 M) ICBC 5,000 Employees 40Claim Centres 21 Driver Service Centres 4 Call Centres

8. Competitive Optional coverage Vehicle Collision Comprehensive Other Equipment Motor Vehicle Equipment Excess Special Equipment Motor Home Contracts Individual Extended Third Party Legal Liability Excess UMP Loss of Use Vehicle Travel Protection Regulated Basic coverage Compulsory insurance coverage Third Party Legal Liability Accident Benefits Underinsured Motorist Protection (UMP) Hit & Run & Uninsured Motorists Inverse Liability Coverage Loss Management & Road Safety Reduce crashes and auto crime Non-Insurance Services Vehicle and Driver Licensing Vehicle Registration Government Debt Collection ICBC Products Integrated Operations

9. Structure of Crown vs. Private

10. The Road Traveled Made-in-BC system, benefiting British Columbians: • Profits stay in BC to benefit policyholders • ICBC jobs contribute positively to the BC economy • Expense efficiencies due to size • Insurance tied to Licensing reduces the number of uninsured motorists • Presence across the province • Partnerships with communities

11. The Road Traveled 1973 – ICBC is established 1977 – Competition on optional coverages allowed 1985 – General insurance division is sold offCanadian Northern Shield formed

12. The Road Traveled 1991 – Financial challenges 1996 – ICBC assumes licensing services from Motor Vehicle Branch of MOT 1996 – No-fault debate 1997 –“Drive to Save Lives” campaign

13. The Road Traveled “Drive to Save Lives” Six Point Plan launched in partnership with the Attorney General, BC police forces and local communities • crackdown on impaired drivers • tough measures to reduce speeding and dangerous driving • higher insurance costs for drivers responsible for crashes • new measures to improve driving (graduated licensing) • strengthened anti-fraud and auto-crime measures • upgrading insurance systems, injury management and dispute resolution

14. The Road Traveled 2001 - Government Core Services Review 2003 - British Columbia Utilities Commission (BCUC) to regulate ICBC 2007 - Bill 93 becomes effective to ensure a “level playing field”

15. ICBC - Oversight Oversight and Reporting ICBC Board Shareholder’s Letter of Expectations Treasury Board External Auditor Appointed Actuary Select Standing Committee BC Utilities Commission Minister of Public Safety and Solicitor General Auditor General Controller General Crown Agencies Secretariat Strategic Planning Current Context Mission, Vision, Goals and Objectives Corporate Measures and Targets Corporate Strategies Business Planning Line of business strategies and tactics Line of business measures and targets Budgeting Reporting on Performance Providing information on how well we achieve our objectives and targets

16. Regulation • BC Utilities Commission (BCUC): • Independent regulator for Basic rates since 2003 • Ensure no cross-subsidization of ICBC’s Optional insurance by Basic • Ensure all costs are managed reasonably

17. Rate Regulation • Per Utilities Commission Act • Rates must not be unjust, unreasonable, unduly discriminatory or unduly preferential • Rates will be determined by hearing, open to all interested parties • Rates can be reviewed on ICBC request, BCUC request or interested party request

18. BCUC Process • “Quasi-judicial” • Public process • Interest Based

19. Regulation of ICBC Government Special Directions Directives BCUC ICBC

20. Special Direction IC2 Excerpts from IC2: 3(1)(b)(ii) Commission must set rates in a way that will allow the Corporation to achieve by December 31, 2014 an MCT ratio of at least 100% on its Basic business 3(1)(c) Commission must fix rates on the basis of accepted actuarial practice

21. Regulation of ICBC Public Policy Government Special Directions Directives Information Requests BCUC ICBC Filings

22. BCUC Process • ICBC submits Application to the BCUC • Application reviewed by BCUC and Intervenors • BCUC and Intervenors ask questions through written information requests • BCUC and Intervenors ask questions in oral hearings • BCUC issues Decision

23. Insurance vs. Utilities

24. Part II – Actuarial Road • Background • Actuarial Road • Rate Design • Revenue Requirements • Capital Management Plan • Scenic Tour • Bait Car Program • Road Safety Programs

25. Actuarial Road

26. 2007 Rate Design – Basic Insurance

27. ICBC’s Current Rate Design • Rate Class • Territory • Claim Rated Scale • Commercial Fleet Plan • Seniors Discount • Disability Discount • Driver Penalty Point Premium • Multiple Crash Premium

28. Special Direction IC2 Government BCUC Items in IC2 relating to rate design: • Rating variables of age, gender and marital status cannot be used in pricing • Discounts for disabled and seniors are permitted • Rates are to remain relatively stable and predictable

29. Government Directive Government ICBC Prepare and implement a plan that: • Addresses high risk drivers • Maintains senior and disability discounts • Proposes changes to meet ongoing business requirements Retain until 2011 the following elements: • Claim Rated Scale (CRS) • Rate territories and their boundaries • Existing rate classes

30. Rate Design Application BCUC ICBC Multi-year Plan Short term: • Driver Risk Premium • Other Operators • Rate Adjustments • Commercial Fleet Plan Long Term: • CRS • Rate Class and Territory

31. Multi-year plan • The purpose of the plan: • Present ICBC’s vision, overall goals, objective and strategies for Rate Design • Set out ICBC’s plans for rating variables that will be preserved • Convey that changes need to be sequenced in logical and gradual manner • Avoid rate shock * Plan subject to BCUC approval

32. Driver Risk Premium (DRP) • DRP to replace Driver Penalty Points (DPP) premium • DRP more reflective of the risk of causing crashes and the associated financial implications • 3 year scan beginning Jan 1, 2008 (DPP is a one year scan) • Worst 5% of the population as compared to 1 to 2% for DPP * Plan subject to BCUC approval

34. Other Operators • 22% of claims involve a driver who is not the PO/RO, whether at fault or not • Initially, minimal additional premium of $25 • Over time, we will transition to more actuarially based premiums • Need to implement as a significant step towards a more driver based system * Plan subject to BCUC approval

35. Rate Adjustments • Approximately 1500 customer groups • Reallocation of $9 million to commercial classes from the personal classes • Phased implementation with 6% cap on annual changes • Going forward, to be a normal ongoing process * Plan subject to BCUC approval

36. 2007 Revenue Requirements – Basic Insurance

37. 2007 Revenue RequirementsApplication BCUC ICBC ICBC proposes 3.3% rate increase Application also includes • Revised capital management plan • Investment operations • Response to bodily injury costs • Operating Expenses • Governance and accountability framework • Performance measures • Financial allocation • Road Safety rationale and assessment methodology

38. 2007 Revenue RequirementsApplication

39. 2007 Revenue RequirementsApplication

40. Projection of Claims Cost

41. Projection of Claims Cost 1.2% Adjustment to Base2006 PY

42. Projection of Claims Cost 2.1% Increase for Trend to 2007 PY 1.2% Adjustment to Base2006 PY

43. 2007 Capital Management Plan – Basic Insurance

44. Special Direction IC2 Government BCUC • IC2 requires BCUC to ensure that ICBC achieves a minimum amount of capital as measured by the MCT 3(1)(b) require the corporation to achieve, by December 31, 2014, and to maintain, after that date, capital available equal to at least 100% of MCT . . . • BCUC then directed ICBC to develop a Capital Management Plan for the Basic insurance business

45. Basic Ins. Capital Management Plan • Actuarial Department led development of the Plan • DCAT analysis performed • Indicated management target MCT ratio = 130%

46. Basic Capital Management Plan BCUC ICBC 2006 Revenue Requirements Application: • ICBC filed a capital management plan for Basic insurance • Proposed management target MCT of 100%

47. Basic Capital Management Plan BCUC ICBC July 2006 BCUC Decision, Commission determined that • 100% MCT ratio for Basic is inadequate as a management target and is to be considered a minimum • ICBC should set capital management target within DCAT indicated range and establish its capital plan accordingly

48. Basic Capital Management Plan BCUC ICBC 2007 Revenue Requirements Application: • ICBC filed revised capital management plan • Proposed management target MCT of 130%

49. Basic Capital Management Plan Specifics of the Plan • Builds to a target MCT ratio of 130% by 2014 • Calls for two provisions in be included in rates: • Capital build provision • Capital maintenance provision • Subject to BCUC approval

50. Basic Capital Management Plan Remove 1/10th of Basic surplus Before 2014 Capital Build Provisions 1/7, 1/6, 1/5, ... After 2014 Capital Build Provision 1/5