Auto insurance brokers receive nearly 20 per cent commission when safest drivers get optional insurance

ICBC documents show that insurance brokers can receive a nearly 20 per cent commission on optional insurance packages.

Global News obtained a copy of the broker remuneration plan for 2019 that shows a fee structure ranging from the 3.11 per cent base premium for drivers with no discount to 19.93 per cent for drivers with the highest safe driver discount.

The public insurer pays a higher commission rate for better drivers because they pose a lower risk to ICBC.

ICBC has not provided numbers on how many drivers with optional insurance have the maximum discount.

The provincial government is in the midst of overhauling ICBC and as part of that the public insurer needs to “update the broker remuneration structure.”

“ICBC intends to mirror the current remuneration structure as much as possible to maintain predictability in the broker revenue through this period of significant change,” reads a letter to Autoplan brokers.

There is a substantial difference between how much insurance brokers get in commission from basic insurance compared to optional insurance. Optional insurance commissions total about $334 million per year, while basic insurance totals are closer to $100 million.

WATCH (aired December 4): ICBC paying millions in broker fees

Every time you renew basic insurance the broker gets $13.72. For new insurance plans the broker gets $14.83 in commission.

Because there is competition with other insurance companies on optional insurance, ICBC pays brokers an average of around 15 per cent on a renewal or new plan. In the case of a $800 optional insurance bill, brokers can earn $120.

“There are a lot of complexities through other transactions and other renewals and things,” Insurance Brokers Association of B.C Executive Director Chuck Byrne said. “The bottom line is there is a lot of complexity that brokers have to deal with that they don’t get properly paid for.”

“Overall it’s a heck of a good system that works exceedingly well.”

Last year auto insurance brokers billed ICBC $434 million in commission. The brokers costs include staff, training, setting up broker locations and various other expenses. The 902 brokers in the province billed 33 per cent more in 2017-2018 than in 2011.

The public insurer lost $1.3 billion last year and is forecasting a loss of more than $800 million this fiscal year.

“We truly value the continued strong working relationship between ICBC and Autoplan brokers,” the letter from Insurance Sales and Broker Governance Director Jonathan Hoey reads.

“I sincerely thank you for your ongoing commitment to our partnership and to our customers through the most significant changes in our history.”

There are two significant changes underway.

As of April 1, there will be a cap on soft-tissue injuries and a restriction on the amount lawyers can be paid out by ICBC. The change also includes an improvement to the sort of services and treatments those in a crash can receive. The changes are expected to save ICBC $1 billion a year.

WATCH (aired December 28): Premier John Horgan says auto insurance rates aren’t ‘out of whack’ compared to other province

The province is also charging good drivers less and bad drivers more. These changes come into effect on September 1, and create a definition for what accounts for both a good and bad driver. These changes are expected to be revenue neutral but will change the brokers’ commission structure.

“We intend to consult with brokers on this new structure beginning early in 2019,” reads the letter.

On top of the fee structure, the internal documents also show additional ways that brokers can receive payment from ICBC.

If a broker enrols a driver into a payment plan, then ICBC pays the broker $8.50. Any collection of ICBC debt over $25 means $7 for the broker and a collection of motor vehicle debt, including outstanding tickets over $25, means $8 for the broker.

WATCH (aired December 10): Security footage released by ICBC shows man allegedly faking parking lot injury

Every new licence plate sold means $14.82 for the broker and an additional $5 if it is a B.C. parks plate.

“The fee structure is set by government, by ICBC,” Byrne said. “You are talking about millions of transactions so it becomes a big number. But when you look at the work the brokers do and the detail discussion with the client, it works pretty well.”

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