Official Report of

DEBATES OF THE LEGISLATIVE ASSEMBLY

(Hansard)

WEDNESDAY, JUNE 18, 1997

Afternoon

Volume 6, Number 2

[ Page 4587 ]

The House met at 2:06 p.m.

Prayers.

Hon. D. Zirnhelt: From the town of Williams Lake, we have 17 grades 6 and 7 students from Marie Sharpe Elementary School, with their teacher Laurence Greeff, and accompanied by parents Lorna Newcomb and Rahkee Pooni. Please make them welcome.

G. Farrell-Collins: I'd like the House to welcome two members of the Saskatchewan Legislature. They were here earlier, but today they are joining us on the floor. Behind me are June Draude for Kelvington-Wadena and Rod Gantefoer for Melfort-Tisdale. I'd ask the House to make them welcome.

Hon. L. Boone: Unlike the member for Peace River North, I really don't have to stand up very often and introduce guests. But I am today very pleased to introduce in the Legislature my constituency assistant Irma Van Helvoirt, her spouse Ray Trudel and their wonderful son Matt. Would the House please make them welcome.

T. Nebbeling: Today we have in the gallery a young aspiring politician. She has met the Premier in the past, and today I had the opportunity of introducing her to the Leader of the Opposition. Her father brought her today to celebrate her eleventh birthday in order for her to get to know the rest of the bunch. I would ask the House to make Claire Woodbridge welcome. She is in the gallery.

J. Sawicki: In the galleries today I have guests from my constituency: Mr. Denny Ramsbotham and his new wife, Marina. They are here to visit their daughter Jane Ramsbotham, who is currently one of this year's interns. I just want to say that she is with the government caucus. Denny, your daughter is doing a great job, as you knew she was going to. Would the House make all of them welcome.

G. Plant: Seated in the gallery today is a friend and constituent, David Jang, who is a trustee of the Richmond school board, and his friend Heather Watkins. I ask the House to please make them welcome.

Hon. P. Ramsey: Joining us in the gallery today are two representatives of the Francophone Education Authority of British Columbia: Nicole Hennessey, the president of the authority, and Dr. Nick Ardanaz, who is the CEO of the authority. They are here to witness a very important day for francophone education in British Columbia. Will the House please make them welcome.

I. Chong: Today I am pleased to introduce some very good friends of mine who reside in the Western Communities: Dr. James Portelance and his wife Letitia Portelance. Dr. Portelance has been an active member of the community, having served on a number of boards relating to health care and education. In 1950, Dr. Portelance represented Canada in New Zealand at the Commonwealth Games, where his efforts in swimming paid off with a silver medal. Would the House please make them welcome.

T. Stevenson: In the House today I'd like to introduce Eric Kay. Eric is a part-time CA in my office and fills in at vacation time, and so on. Would the House please make him welcome.

F. Randall: In the gallery today we have some good friends and some constituents from Burnaby-Edmonds. I would like to introduce them also, on behalf of the members for Esquimalt-Metchosin and Vancouver-Kensington. There is Rajinder Pandher and his wife Raj Pandher. They are here visiting Amanjit Pandher, their daughter, who is working as a legislative intern. Would the House please make them welcome.

J. van Dongen: I am pleased to introduce today a group of grades 6 and 7 students from Margaret Stenersen Elementary. They are here with a number of parents and their teachers, Frank Bowley and Shelley Young. I'd ask the House to please make them welcome.

Introduction of Bills

MISCELLANEOUS STATUTES

AMENDMENT ACT (No. 2), 1997

Hon. U. Donsanjh presented a message from His Honour the Lieutenant-Governor: a bill intituled Miscellaneous Statutes Amendment Act (No. 2), 1997.

Hon. U. Dosanjh: This bill amends a number of statutes. They are: British Columbia Buildings Corporation Act, Court Rules Act, Health Authorities Act, Hospital District Act, Motor Fuel Tax Act, Offence Act and Supreme Court Act. I will, of course, be elaborating on these during second reading of this bill.

Bill 42 introduced, read a first time and ordered to be placed on orders of the day for second reading at the next sitting of the House after today.

[2:15]

LOCAL GOVERNMENT STATUTES

AMENDMENT ACT (No. 2), 1997

Hon. M. Farnworth presented a message from His Honour the Lieutenant-Governor: a bill intituled Local Government Statutes Amendment Act (No. 2), 1997.

Hon. M. Farnworth: This bill is the start of a multi-year renewal of the Municipal Act, which reflects the changing relationship between the provincial and local governments.

Interjections.

Hon. M. Farnworth: This one's been done through consultation. [Laughter.]

It will ensure better local government by cutting red tape, increasing local autonomy and providing a clear division of responsibilities between the province and local governments. It will eliminate many outdated requirements in the Municipal Act and will ensure that local governments have the flexibility and authority to take care of the things they do best. It has been developed in consultation with the Union of British Columbia Municipalities through the joint council process and has their support.

[ Page 4588 ]

Bill 46 introduced, read a first time and ordered to be placed on orders of the day for second reading at the next sitting of the House after today.

SCHOOL AMENDMENT ACT, 1997

Hon. P. Ramsey presented a message from His Honour the Lieutenant-Governor: a bill intituled School Amendment Act, 1997.

Interjections.

The Speaker: Order, members. First reading is essentially pro forma. You shouldn't be heckling.

Hon. P. Ramsey: This bill will enable francophones living in British Columbia to have management and control of their children's francophone educational program, as provided for in Canada's Charter of Rights and Freedoms. Courts have interpreted

section 23 of the Charter as requiring that francophone parents have management and control of francophone education, and this legislation is designed to provide that management and control through the Francophone Education Authority.

The authority is a body with rights and responsibilities similar to a school board. It was first established by regulation in November of 1995, and that regulation is replaced by this act. The act establishes the Francophone Education Authority by legislation, in accordance with the ruling of the Supreme Court of British Columbia. The legislation is designed to meet the requirements laid out in

section 23 of the Charter.

It states that children who live within the territorial jurisdiction of the authority have the right to enrol in a school operated by the authority if one of their parents is a Canadian citizen whose first language learned and still understood is French or who received primary school instruction in Canada in French or who has a child who was educated or is being educated in Canada with French as the language of instruction.

This legislation specifies the rights and responsibilities of the authority, such as setting up, operating, administering and managing francophone schools, setting local policy for those schools, and providing educational programs in French to eligible students.

Bill 45 introduced, read a first time and ordered to be placed on orders of the day for second reading at the next sitting of the House after today.

BUILDERS LIEN ACT

Hon. D. Miller presented a message from His Honour the Lieutenant-Governor: a bill intituled Builders Lien Act.

Hon. D. Miller: More good government. If I could use one word to describe the bill, it would be: deregulation and cutting red tape.

Interjections.

Hon. D. Miller: Mr. Speaker, why use one word when more than one will do? I thought the members opposite would greet that with some enthusiasm, however . . . .

The Builders Lien Act has been part of British Columbia law for almost 120 years. Revising the act to better reflect the needs of today has been a priority for the construction industry for a long time. Today we are acting to meet those needs.

The new act embodies the efforts of both government and industry to reduce red tape and streamline a piece of legislation that is critical to the long-term viability of this important sector. Like the old act, the new Builders Lien Act provides some security to those working in the industry that they will be paid for what they have done.

But it does go further. The new act provides a more equitable distribution of risk among those in the construction chain and clarifies important milestones in the construction process. It provides increased consumer protection and streamlines procedural requirements. By speeding up the flow of money within the construction chain, it improves the overall operating climate for all contractors. I am pleased to say that it accomplishes all of these things in a way that is sensitive to the needs and interests of all stakeholders.

Bill 38 illustrates this government's continued efforts to protect and advance the interests of all British Columbians. Whether they be working on a construction project, doing a renovation or purchasing a house, this act provides for fair and equitable treatment for everyone. It also demonstrates the government's ongoing commitment to the health and well-being of the construction sector -- a sector that accounts for 15 percent of the province's GDP and employs 7 percent of British Columbia's workforce.

Bill 38 introduced, read a first time and ordered to be placed on orders of the day for second reading at the next sitting of the House after today.

Oral Questions

FOREST SECTOR JOBS

G. Campbell: We all know that the Premier tried to explain away his two fake balanced budgets by asking for wriggle room. Wriggle room will not be acceptable to forest families who have lost their jobs and are worried about their mortgages and their futures. So today I want to ask some specific questions to the Minister of Forests, so that there will be no wriggle room tomorrow. According to the Ministry of Forests web site, there were 106,000 people directly employed in the forest sector in 1995. On March 21, 1996, the Premier promised to create 21,000 net new, direct forest industry jobs.

Could the Minister of Forests tell us today how many workers were directly employed in the forest sector when the Premier first made his promise of 21,000 net new, direct forest industry jobs?

Hon. D. Zirnhelt: The opposition choose statistics selectively. When they talk . . . .

Interjections.

Hon. D. Zirnhelt: The figures they're referring to are the labour force survey, which has all kinds of inaccuracies in it. The figures we use are actual surveys of payroll -- actual jobs -- and the baseline will be actual jobs.

G. Campbell: It's incredible to me that the Minister of Forests stands up and tells this side of the House and the people of British Columbia that the 106,000 that his Forests

[ Page 4589 ]

ministry told people were employed in the forest industry is in fact not a correct number. Would the minister please tell us . . . ? Tomorrow is no day for wriggle room; tomorrow is the day when people should have some confidence in the numbers that the minister and the Premier are going to use.

Will the minister please tell us and the 5,500 forest sector families who have lost their jobs in the last year what the baseline number is? How many people were directly employed in the forest industry in 1996 when the Premier made his promise? His minister told us there were 106,000 people employed in the forest industry in 1995. How many were employed in 1996?

Hon. D. Zirnhelt: The opposition had an opportunity to support Forest Renewal, and they didn't support it.

Interjections.

Hon. D. Zirnhelt: This opposition has an opportunity tomorrow to support a visionary future for the forest industry in British Columbia . . . . [Laughter.] They laugh when we talk about 21,000 more jobs. We'll explain it all tomorrow. It will be very clear tomorrow what the baseline is and what the target is. To those families whose jobs have been threatened by forest policies of the past, we will tell them that we will update those forest policies. We will keep a visionary goal in front of us for the next few years. There will be one heck of a lot more jobs after tomorrow.

G. Campbell: I am assuming -- and I will take the government at its word -- that it is going to try and do something constructive to repair the damage it's done to the forest industry in the last few years. All I am asking the minister today -- who is asking for us to join him in trying to encourage a new and prosperous forest industry to repair that damage -- is to please tell this side of this House and the people of the province what the baseline number was that the Premier decided to build his promise around. There were 106,000 jobs in the forest industry in 1995.

In 1996 the Premier promised 21,000 net new, direct jobs in the forest industry. What was the baseline number of jobs when the Premier made that promise?

Hon. D. Zirnhelt: The baseline was the statistics of the time -- March 1996. The baseline that we have agreed on with the forest industry is a common set of data that we all have confidence in, and it will be the measuring line . . . .

Interjections.

Hon. D. Zirnhelt: We'll tell you tomorrow.

Some Hon. Members: Now!

Hon. D. Zirnhelt: This opposition gets its statistics from the Vancouver Sun . We will be using Statistics Canada figures when we explain the baseline and explain the target and the way in which we'll measure employment. This opposition equivocates. When there was an attack from Greenpeace, they had to be challenged in this House before they came out and supported us . . . .

The Speaker: Thank you, minister.

Hon. D. Zirnhelt: Because they want to argue about statistics, they will not get on board and support a brave initiative on behalf of the communities and forest workers in this province. They hesitate, hon. Speaker.

T. Nebbeling: Now that the minister speaks of stats, can he provide us with the information? Which one of the three Statistics Canada-provided surveys has been used? We have the annual survey of manufacturers; we have the monthly survey on employment, payroll and hours; we have the labour force survey. Can the minister tell us which of these surveys has been used to determine the baseline number to create the jobs and timber accord?

Hon. D. Zirnhelt: I wouldn't want to confuse and cloud probably the greatest announcement in Canada in years with petty arguments over statistics. These people yesterday in the debates . . . .

Interjections.

The Speaker: Members, order, please.

Hon. D. Zirnhelt: What did they say in the debates last night? The member for Shuswap said he believed that job creation, government-industry cooperation, government vision and job targets -- all this wonderful stuff -- are "completely out of step with the realities that pervade the world today." That opposition, by quibbling over statistics, is out of step with the people in the communities. Tomorrow we will tell them how we're going to achieve the goal of 21,000 jobs.

T. Nebbeling: To have a vision, you have to have your eyes open. I don't think that's happening here. Can we have a commitment from the Premier that under the accord, every one of the 26,500 jobs will be new, direct forest sector jobs and that these jobs indeed will be full-time and year-round?

[2:30]

Hon. D. Zirnhelt: That side should know that the commitments will be unveiled tomorrow, and they'll see it all in the good light of day.

Interjections.

Hon. D. Zirnhelt: Yeah, they should come along. I challenge those members to get out into the forest communities and celebrate the jobs and timber accord -- the greatest announcement in this decade.

C. Hansen: I was astounded to hear this Minister of Forests talk about using a payroll survey as baseline. The StatsCan payroll survey? Is that what you're talking about? That has been discredited as a tool for use in labour force analysis in this country as recently as three months ago. You know, it reminds me of the Premier talking about wriggle room last year. That's what they're doing -- bringing in wriggle room in the kind of baseline that they're planning to use.

Yesterday the Premier talked about counting in "saved jobs" -- not new jobs but jobs that were being saved -- in this

[ Page 4590 ]

tally towards meeting the target of 26,500 new jobs. I would like to ask the minister a very specific question, because I know you like specific questions -- to which we expect specific answers. What is this minister's definition of a saved forestry job?

Interjections.

The Speaker: Members, we're waiting.

Hon. D. Miller: Well, I would hope that everyone here would acknowledge that occasionally the market, which the opposition relies upon so heavily to shape the future of this province, occasionally has failures. When that happens, thank goodness we have a vehicle like Forest Renewal -- which this opposition voted against, did not support -- whose resources can be brought to bear, as we did in the community of Golden, where we saved the jobs at Evans Forest Products. That's the kind of commitment this side of the House has made to forest communities. Isn't it amusing to watch the opposition now?

They have no plan for forest communities -- absolutely none. With this nitpicking . . . . I would advise them: show up tomorrow, support this government, support forest communities and take a position for once.

C. Hansen: People in forest-dependent communities around this province, those who have jobs in the forest industry today, are looking to have their jobs saved. They want their jobs saved from NDP forest policies in this province.

I will ask the Minister of Forests another question, a specific question: will the jobs in this province that are still there today but are at risk because of these NDP policies in forests . . . ? Will they be counted in any way in the 26,500 jobs that need to be created for the Premier to meet his commitment to British Columbians?

Hon. D. Zirnhelt: What is protecting jobs today in forest-dependent communities are forward-looking land use policies, an ability to negotiate land claims, a Forest Practices Code that protects our markets, and the jobs and timber accord that we're going to announce tomorrow. Tell that opposition to stay tuned.

J. Wilson: Will the Minister of Forests tell British Columbians how many full-time, value-added forestry jobs existed in the province as of March 21, 1996? And will the Minister of Forests tell British Columbians how many new, full-time value-added jobs he is counting on creating between March 21 and the year 2001?

Hon. D. Zirnhelt: What naïvety, after I said three or four times "wait until tomorrow," that he'd get up and ask such a specific question. At least he's admitting that we intend to create jobs in the value-added sector.

J. Wilson: Mr. Speaker, it would be nice to get one answer, anyway. So we'll try again.

Will the Minister of Forests tell British Columbians how many silviculture jobs existed in the province as of March 21, 1996? And will the Minister of Forests tell British Columbians how many new, full-time silviculture jobs he is counting on creating between March 21, 1996, and the year 2001?

Hon. D. Zirnhelt: I don't believe it. I just said: "We'll give the details tomorrow."

An Hon. Member: Come along. Come along.

Hon. D. Zirnhelt: Come along and help celebrate it. We intend to make the announcement in a forest-dependent community, not in the seat of bureaucracy. Come along. Celebrate it. Don't try to rain on the parade. Get in the parade.

R. Coleman: All this rhetoric from the Minister of Forests reminds me of a fairy tale about a puppet made by a woodworker named Geppetto.

Will the minister tell British Columbians how many full-time forestry jobs Forest Renewal B.C. saved up to March 21, 1996? And will the minister tell British Columbians how many full-time forestry jobs he's counting on Forest Renewal B.C. to save between March 21, 1996, and the year 2001?

Hon. D. Zirnhelt: When the investment plan of Forest Renewal is made known, they'll be very pleased with the amount of money we're spending on creating new jobs in the forest-dependent communities. I can just say again that they should wait until the announcement tomorrow, and they should save their energy to help celebrate this magnificent announcement. If they don't and if they stay on as naysayers, the people won't forget; they won't forgive. But they will remember a government that had the vision to say: "We will target 21,000 more jobs by the year 2001."

Interjections.

The Speaker: Order, members, please. I realize the end of the week is looming.

Hon. P. Priddy: I ask leave to make an introduction.

Leave granted.

Hon. P. Priddy: In the gallery today there is a group of students who are here from Ray Shepherd Elementary School in Surrey. Ray Shepherd is a school that has a superb reputation for its performing arts program that they offer for all students in the school, from kindergarten to grade 7. In point of fact, the students, staff and parents just wrote the original music for a performance called Schoolhouse Rock .

The students who are here today are the senior choir from grades 4 to 7. They were performing at Cloverdale Elementary School here in Victoria today, as well as on the lawns on the Legislature. This is an unauditioned choir. I wish it had been available when I was in elementary school, because I was never permitted to be in the choir. I think that's quite wonderful. Some of these students perform with the CBC Orchestra and the Vancouver Symphony Orchestra and meet twice weekly to practise all year long.

They are here accompanied by the principal of their school, Mr. David Price; Angus Stuart, who is a fine music teacher from Surrey; Marguerite Sawatsky; Brent Dunsford; and Cody Triggs. I would say that this is also an example of the fact that there are so many committed adults in our education system, committed to making a positive difference in the lives of the students that we see here today. Would the House please make them welcome.

G. Abbott: I also ask leave to make an introduction.

Leave granted.

[ Page 4591 ]

G. Abbott: I just noticed that we have in the gallery today His Worship Wayne McGrath, the mayor of Vernon. I'd like the House to make him welcome.

D. Symons: Just a quick greeting, also, to the students from Ray Shepherd. My wife happens to teach at that particular school. I recognize all the names of the teachers there as friends and colleagues of hers, and I'm sure these students are a fine group. Could you give them another welcome.

Orders of the Day

Hon. J. MacPhail: In Committee A, I call Committee of Supply. For the information of the members, we'll be debating the estimates of the Ministry of Human Resources. In this chamber, I call Committee of Supply. For the information of the members, we'll be debating the estimates of the Ministry of Finance.

The House in Committee of Supply B; G. Brewin in the chair.

ESTIMATES: MINISTRY OF FINANCE AND

CORPORATE RELATIONS AND

MINISTRY RESPONSIBLE FOR

INTERGOVERNMENTAL RELATIONS

(continued)

On vote 31: minister's office, $348,000 (continued).

Hon. A. Petter: I understand that through mutual agreement we've agreed to deal with some of the issues concerning ICBC, which is one of the responsibilities that I have and enjoy. Therefore let me introduce some of the staff who are with me today to assist in this: seated to my left is Thom Thompson, the president and CEO of ICBC; behind me is Greg Basham, who is a government and corporate relations executive with ICBC; and to my right is Lawrie McFarlane, who is the deputy minister in charge of the Crown corporations secretariat.

[2:45]

D. Jarvis: It's a pleasure to rise, as always, to discuss ICBC estimates this year. I appreciate what the minister says -- that we will be asking some of the questions. We probably have enough questions here to last 32 hours or more, but it's doubtful that we'll take that long, providing the minister's always prepared to give us the answers that he usually does give us.

It's obvious that our current system of auto insurance in British Columbia is not perfect. Although the current system may be imperfect, there are certain things that we can accomplish, probably with some minor changes. Although the minister appeared to all of us to be in the mode of making some drastic changes to ICBC, it is good to see that he has finally yielded, possibly, to public opinion -- it's hard to say.

The problem, as we know in the insurance industry, is the drivers. It's their inattention and their ignorance, in that sense, and their idiotic actions sometimes -- perhaps in the majority of cases. But in the majority of cases they do lead to bigger problems that are affecting our driving community. Up to this point we have had an apparent intolerance in this province for the death and horror the automobile has caused over these years, with the numerous deaths and thousands of injuries that we have every year.

One would hope that death and injury from car crashes is preventable, but we all know that that is a rather more difficult situation or event than we could possibly hope to shoot for. But human error is also inevitable. Hence we not only owe the people of British Columbia an affordable insurance but we are also looked upon to provide a proper system which will provide them with proper coverage and compensation, if we are to continue with this government-controlled monopoly.

The question of privatization always comes in, and even our Premier -- around this time, July of last year -- suggested that if he could not find an equitable way of solving the problem with ICBC, he was prepared to get rid of the whole thing. I assume that even the Premier's last, or possibly second, choice in this case would be privatization. It's hard to say whether privatization would be of value in this province after all these years with a government monopoly. But it certainly gives rise by many people that . . . if we had a competitive basis rather than a monopoly, then perhaps the rates of insurance may go down. But would the coverage improve? It's hard to say.

It's the escalating cost of auto insurance which has caused people to consider that there are other means of affordable coverage. We in the opposition can only be pleased that at this point the government has decided not to proceed with a form of no-fault insurance. This was an alternative to the present tort system, and experience in other jurisdictions -- as we have said many times -- shows that this was so very questionable as to what any final results would be that it was more of an ideology than a practicality.

Our current system may be imperfect, but it can accomplish some of the goals if everyone gets behind the proposals, for example, that are recommended by the minister at this time. As I have said before, no-fault is not a solution, and there are ample examples to show that this does not work. It's taken our society thousands of years to devise the present tort system, which offers some measure of protection from kings and tyrants. We do not have any more reason today to trust those kings and tyrants -- if you can use that euphemism -- who are the politicians and bureaucrats who are running ICBC today.

As we have noted, the minister has agreed to a bigger problem, rather than trading off our cherished rights by denying the injured an opportunity to have their day in court. As we know or as to what was proposed, it was suggested that as many as 90 percent of the people driving out there who were victims of an accident could have lost their rights had we proceeded on another premise -- that is, no-fault.

So it is obvious that we must set up provisions for prevention of accidents first, before we try to focus on the saving of dollars and cents. They work together hand in hand. It's really difficult to say how this will be accomplished. It is apparent that the significant contributing factors to accidents are youth, alcohol, aggressive driving, inattention, bad judgment, speed and the inexperience of specific drivers -- all of which can be attributed to human error, although it is often associated with other factors.

It is therefore quite welcome to see the proposed changes in the latest press release by the minister, and we will get into some specific details on those points later on the estimates.

One aspect of concern is that since 1987, I think, we have seen ICBC used almost as a revenue generator for the government. In 1987 the government brought in a premium tax, and in that year I think it was $7 million. By 1995 -- the only records I have at the moment -- the annual revenue on this

[ Page 4592 ]

tax item was up around $91 million. Then about four years ago, this present government imposed a provincial sales tax on work done in body shops, and on lawyers. I understand that is close to $40 million or $50 million annually. None of this goes to ICBC. So ICBC, although it's essentially the collector, is being used as a cash generator or a revenue generator for the government.

ICBC also subsidized the government for close to $200 million annually, mostly by way of highways improvements -- lights, left-turn lanes, road services, etc. That's not all bad; we're aware of that. But at the same time, it is taking it off the line ministry, Highways, through the people that pay insurance in this province, and that is adding to their premium cost. It remains to be proven whether this form of using money that would more or less be the responsibility of the line ministry . . . whether it is of value in reducing the actual premiums of the drivers in this province.

Then there's the question of the way the government has used ICBC lately. It has had the Allen review. There's a great question of whether these items -- the Allen review, the KPMG reports . . . . The KPMG reports have cost about $2 million already. I understand that they now have a first report and a second report, which we're aware of. We'll be inquiring as to the third KPMG report, which we understand is now out or ready to be out. The first two cost $1.4 million, we understand.

We have no idea what the cost of the other one will be, and whether it will be given to us or made available to us so that we can find out what we have spent, say, another half-million dollars on. I haven't got a figure on the Allen report, which I'll be asking the minister for, eventually.

Advertising. ICBC spent over $330 million that we know of on advertising alone, up until probably early April. Palmer Jarvis, we're told -- that's a good outfit, Palmer Jarvis; I wish I had some of their money -- was given $4.1 million for an advertising campaign. That advertising campaign, from what I can imagine, was to do CounterAttack, Road Sense, etc. We'd like to get some specifics on that, eventually.

Really, ICBC has been sort of a quasi-ministry as far as the government is concerned. Since 1988, ICBC has collected hundreds of millions of dollars on behalf of the government through Motor Vehicles, just in licence plates alone. Now that has all been joined together, so I guess there is going to have to be some kind of adjustment on that aspect.

The bigger the ICBC monopoly grows, I would say, the easier it will be for the government to shuffle tax burdens back and forth. I'm quite sure that the government would like to see ICBC become an even larger monopoly.

It is hoped, as I said earlier, that we can have a fairly open and free dialogue on how we can not only prevent accidents, but serious injuries, and also discuss the costing of these methods. It is hoped that we can have an amicable discussion over the next few hours or days or months, with the hopes that everyone has a good understanding of what is going on. I think it is really necessary to understand what the intent of this government is, what the intent of ICBC is, and to understand the changes towards ICBC, with hopes that the changes can be effected. ICBC clearly needs a change in its way of operation.

The first change in its operation should be in the public interest. I was going to say that we have no economic policy with ICBC, just ideology, as far as the government's concerned. But with all the moneys that are going back and forth, there's certainly an economic policy there somewhere along the line.

It is well known that true cost saving can only be achieved through a reduction in injuries and the severity of motor vehicle accidents in this province. Significant cost saving is available through better management of the claims paid, perhaps, but not through a system that ostensibly takes away your rights.

I keep sort of hammering on, coming back to the no-fault question, but it was quite a traumatic time in this province when it was suggested by the government that we bring in a no-fault system. Now I've heard, and I will discuss it later, that that originally came out of ICBC as early as 1983. Nevertheless, savings can be achieved in other ways than taking away your rights. So we'd like to look at the business plan and the strategic plan of ICBC to find out whether the minister intends to bring in enabling legislation. Will this just be part of ICBC's full plan, or are additional reforms needed to keep its costs under control?

At the same time, Madam Chair . . . .

The Chair: Member, I was just drawing your attention to the green light; your 15 minutes is nearly up.

[J. Doyle in the chair.]

D. Jarvis: I know we're going to be here for a few hours, but on a point on humour -- and perhaps it's not a point of humour, but I'll conclude on this point -- back in England in February of '87, a British-based accident management company did a frequency-of-insurance-claims survey and found out that it was the zodiac that contributed to accidents. So maybe we could throw everything out and just stick your birthday on your licence when you make out your application. I would be more than pleased to go along with that one, because the best drivers in the world, as far as the British survey went, are Scorpios. I happen to be a Scorpio, so I would have the cheapest insurance of all.

Anyway, I guess to start the ball rolling, as the green light has just gone off, I will ask my first question of the minister: when the budget estimates were drawn up, did ICBC take this latest announcement into account? These announcements certainly are going to make a dramatic impact on the budget. I wonder if the minister could answer that.

[3:00]

Hon. A. Petter: I appreciate the member's overarching introductory comments, in particular his strong words of support for the direction the government is taking in terms of tackling costs in ICBC through a very aggressive program of road safety. The member is, of course, absolutely right that the rate of accidents in this province, which is 25 percent above the national average, is the major problem that we are trying to tackle. It was my judgment, and that of the government, that that should be the first priority.

Certainly, given the measure of support for that initiative, we did not want to undertake other steps that could distract from what is a very strong public view among stakeholder groups and others, which has really come together over the consultation period, regarding cost saving over the past year -- a consensus in favour of the kind of aggressive road safety package that I announced recently.

I would say that we're going to have ample opportunity in this House to debate the specifics of that package, at least in terms of the legislation that's necessary to facilitate it. I tabled legislation yesterday, as the member will know. The rules of

[ Page 4593 ]

this House provide that where matters are before the House for debate as part of legislation, it is not appropriate to debate that legislation in the context of estimates.

So I guess what I'm asking the member to do is to avoid duplication -- not in any way to deny an opportunity to explore these issues, but to try to apportion them. If we can use the estimates debate to talk about issues within estimates -- remembering that there will be plenty of chances to talk about the specifics of the road safety package -- then that will enable us to cover as much as we possibly can within the course of these estimates without in any way detracting from the ability of the opposition to explore specifics around the road safety package that they may wish to explore in the context of the legislative package in both second reading and committee stage.

I won't respond specifically to all the points the member raised; I'm sure he'll come back to them. But a few of the general points that he made are worth responding to. One is that he says there's no economic policy in respect of the government's approach to ICBC. Clearly I don't agree with that. I think there is an economic policy and a social policy. I would say it's a stool with three legs. The first leg of the stool is safety, to use ICBC as an instrument to encourage traffic safety. That, of course, is very much the thrust of the initiatives we've announced in recent days.

The second is to ensure that premiums paid for ICBC remain affordable. I think the government's record over the last three years and into this year has been, historically, a very successful one in terms of keeping rates down. In 1994 rates went up 3.5 percent; in 1995, 1.75 percent; and, of course, last year and now this year we have zero percent rate increases. Today I noticed a statement from, I think, Statistics Canada, talking about how inflation was being kept down in B.C., and they attributed that reduction in inflation to the fact that our automobile insurance rates in B.C. are low.

The third leg of that stool is to take advantage of the fact that we do have a Crown agency for insurance to maximize savings and to ensure that we provide insurance coverage in the most effective and efficient way possible. By moving road safety into ICBC . . . . We can take advantage of the savings that accrue from road safety to insurance by integrating within ICBC a strong safety component.

So there are certain advantages that exist within a public insurer. I want to point out for the member that about 40 percent of the ICBC premium dollar is subject to competition, so it isn't a monopoly insurer in all respects. But it is a public insurer, and part of our economic policy is to take advantage of the fact that we have a public insurer -- to keep costs down, to promote safety, and to ensure it's done in the most comprehensive way possible.

Now, the member's final question was: were the estimates -- I take it he means the estimates that were released with the budget concerning ICBC's estimated deficits for this year -- predicated upon these road safety initiatives? The answer is no, they weren't. They were predicated upon status quo assumptions. So any savings we can make in this calendar year, which is ICBC's fiscal year, as a result of these initiatives or other initiatives that ICBC may have undertaken since the release of the budget -- vehicle impoundment and the like -- would assist us in reducing that estimated deficit.

D. Jarvis: I looked at the claims aspect of the reports. It showed that the bodily injury claims have only gone up 2 percent and that property damage claims have gone up about 17 percent. I wonder if the minister would care to comment on that.

Hon. A. Petter: Well, I understand how the member might have got that impression from the annual report, but perhaps I can answer two questions in one. He asked or questioned whether there was a third report from KPMG, and in fact there is. I think that third report, which in particular looks at 1996 in more detail and projects some of the earlier analysis forward, helps to answer that question. In fact, by my recollection, the increase in bodily injury in 1996 continued to be a major contributing factor to ICBC's costs -- in the range of 13 percent.

What happened was that in 1996 there was a prior-year adjustment that occurred as a result of previous claims that had been charged against ICBC. The experience of those claims turned out to be less onerous than ICBC had previously forecast, and therefore there was a benefit that was carried forward into '96 that allowed for an adjustment that made it look like the claims costs were going up something like 2 percent.

But, in fact, once that adjustment is taken out of the equation, the actual bodily injury experience in 1996 continues to be a major contributing factor -- as do certain elements of material damage and comprehensive claim, like theft -- but more in the range of 13 percent. The third report from KPMG, which has been released and which I'd be happy to provide to the member, I think helps to explain those trends in more detail than the annual report endeavoured to do.

D. Jarvis: I would appreciate it if we could get a couple of copies of that report sometime today. Either they can be delivered to our opposition offices or we can run down there.

It's going to be pretty hard at this point to try to stay away from these road safety programs and discuss them later without asking dollars and cents. But regarding the rate of return on investments . . . . I want to explore that end of it. What kind of policy did they have with regard to the gains and losses that you have on the sale of investments over, say, the life of the investment?

Hon. A. Petter: We will check for the precise numbers. The number, I believe, is in excess of 7 percent -- in excess of benchmarks that were established for ICBC. Again, I'd be happy, if we want to get into excruciating detail in these matters, to make sure that the member is provided with this information in written form.

To anticipate, perhaps, where the member is going with this, what I would say is that there was a benefit in this past year from some pretty good markets that produced an extra capital gain from investments. I know there have been some suggestions made concerning the accounting treatment of that. The accounting treatment of that was that the benefit was amortized over a number of years. And the reason for that is that it is consistent with standard accounting practices.

ICBC, of course, is obliged to follow those practices in ensuring that that gain is adequately provided for in its books, which led to some -- I don't want to inflame things -- distorted assertions concerning ICBC's financial picture, in my view.

D. Jarvis: Well, if I'm correct, it's over a five-year, or 60-month, period of time, and I really do wonder why it is for this. Is it to make it a smoother exercise, or . . . ? If so, would this not be misleading to the average reader of the statements -- the financial statements, that is? Would the minister answer me on that aspect?

Hon. A. Petter: I asked for information on this because it became an issue some months ago. The answer is that the reason that it is standard accounting practice to amortize this

[ Page 4594 ]

benefit over a number of years is because, in an operation like ICBC, one wants to provide for a smooth flow of unexpected revenues and unexpected losses so as to enable the corporation not to have to radically ramp up or ramp down its rates or its benefits from year to year.

Therefore, in an operation like ICBC, the standard accounting treatment for these kinds of gains beyond expectations is to amortize them over a period of time in order to ensure that those benefits are treated in a responsible way over the years, and don't result in huge, radical incentives to suddenly slash rates or whatever it may be that can't be sustained over time.

D. Jarvis: Well, then, basically it is a smoothing exercise, in that sense.

Although we haven't recognized the income from investment sales, I assume that you have the cash available to . . . .

Hon. A. Petter: Yes, and the money goes into reserves, and then the accounting treatment is to accrue that over the period of time.

I just would point out to the member that it is smoothing, and it's done on the loss side, too, to provide for a more stable form of accounting so an operation like ICBC can plan for the future more adequately. That's why ICBC's accountants and those who reviewed the matter felt that this was the appropriate accounting treatment.

D. Jarvis: The funding for the road safety program and the traffic safety initiatives is approximately $50 million. My question is: to what extent do these expenditures result in reducing claim costs? Can you go into some detail on that aspect?

[3:15]

Hon. A. Petter: Again, I'd be happy to provide the member with ICBC's five-year plan, which sets out the use of road safety initiatives to try to achieve savings. Obviously we're at the front end of some investments that have not yet reaped the benefits that ICBC expects.

In those areas where ICBC has made actual investments in, say, intersection improvements and road improvements . . . . It's a much smaller number than the member suggested in his introductory remarks -- it's about $3 million to $4 million in that segment of road safety. And I mean in the very introductory remarks, the ones that were made some time ago, not these introductory remarks. The experience has been savings in the ratio of 3 -- or more -- to 1, and in some cases, it's 7 to 1, I'm told. It's hoped that the return in savings from safety investments can meet or exceed that kind of 3-to-1 ratio in the future.

ICBC is generating, as I say, a five-year plan -- I'd be happy to share that plan with the member, both in its formative and in its developed stages, as it unfolds -- and is making sure that the investments are targeted in a way that produces that kind of ratio of saving.

D. Jarvis: Some $38 million was spent on software. I guess that was the start of the NGIS program. That was the development cost on that project. I assume it had some benefits, but it appears that it's gotten into a little more . . . . It may be out of control -- I don't know. I hear reports that you have now spent well over $80 million on it. At the same time, it doesn't seem to be proceeding forward, because of all these glitches that you have with ICBC. So I wonder if you could tell me what these expenditures relate to and if they have any future value.

Hon. A. Petter: The member is correct. There has been a substantial investment in software development in the range of $38 million. I don't know of any amount beyond that to this point. Of course, software development, particularly in this area, is costly and sometimes difficult to project. The investment has, as I understand it, produced some major benefits, but there is some further work that needs to be done. I understand that ICBC hopes there will be some application of the software to date in the very near future. Then there may be . . . .

ICBC will be looking in another phase at an incremental but reduced cost to try to take the software to another stage to assist in carrying out its operations.

So there has been a substantial investment. It hasn't achieved all of the objectives that ICBC set out for software upgrading. There is a bit more work to be done to get it to the point of application, but they're very close to the first phase of application. Beyond that there is further investment that ICBC is looking at to then build on and enhance that software development to date -- but to do so in a way that ICBC believes can be incrementally less costly than the formative development that's taken place to date.

D. Jarvis: On page 4 of the financial report, I note that the costs of the software development increased from $13.4 million in '95 to $4.8 million in '96. I wonder if the minister could specifically give me the reason for that.

Hon. A. Petter: Maybe the member could just tell me which page of which document he's referring to.

D. Jarvis: Page 4.

Hon. A. Petter: Page 4 of what?

D. Jarvis: The annual report.

Hon. A. Petter: The member has a different annual report than I have, hon. Chair.

Interjection.

The Chair: If the member would address the Chair, please.

D. Jarvis: I don't know where it is, but I will come back to it to direct you to it properly.

As I said, ICBC spent $38 million. But there's a question on employee salaries and benefits. There was an increase of $25 million in 1996. I wonder if he could explain what that is.

Hon. A. Petter: The increased costs, I guess, would be attributed to three things. First of all, there was a higher than desirable or anticipated claims volume during parts of last year, so temporary staff were utilized to some extent to deal with that claims volume. There was a pay equity adjustment, as I understand it, within the contracts provided for between ICBC and its employees. Also, there would have been some small additional cost into the year for the additional staff transfer to ICBC. That occurred through the transfer of some Motor Vehicle functions to ICBC.

[ Page 4595 ]

D. Jarvis: I have a question here on why payments to policyholders for premium refunds more than doubled in 1996, from $85 million to $200 million approximately . . . . How would this affect the rate stabilization fund?

Hon. A. Petter: The member will recall that there was some confusion in the year in question concerning the

interpretation of the rate freeze. As a result of that confusion, members -- I think on all sides of the House -- expressed concern that people whose premiums were going up in the face of the rate freeze perhaps didn't understand that ICBC's

interpretation of the rate freeze had been to keep the overall premiums frozen but to adjust rates within that overall umbrella.

Because of that confusion, the government requested that in fact the rate freeze be interpreted as a freeze on individual rates. There were therefore refunds. In fact, we discussed this a little bit last year in the House. I think the opposition suggested dollar cheques going back, and things. The member may remember. So as a result, there were some rebates -- more than the usual number of rebates -- provided to people who had paid premiums that had gone up, contrary to the

interpretation the government took of the rate freeze. ICBC then made adjustments.

In terms of the impact of that on the rate stabilization fund, obviously the rate stabilization fund is there to guard against losses that ICBC incurs. Those losses can be due to either failure to increase premiums or to increased payments. But at the end of the day, then, the rate stabilization fund is affected by the net position of ICBC at the end of the year. If ICBC incurs a deficit, subject to whatever adjustments take place from year to year in accounting, by and large that deficit then draws down the rate stabilization fund.

D. Jarvis: With regard to the pension fund, we're always interested in that. The pension fund shows a surplus of approximately $40 million. I was just wondering why there was such a large surplus. Did it result from, say, overfunding?

Hon. A. Petter: Yes, it's obviously good news when a pension fund is in balance or surplus. ICBC's fund has been, as I am informed, in a balance situation. As a result of very strong markets and the returns on investment to the fund, it has been in the fortunate situation, in the last year, of accumulating a significant surplus -- perhaps not hugely significant in relation to the total fund but significant enough. That, of course, helps guard against bear markets and downturns in the future.

D. Jarvis: That's a fairly large surplus, $40 million. Is there any argument there to say we could reduce the employer's contribution?

Hon. A. Petter: In this area -- and the same is true in other areas of ICBC, its general reserves and the like -- part of the actuarial review of ICBC that is undertaken is to review the extent to which the various funds it maintains are adequate to meet their purposes. If indeed they are more than adequate to meet their purposes, then sometimes prior-year adjustments are made. In this case, I guess the actuarial assessment was that this surplus at this time was such that there were no adjustments made to take account of this.

I don't think the extent to which an employer might contemplate reducing contributions and the like has been contemplated. But clearly, if there was an actuarial assessment that the surplus had reached the point that it was no longer necessary in order to maintain stability or guard against downturns in the fund, and to the extent that the arrangements governing the fund allow the employer to reduce contributions, that would then be an option.

All of these things are assessed from an actuarial point of view, and adjustments made. Indeed there was an adjustment made, as I already indicated to the member, based on prior years' claims experience not being as onerous on the corporation as had been expected. For that reason, some of that benefit was applied against the increase that would otherwise have occurred in personal injury pay-outs. As a result, the appearance of only a 2 percent increase occurred, against what was really a 13 percent claims increase on the bodily injury side. But we've already covered the territory.

[3:30]

D. Jarvis: It's rather interesting sometimes how you use an actuary on one hand, yet in running ICBC you don't use an actuary. I think you probably should do so, to be in competition with the private sector . . . .

Nevertheless, I found out where I was. It was not page 4, it was page 23. There was a significant drop in the development of the software from '95 to '96. What specifically is that reason, please?

Hon. A. Petter: I love estimates debates; one learns so much -- on both sides of the House.

As I understand it, the entry that the member is referring to refers to software outside of the NGIS system that's being developed. Because of the efforts going into NGIS in developing new software within that system, there has not been the same investment that would have otherwise occurred in the other software. There's a very high depreciation on bond software. Because of its relatively short shelf life unless it's constantly upgraded, the depreciation here is considerable within this component of the software.

D. Jarvis: A question has arisen . . . . I'm not trying to get into the no-fault aspect of it; I'd be the last one to want to do it. I want to ask this question, but I just thought I'd let my associate . . . . You'll notice that this will be my last question on this

section for the moment, then I'm going to turn it over to the member for Kamloops-North Thompson, whom you are all very familiar with, who is going to ask a couple of questions.

I wanted to ask you if you . . . . The no-fault committee threw statements around for awhile to say that there was a very, very large surplus rather than a deficit of about $135 million to $136 million in ICBC. It was ascertained, basically, by saying that the rate stabilization reserve was at $210 million and deferred investment profits were at approximately $195 million. Then, when you look at the market value of investments over costs . . . .

They came out with a figure there, the difference -- I think that's page 22, for your own information -- showing about a $225 million increase in the market value of investments over cost. So therefore, when you take that snapshot of ICBC at that time and you add those figures up, you would show that there was about a $630 million profit.

I wonder if the minister would care to make a comment on the $630 million asset at that time versus the time that they made out their report showing they had a $136 million deficit.

Hon. A. Petter: Unless I'm misunderstanding the member, I think this relates to the same matter we discussed earlier

[ Page 4596 ]

-- that there were, through investments, some additional gains made because of a very strong market for those who invest. Some in the coalition tried to argue that that gain could all be brought into a single year, and as I said earlier, I asked for advice as to why that had not been done. I was told in the strongest terms that it was because the appropriate accounting treatment was to amortize it. And I've already explained why that is.

In respect of the $135 million loss, that got charged against the rate stabilization fund, and that fund then got drawn down. That fund continues to provide a buffer for the corporation against anticipated losses this year and gives us a bit of breathing room to try to get these traffic safety initiatives and others -- which are part and parcel of the announcement I made the other day -- underway.

D. Jarvis: Could the minister maybe explain how that investment has progressed? Where do we stand today, for example? I know you can't give me a specific dollar figure for it today, but is there a continual improvement on that?

Hon. A. Petter: Ah, investments. I'm trying to get the member as full an answer as I possibly can. As I understand it, the rate of return this year is down a little bit from last year but is ahead of what was projected in the budget for this year. In large measure, it's ahead because there was a return or sale of equity in the neighbourhood of $20 million -- somewhat above $20 million. The good news, I guess, is . . . . Again, the way accounting treatment works is that when there's a return on equity, that does come into the year in which it occurs. We're probably a little bit more than $20 million ahead on the return on investment to this point in the year from what was forecast.

K. Krueger: When the ICBC annual report for the period ending December 31, '96, was published, it came out with a press release with the header: "Record Claims Lead to $135 Million Loss for ICBC." If the premiums had not been frozen in early 1996, if they had been collected at the rates that ICBC had previously planned and which it had determined through its actuarial experts . . . . How would that figure have been different if they'd actually enjoyed the premium income that they had planned on?

Hon. A. Petter: As I understand it, had the rate increase that was previously contemplated -- 1.5 percent, I think it was -- gone ahead, the loss in the last year would have reduced by something in the order of $60 million. I don't have to point this out for the member, but I'm going to, anyway: that would have been $60 million that would have come out of the pockets of British Columbians and was $60 million that was saved in the pockets of British Columbians due to the actions of the Premier and this government.

K. Krueger: In the current year, 1997, if the corporation had not only the rates that it planned for in 1996 but also any increases it had contemplated for 1997, what's the additional number that ICBC would have had as revenue?

Hon. A. Petter: It's difficult to answer the member's question, because in fact there was no rate increase proposed or contemplated by ICBC against which I can measure the member's question. The member's question is wholly hypothetical. Again, thanks to the efforts of this government, rates were frozen. As a result, taxpayers were not asked to pay that $60 million figure a second time, nor were they asked to pay a further amount that the member is now suggesting might have been requested but for the very progressive actions of this government.

[3:45]

K. Krueger: ICBC has always, I believe, represented itself as essentially a wholesale automobile insurance company -- that is, no profit motive exists. The company intends to charge its premium-payers what it expects to have to pay out in the coming year, while factoring in things like administrative costs, investment income and so on.

Even if we had an absolutely perfect forecast of what claims costs were going to be for 1997, would the minister concede, then -- and this is assuming that the very surprising wouldn't have happened and we would have a lower claims-incurred number in 1997 than in 1996 -- that ICBC would have had at least that additional $60 million income for 1997 that it lost for 1996, based on its original premium numbers? Is that valid?

Hon. A. Petter: Unless I misunderstand the question, it seems completely tautological. I mean, yes, if we had not frozen rates to avoid a cost of $60 million that would have otherwise occurred, then a cost of $60 million would have otherwise occurred -- yes.

K. Krueger: What I was trying to confirm is whether the minister agrees that the premium freeze has cost the corporation probably at least $120 million in its overall financial picture for the two years affected by the freeze.

Hon. A. Petter: It's true; if we had stuck British Columbians with a $60 million rate hit last year and this year, my addition tells me that that would have cost British Columbians an additional $120 million over two years.

K. Krueger: Well, I submit to the minister that somebody has been stuck with the $120 million, because the claims have plainly been there regardless, and a $135 million loss for 1996 alone is reported.

Over the years just prior to the premium freeze, ICBC had finally moved toward a regional rating system where people were assessed premiums according to the loss experience of the policies within their geographic area. As I understand it, the premium freeze put a stop to any further movements in the appropriate directions under a regional rating philosophy. That is, areas such as the one that I represent already have a lower premium than areas such as Vancouver, where the loss experience is far worse.

But areas where the loss experience was better than the amount being collected in premiums were enjoying a discount in premiums year after year, albeit relatively small. And areas that were experiencing a higher loss and expense ratio than the premiums they were actually taking in were experiencing some fairly substantial premium increases. So as I understand it, the freeze meant that everyone stayed at the same levels they were at.

I'd like to know the intent of the Insurance Corporation and the government with regard to rating according to regional loss experience when the freeze ends.

Hon. A. Petter: It's true that the effect of the rate freeze was to freeze rates; and because rates were frozen, it meant that additional increases in rates due to geography -- or decreases, for that matter -- that might have otherwise been undertaken did not occur.

As we move forward through the second year of the rate freeze, I think that one of the issues ICBC and the government

[ Page 4597 ]

will have to consider is whether there are, in making sure we continue to keep rates affordable, any adjustments that can be made within the overall rate structure to apportion the cost in a way that's more efficient and effective -- adjustments that perhaps make those who cause greater costs pay a fairer share. And that could be a function of geography; it could be a function of the expense of fixing particular cars; it could be a function of a number of variables.

Again, it's hypothetical, but as we move forward through and out of the rate freeze period, yes, there may be some opportunity to consider adjustments in rates that track these various factors -- of which geography is one.

K. Krueger: I assure the minister that we will be getting to other variables, as well, but I specifically want to talk about this one. People agitated for rating according to regional loss experience for years before it finally became a reality. In many people's minds it wasn't moving quickly enough, but it was at least moving. Areas that had always subsidized, specifically, Vancouver by paying higher premiums than their own regional loss experience would justify were finally seeing reductions, and the lower mainland was seeing increases.

While that's not necessarily pleasant for people in the lower mainland, it does put pressures on motoring traffic in Vancouver and in the lower mainland so that potentially you wouldn't have as many vehicles on the road, you wouldn't have as much need for more infrastructure, you'd have greater use of public transit, and you'd have less automobile emission pollution. There are a lot of reasons why it makes sense, not the least of which is that people in the interior and on Vancouver Island were beginning to escape from the burden of subsidizing people in the city to drive on roadways.

What I'm asking, on behalf of all of those constituents of mine, of other interior MLAs and of Vancouver Island, is whether or not the corporation and the government intend to resume moving toward genuine rating on the basis of regional loss experience when this so-called freeze is lifted.

Hon. A. Petter: This is a matter of future policy and a matter that will have to be given full consideration as we move forward. Really, I don't have a position beyond that to share at this time, but I'll be happy to share with all of my colleagues in Vancouver, as I'm sure the member will with all of his colleagues in Vancouver, his urging that we increase rates substantially in the greater Vancouver area.

K. Krueger: Of course, my position is that it's not a matter of future policy so much as a matter of past and temporarily frozen policy. I'd certainly like the minister to be applying his mind to these questions. I don't think that most of our constituents would consider it fundamentally fair that people outside the city, who already have substantial motoring expenses that people inside the city don't have, should have to subsidize city driving. Regional rating according to loss experience is something that I would like the minister to apply to his considerable intellect, too. I'll look forward to further discussions with him on it in future.

In 1996, according to ICBC's annual report, the number of claims reported during the year rose exactly 100,000 over the 1995 experience. Is there any different system of counting claims in place at ICBC, or was there in 1996 over 1995?

Hon. A. Petter: I'm informed that there was no difference.

K. Krueger: For the minister's information, in the past as new mandarins rose to power and faded away, they changed policy from time to time. One, for example, who had control of the claims division for a while, instituted a policy where he wanted a claim file opened for every car involved in an accident regardless of who was at fault -- or whether, for example, one particular motorist was responsible for damages to five other cars. I'm sure the minister can see how a change like that would dramatically change the numbers that ICBC reports to him. Changes like that should probably be highlighted and flagged for the minister's consideration when they're made.

Moving to the matter of the no-fault issue, which was finally put to bed last week -- and many of us are profoundly pleased about that -- I would like to know if the minister could quantify for us how much was spent on media -- advertising and so on -- during the advance work that was done on the no-fault initiative.

Hon. A. Petter: The amount spent in respect of advertising relating to the cost containment strategy was $735,000, I think. Just to give the member some sense of the proportion that ICBC spends on its Road Sense program, for example, it's about 15 percent of the total, so Road Sense billed $5.2 million in terms of expenditure.

What I draw to the member's attention is that that campaign went a long way to raising public consciousness around the kinds of cost pressures that ICBC has been under -- the major contributions to those pressures -- and has contributed directly, in my view, to the success of the consultation process and the package that we were able to announce last week.

If the member looks at some of the advertising -- I have some in front of me -- it talks about a number of possible initiatives that could be taken to improve the car insurance system: get tougher with bad drivers, invest more in road safety, make the injured victim the priority, focus on helping people recover faster, reduce fraud abuse and auto theft and keep rates stable and affordable. Those are the six steps that are outlined, at least in the ad I have.

I think the member will see that many of those steps that were put forward were adopted and endorsed by numerous groups and have now become key components in the road safety initiative that I was able to announce last week.

K. Krueger: I understand the minister to say that the advertising that he would attribute to the advance work for no-fault approximated 15 percent of the total advertising of those issues and the Road Sense program.

ICBC has always had some expenses explaining its product, as well -- product advertisement. I wonder what the global expense for advertising at ICBC was for all those things in 1996.

Hon. A. Petter: The total advertising budget for the corporation is $8.3 million. I was just relating it to the Road Sense component. As a component of the total advertising budget, it's less than 10 percent.

But I certainly do not want to yield to the member's argumentative suggestion as to the purpose of this advertising. As I've indicated, the advertising was there to draw the public's attention to a range of pressures that ICBC faces that contribute to increased costs and would result in increased premiums if steps weren't taken, and then to a range of possible steps that might be contemplated in order to address those costs. I think the evidence that this was money well spent was the degree of interest that was stimulated in the cost containment issue around a range of initiatives, some of which

[ Page 4598 ]

were endorsed with an enthusiasm and unanimity that I think was impressive, perhaps unprecedented, as well as some proposals that clearly caused controversy and perhaps assisted people in endorsing others with more enthusiasm than they otherwise would have. So in my view, it's money well spent and money that had a direct relationship in producing the package of road safety initiatives that I was able to announce with a high measure of stakeholder support just last week.

[4:00]

K. Krueger: So we have a total advertising expenditure in 1996, then, of $8.3 million -- $735,000 on cost containment; $5 million or so, I take it, on the Road Sense program; and surely some on actual explanations of the corporation's existing insurance products. Are there any other areas of advertising that ICBC spent money on in 1996?

Hon. A. Petter: No. I think the member has summarized it very nicely.

K. Krueger: Surely there were considerable resources at ICBC devoted to ramping up, as the lingo goes, for no-fault. There obviously were staff committed; there was a sort of war room arrangement that was discussed in the weeks previous to the decision not to proceed with no-fault. There was a great deal of emphasis within the corporation on that option for quite some time over the last two years. Can the minister give us a global number? I'm not talking about advertising now, but about actual devotion of resources, travel expenses, studies and other expenses. Can the minister tell us what was spent in the consideration of no-fault as an option?

[T. Stevenson in the chair.]

Hon. A. Petter: Again, I guess I could be obstreperous here and take issue with the member's characterization, but I like to be helpful, because I think it saves everybody time and aggravation.

The amount that ICBC has spent on trying to gather information to assist in a cost-containment strategy, including initiatives such as an improved claims system that will both save costs and better serve customers, including consultants' reports concerning cost pressures and including the drawing-up of a five-year safety plan . . . . Again, it's a bit of guesswork here, but the best sort of global number I could offer would be something like $4 million. Those efforts, I think, are going to be well rewarded in the substantial savings, not only in dollars but in lives, that are going to result from the very aggressive road safety program that is now moving forward.

Actually, I'll go beyond that and say that it isn't just the program; it is the degree of public awareness and support that has grown over the last year around this set of initiatives, which I think has the potential to effect the same kind of cultural change around safety that we have seen previously around drinking driving in particular -- although there's more we should do in that regard -- and around smoking -- although there's more we are doing in that regard. It's that kind of cultural change.

If we can get drivers in B.C. to see that this 25 percent difference in bad driving is a problem -- their accident rate is 25 percent higher than in other jurisdictions -- and to take responsibility for that, then I think we will have done much better than simply what we would do through a government-driven program.

So these initiatives which were devoted toward gathering the information, drawing up a five-year safety plan and other associated stuff are dollars that will prove to have been remarkably well spent.

R. Coleman: I'd like to ask leave to make an introduction.

Leave granted.

R. Coleman: One of the best elementary schools in the province of British Columbia is Betty Gilbert Elementary School in Aldergrove, and one of the best-behaved and most intelligent grade 4 classes in the province of British Columbia is Ms. Friedenstab's grade 4 class from Betty Gilbert Elementary School. Ms. Friedenstab and her class and some parents are in the gallery today. Would the House please make them welcome.

K. Krueger: Referring again to the annual report for 1996, on page 2 is a letter from Miriam Olney, chair of the ICBC board of directors, and on the facing page is a letter from Thom Thompson, president and CEO. What really seemed to me to jump out when I read the two letters was that they didn't appear to be saying the same thing. Of course, they were published prior to the decision about no-fault, but Ms. Olney makes a very valid point that Road Sense was pioneered by ICBC in 1994 and is only now coming into its own.

I think we're seeing that, in that photo radar was the first program that the government actually delivered, with a little bit of a shaky start -- and shaky since, actually. A number of other programs were only very recently brought on, and of course, more programs were announced last week.

In Mr. Thompson's letter, the thrust almost seems to me to be that things just aren't working, the way they are, and that we're going to have to have product change. I took it, at the time, as a very strong indication that no-fault was coming down the pike.

I wonder if there has been a conflict going on within ICBC, as to whether or not no-fault was the way to go.

Hon. A. Petter: In fact, I read the two letters as complementary and consistent with the direction the government has taken. Yes, there has been considerable progress made by ICBC: through its Road Sense program, through the introduction of photo radar, through some of the investments ICBC makes in intersection improvement and the like. But yes, it's also true that further changes to increase road safety and to modify the insurance product are required.

That's reflected in the package we announced last week, in which there were further efforts and changes to really undertake a very aggressive program on road safety. But there were also changes such as moving to a net income rather than gross, such as the material damage deductible and such as encouraging mediation rather than litigation, which we and stakeholders believe are good public policy, merit support and will assist in meeting future cost pressures. We'll have a chance, of course, to debate those in some detail when we get to the legislation. But I think these two messages, while they reflect the distinctive views and personalities of their authors, are nonetheless complementary.

K. Krueger: I'm not attempting to be confrontational here. I've already said that I'm very pleased about the decision to abandon no-fault and also about the announced programs to attack the source of the problems and the expenditures.

But with respect, a lot of the advertising I was referring to earlier was clearly targeted at the tort system -- at lawyers.

[ Page 4599 ]

Lawyers were mentioned a lot. The sort of song and dance that we read on page 6 is clearly, I think, an attack on the tort system. Yet, when you flip over one page to page 8 and look at the little table involving auto plan claims incurred, you see that bodily injury claims expenditures went up $16 million in '96 over '95. That's a lot of money to most of us, but compared to premium revenues of $2.276 billion, it's a relatively small increase. In fact, the percentage of bodily injury claims as a portion of the entire claims expenditure actually dropped by 4 percent in 1996 over 1995.

So reading that, it seemed to me at the time -- and still does -- that the emphasis on lawyers and bodily injury expenses and so on perhaps was somewhat misplaced, particularly when you look at the fact that the cost of fraudulent and exaggerated claims -- itemized at the bottom of page 5, on the right -- was estimated at $150 million, and auto crime and auto theft was $160 million of the 1996 claims costs. It seems to me that clearly we should be focusing on those areas, rather than attacking other stakeholders in the system.

In any event, now that the decision has been made . . . . We got a press release last week, and a number of programs were announced. I wonder if the minister could give to this House some projection of the anticipated start dates for those various programs and the cost of bringing them on stream.

Hon. A. Petter: I don't know if the member wasn't in the House earlier or simply missed the debate if he was here, but I explained that the numbers in the annual report did not reflect the accident rate increases year over year, because of prior-year adjustments. The real increase in claims costs for bodily injury claims from '95 to '96 was 13.2 percent.

I think it's unfortunate that some groups seized on numbers in an annual report that are financial numbers and didn't look behind them to the actual accident rates. I don't really want to get back into that debate, because we had it earlier. I'd be happy to provide the member with some of the work KPMG has done on the '96 year that looks at the accident experience year over year. I just want the member to be aware that bodily injury claims continue to be a major cost pressure -- in fact, a greater cost pressure than other areas, such as material damage, which is also of serious concern.

In terms of concerns regarding court costs and legal costs, that concern is not only a concern of KPMG, which is quoted in the annual report, but it has been a concern of the Canadian Bar Association, which recommended that we undertake aggressive alternative dispute resolution, including mediation. That indeed has found its way into the package of reforms that were announced.

Legal costs do contribute substantially -- they are estimated at over $200 million -- to ICBC's costs. That's not an attack on the legal system; it's a fact. As I say, the Canadian Bar Association itself has indicated it's of concern and has agreed to work with government in addressing that concern through mediation efforts, for example. So I think there were a lot of knee-jerk and, in some cases, exaggerated reactions from stakeholders, who perhaps put self-interest ahead of a more considered set of views.

Fortunately, the process, I think, has worked remarkably well. We end up with a very strong consensus on the package that was introduced, and for that I am grateful. I think we now need to work hard to make it succeed. We'll continue to hold stakeholders accountable. I'm sure that we will be held accountable for our

part in doing so.

In respect of the timetable, really I think it's more appropriate to address that when we get to the legislation. There are a range of provisions within the legislation. Once the legislation is passed, I'm hopeful that some of those can proceed almost immediately; others will take time.

The shift to net income, for example, is one that should take place almost immediately under the legislation. The move to graduated licensing will take longer, because it requires a system to be established -- I hope some time next year. Other initiatives fall somewhere in between those two time frames. There may be a few that will take longer still. Obviously some of the benefits from things like intersection cameras will take longer, because we're going to proceed with pilot projects. But I'd be happy to address that when we get to the legislation in a more specific way.

[4:15]

K. Krueger: The premium income shown on the first page of the annual report, at $2,276,566,000, is substantially larger than the claims-incurred cost, at $2,125,476,000. ICBC for years has been proud to say that it substantially runs the company on its investment income, which was $348.5 million in 1996.

If ICBC lost $135 million in 1996, there seem to be a number of factors that add up to that. One of them is the NGIS expenditure that was discussed earlier. I think the minister quantified that at $38 million. It's my understanding that this software expense has been incurred through an open-ended contract. Actually, the system is far from meeting the needs that it was planned to meet. I'd like a more detailed explanation from the minister of the status of that.

If he's been given to understand that it's fairly close to being up and running, I wonder if he's been given a target date and, if not, if he would ask for one and advise this House later and also confirm whether or not the suppliers were actually allowed to go ahead and run up that kind of a bill for our public insurance company in an open-ended contract.

Hon. A. Petter: Again, I'd be happy to try to provide the member with fuller details in another forum, because it is a very complex matter. But by and large, I'll try my best in the circumstances that are available to give at least an outline of what has transpired to date.

There was a partnership arrangement reached with IBM initially. It was not an open-ended contract -- far from it. It was a partnership arrangement. That partnership arrangement proved more costly than ICBC had originally anticipated. So I believe it was in January or thereabouts of this year that the partnership was brought to an end. ICBC took over the management of the work and continued with IBM on a fee-for-service basis but managed, with its own management, to reduce the cost substantially.

The development has reached the point where it is anticipated that the first application is likely to proceed in September. If that first application proves successful -- or once it proves successful, hopefully -- then the expansion of that application can be undertaken throughout the system. That expansion will be undertaken, again, with ICBC acting as the manager, through various contracts with software providers on the most cost-effective basis.

K. Krueger: There was some discussion of a fairly dramatic reduction in the number of brokers serving ICBC.

[ Page 4600 ]

I understand that those discussions have been put on hold until the fall. Does the fact that -- as I understand it -- ICBC wants to reduce it to 600 brokers have a direct relation to the capacity of

NGIS?

Hon. A. Petter: No. The question of brokers and the tentative agreement that did not proceed, which the member is referring to, had nothing to do with NGIS whatsoever. It was an attempt to find cost savings on a cooperative basis with brokers through an arrangement. The initial tentative agreement proved to be one that was not fully supported throughout the industry.

Now ICBC is undertaking further consultations. The idea here is to find a most cost-effective way of delivering services in conjunction with brokers and a more efficient way to improve service and other elements of the relationship between brokers and credit unions who act on behalf of ICBC.

K. Krueger: The expense ratio that ICBC reports on page 1 of its annual report rose to 17 percent from 16 percent in '95 and 15 percent in '94. Indeed, it hasn't been at the 17 percent level since 1992. On premium income of almost $2.3 billion . . . . I guess that's a fairly substantial number -- $23 million. I wonder how the minister accounts for such a large increase in the expense ratio. ICBC, again, has always been very proud of how its expense ratio compares to other insurance companies.

Hon. A. Petter: As I read it, the range has been pretty consistent over the past number of years: 17 and 16 percent, dipping to 15 percent in 1994. I think what has to be recognized and put in context is that, as I understand it and as I'm informed, that expense ratio compares very favourably not only with other jurisdictions in Canada but right across North America as one of the most efficient expense ratios. Therefore maintaining that kind of ratio -- while it will go up and down a notch here or there from 16 up to 17 or down to 15 -- is part of ICBC's success story, and it's the continuation of that range of expense ratios that allows ICBC to deliver service on a very efficient basis.

K. Krueger: As I said at the end of my remarks on that question, ICBC has always been very proud of its expense ratio. Nevertheless, a 1 percent increase, when you're talking about a $2.3 billion-a-year income, is a very substantial number. ICBC has a relatively new chief executive officer. The chief executive officer before him worked in the 15 percent and 16 percent range. Surely he's concerned about an increase in the expense ratio, which costs out at about $23 million a year. I would just like to have -- especially since he's in the House with the minister -- an explanation of how the $23 million was spent in doing things differently from 1995.

Hon. A. Petter: Well, we're having an interesting seminar over here on this side of the room. I'm not sure we're going to get down to the bottom of it, but let me undertake to get back to the member with an explanation. There is some thought that it . . . . It is a 1 percent differential, and it may be explained more with investment decisions or premium decisions than with respect to any basic change. Indeed the management philosophy is unchanged, and that is to maintain the lowest possible expense ratio.

As for the reason why it varied within this 1 percent range in the last year, I will -- if the member wants me to -- provide a fuller explanation, but I don't think I'll prolong the seminar here in order to do so.

K. Krueger: I do accept that, and I would like that detail when the minister is able to provide it.

Goofy things happen sometimes in large organizations, and I'll give the minister a quick example. One of the mandarins that rose to power in the claims division a few years ago decided that the way to save the world at ICBC was to launch what he called a claims standardization program. He seemed to be a throwback to the Industrial Revolution. He published a chart of what every adjuster's desk should look like, where they should keep their mail buckets and where they should keep their diary buckets, and another chart of when they should do their diary and when they should do their mail.

He presumed to get involved in just about every detail of an adjuster's or a clerk's life in an ICBC claims office, and he took his best technical people -- people who were there to train bodily injury claims adjusters and material damage estimaters -- and sent them on travelling road shows around the province to literally inspect people's desks and make sure that the buckets were where he said they should be, the pens and pencils were where he said they should be, the diary was pulled on the day he said it should be and the mail was handled on the morning he said it should be.

Everybody -- all the adjusters and clerks and managers and supervisors -- did little ticky sheets for him to prove that they were checking these things constantly. To no one's surprise but his the world didn't unfold as he thought that it would, and ICBC's claims costs began to rise significantly because no one was minding the store and everybody was checking the buckets, trays, pencils and diaries.

So things like that happen, and sure, 1 percent looks small. But $23 million isn't small, and this is the sort of thing that can quickly spiral out of control.

Another significant cost at ICBC, of course, is the salary of the employees. The number of employees has been rising, and certainly the motor vehicle branch transfers are involved in the overall number of employees. Do the minister and the people advising him foresee any increase in staff at ICBC in '97 over '96, excluding the transfers from the motor vehicle department?

[4:30]

Hon. A. Petter: Well, one hears all sorts of stories about ICBC. I even hear about safety managers putting their pictures in advertisements, for God's sake, so you never know what stories you will hear about ICBC.

But if I can come to the question that was at the end of that long introduction from the member, the advice that I receive is that there has been no net increase in permanent staff from the transfer of the motor vehicle branch. There are some temporary increases from time to time in dealing with either increased claims volumes or particular initiatives that require staff complements to move them forward. But there has not been a significant increase in staff, other than the transfer that the member alludes to.

K. Krueger: The minister referred to a pay equity change in 1996, which I'm certainly also aware of. When that pay equity adjustment was made, a number of employees received very significant retroactive pay and very significant pay increases. I wonder if the minister could quantify for us what the total cost of the pay equity changes were.

Hon. A. Petter: As I understand it, the cost last year would have been in the range of $6 million to $7 million.

K. Krueger: Just to bring that down to practical terms for the minister, the pay scales that I saw after that was done

[ Page 4601 ]

indicated that an entry-level position in the claims centre -- a mailroom clerical position -- was paid almost the same salary as the base MLA salary last year. That is, the base MLA salary was just over $32,000, and those entry-level employees were starting around $29,000.

It's those sorts of decisions that add up to a 1 percent expense ratio increase and more, of course, and whether or not that's fair to the motoring public -- who pay their ICBC premiums on the understanding that it's wholesale insurance coverage -- is a question I'd like the minister to put his mind to. We all know who ends up paying the bills.

A lot of those people were astonished at the size of the pay increases and the retro pay that they got. There is quite a discrepancy between those salaries and what's paid for similar work done outside the corporation by people who work for private enterprise. The union itself expressed astonishment to me at how easily ICBC capitulated on those pay equity matters, and people speculate that the arrangement was made as a forerunner to doing the same sort of thing at the BCGEU. I wonder if the minister is aware of that suggestion and if there's any basis to it.

Hon. A. Petter: As I understand it, the pay equity adjustment was done following an independent evaluation involving Deloitte and Touche consultants, with cooperation from management and the union, in an effort to identify inequities in the pay structure that were harming women, particularly, and others who weren't receiving pay that was appropriate -- or, to put it differently, who were receiving less than others because they were in pay categories that were dominated by women. I hope the member isn't suggesting that ICBC should save costs by moving towards inequitable pay levels for women. I take it that's not his suggestion.

K. Krueger: With respect, I suggest that nobody was being harmed at ICBC. There was always a lineup at the door of people anxious to take those entry-level jobs when they came available -- in the experience that I know of, at least. People were paid quite handsomely. The fact that one gender or another dominates a pay category doesn't necessarily mean that anybody is being underprivileged or overlooked. It's that sort of logic -- that just because, for example, women dominate a particular type of job, people think it must follow that there's a pink ghetto and there's some harm being done -- that leads to careless decisions.

Once again I would ask the minister to have a second look at whether or not he thinks that pay equity change made sense, was appropriate and was a good expenditure of the public's premium dollar.

Speaking of that, beginning on page 7 and moving over to page 8 under "Financial Highlights," ICBC reports: "Additionally, we have retroactively accrued a $19 million cost of a past liability relating to post-retirement benefits for our employees." I wonder if the minister would explain that to this House, please.

Hon. A. Petter: The member's interest in this, I hope, isn't occasioned by his own previous position with ICBC and his interest in these post-retirement benefits.

This is not a change in benefits; this is a change in accounting policy that tracks a general change in the way accounting is done around these benefits in the United States. ICBC was advised to follow that change, through which health and other benefits that are available to employees upon retirement are costed and accounted for, not at the time they are incurred -- after retirement -- but as part of the expense the corporation incurs in providing pay to employees during the course of their employment.

In a sense, those costs are accrued and costed against the employment period of the employee's time with ICBC, not deferred until subsequently. That was the accounting treatment that ICBC's accountants urged the corporation to adopt to bring it into conformity with others.

K. Krueger: What we're slowly getting to here -- and this is just on a very cursory examination of one annual report -- is that ICBC reported a $135 million loss for 1996. The minister came perilously close to, it looked like, expropriating the rights of British Columbians through a no-fault insurance system based on his expressed alarm over this type of loss -- and made it clear during his announcement last week that no-fault is still an option if he deems that the other measures taken don't work. I certainly hope they work, for the sake of all the people who won't be hurt and won't be killed as a result.

Those measures should have been in place long ago. We're going to talk a little bit about why some of them weren't.

Looking at the numbers we've just canvassed, if ICBC lost $60 million in '96 because of the premium freeze that it would have had according to its plan, $38 million on NGIS, $23 million on a 1 percent administrative expense increase, $7 million in pay equity and had a $19 million adjustment on post-retirement benefits, those total $147 million, which is substantially more than the loss that ICBC is reporting.

I make those points to caution the minister against ever again contemplating such a major change in the social fabric of British Columbia on the basis of this type of evidence. It hasn't been clear to us whether the tail's been wagging the dog or vice versa in all of these considerations, but no-fault was a bad idea, and we hope it's dead and buried.

There was a vice-president in the insurance corporation who was responsible for human resources, and he departed the corporation, as I understood it, in a relatively unexpected way, about the time of the pay equity increases -- just after, actually. I wonder if the minister could tell us whether the vice-president retired voluntarily or whether there were some problems with these post-retirement benefits -- and the way they had been dealt with up until then -- and/or the pay equity manoeuvres, and whether in any way those or other performance issues precipitated the vice-president's departure.

Hon. A. Petter: The member is throwing a whole bunch of things into a hopper and calling it fruit salad, or something. It's quite incredible. The fact is that a number of the matters he refers to deal with changes in accounting treatment that are required of ICBC through the advice it receives from its actuaries and accountants. The member neglects to mention that there was a $100 million adjustment to the benefit of ICBC last year, which depressed the extent to which losses would have otherwise occurred because, happily, of the claims experience.

The member goes back to the point that yes, if premiums had been increased substantially in the previous two years, that would have taken pressure off of ICBC. It's true, but of course this government has understood what apparently the member and his party cannot understand, and that is that British Columbians are not prepared to tolerate the experience of the last ten years, which saw a 140 percent increase in claims costs and related premium increases to go along with it. This government is determined to do something about it. All of the evidence that was produced through the independent

[ Page 4602 ]

financial statements done by KPMG and verified by Coopers and Lybrand, the auditor for ICBC, indicate that KPMG's numbers are correct and that without substantial changes, substantial increases in premiums would be necessary.

We are making substantial changes, and I hope those changes will be enough to avert premium increases. But if they are not, and if the increases required are not reasonable and not affordable, then I have said that this government will take additional steps to protect premium payers. I guess that is the difference between this government and that opposition. This government is determined to protect the consumer -- to ensure that the consumer does not simply become an ongoing source of money to increase the coffers of ICBC. We've seen how ICBC costs have increased in relation to GDP in recent years, in a way that is simply not sustainable.

So we're taking action, and we will take more action if necessary. But as I've said time and again, my preoccupation now is on trying to make the changes that everyone agrees should be our priority work, and I don't think distorting the numbers or playing with the numbers in the way the member does is particularly helpful in that exercise.

On the vice-president issue, the simple answer is that there is no correlation between the vice-president leaving and the treatment of post-retirement benefits or pay equity.

K. Krueger: One of the points that has been made to this government frequently in the past -- and I'll make it again now -- is that the official opposition is all too eager to assist in bringing problem drivers to heel in dealing with the aggressive driving behaviours and attitudes that a very small percentage of the driving population exhibit.

Indeed, when ICBC did a scan a couple of years ago to determine whether it could afford to allow another step on its claim-rated scale to claim-free drivers, the corporation learned that well over a million drivers would qualify for such a reduction. As I understand it, they didn't feel they could afford that step at the time -- an $80 million expenditure -- which I think makes it obvious that there is a very large number of drivers in British Columbia who are not creating the problems, and a relatively small number who are.

Considering what the minister just said and this government's self-perceived commitment to bring down the loss experience and deal with the problem people, why does the chair of the ICBC board of directors have to say, at the beginning of her letter in the annual report, that the Road Sense programs introduced in 1994 are only now coming on stream? Why has it taken so long to introduce administrative driving prohibition and vehicle impoundment and graduated driver's licensing? A number of the plans announced last week are reannouncements, because these things have been in the hopper for at least two years.

Perhaps the minister could explain to British Columbians -- certainly to this House -- why it has taken so long to bring these programs into action.

[4:45]

Hon. A. Petter: The Road Sense program was initiated in 1994, I believe, and it hasn't been underway that long. These kinds of behavioral changes -- and photo radar is another example -- take time. We know there was a strong amount of resistance to photo radar from certain members of the opposition, for example. There had been resistance in other provinces. It takes time for the public to become educated and to start to move towards supporting these kinds of initiatives.

Given the time that was available prior to my being the minister responsible -- or the current president being the CEO and the chair being the chair of ICBC -- there were substantial changes made. It does take time to get these kinds of initiatives underway, and from 1994 to now is not a lot of time.

Photo radar is just starting to have a positive impact in terms of accident rates and is starting to gain a high measure of public acceptance, which I think is good news.

Frankly, I'm not sure we would have reached the degree of public acceptance for this package of initiatives if the government had not gone out and shared, in a very open way, the problems that ICBC faces, the consequences of not dealing with those problems and some of the alternatives that exist in terms of dealing with those problems, and if the government had not taken the action of freezing premiums as a way of getting not only ICBC's attention but also the public's attention, and driving -- pardon the pun -- these kinds of solutions.

From the opposition benches it may be easy to say: "Gee, you should have done it all faster." But I think what is impressive is how far we have come in a relatively short period of time and how much more is now being contemplated with what is essential: a high measure of public support. Standing up and saying, "Government's going to do this," without having public support is not much use.

Being able to move forward with the measure of public support we now have, has the potential of creating a real cultural change that can produce major savings of lives and major savings of dollars, and that's the position we're now in. I take considerable pride in the fact that we're now in that position, because I think the exercise over the last year has helped to bring us to that position today.

K. Krueger: Once again, the opposition has certainly been supportive in dealing with problem drivers. I respectfully remind the minister that this government has been in power since 1991, and I have heard public outcry -- certainly since then and probably before -- that people are tired of paying the freight for bad drivers. So I think the public support was there long before the minister realized it. It certainly wasn't there for no-fault, as the minister has now come to understand. But it has been there.

I raise these points in order to spur the minister on in his announcements of last week and in the hope that these programs will indeed be brought on swiftly and not reannounced two years hence, with little happening in between.

Another issue that the Insurance Corporation of British Columbia has spoken of for years and which we haven't seen too much action on is rating people's vehicle premiums on the basis of damageability -- how easily a vehicle is damaged -- and repairability -- how difficult and how expensive it is to fix it. I remember people shaking their heads in chagrin years ago over a Subaru headlight costing $250, for example, and various vehicles that are put on the market with atrociously expensive parts -- windshields with particular curves in them that cost an exorbitant sum.

There has been discussion for a long time about rating people's damage premiums according to what it's going to cost to fix a vehicle and how easy it is to damage it in the first place. Could we have an update on what the Insurance Corporation's progress has been on damageability ratings and repairability ratings?

Hon. A. Petter: This relates to a matter that we dealt with earlier, and that is the potential, as the rate freeze period comes to an end and within the context of ensuring that rates stay at a reasonable level overall -- which is a commitment and determination of this government -- for looking within the rate structure for ways in which that rate structure can be

[ Page 4603 ]

altered to better track costs and claims experiences. One of the ways in which that might be done is to have a system that is more sensitive to the costs inherent in certain vehicles, in accordance -- as the member suggests -- with their damageability, costs of repair and the like. That is a matter of future policy, but one which I'm sure ICBC and the government will be looking at as part of any changes in rates that may take place once the freeze comes to an end.

K. Krueger: Yet again I'll tell the minister -- and I know he hasn't had this portfolio all that long -- that at ICBC that has been a matter of so-called future policy for at least ten years, I believe. American insurance companies have gone into that practice, and it's only fair that it should be done in British Columbia as well.

Touching once again on the matter of rating according to regional loss experience, if this is a user-pay system, if it is wholesale insurance coverage and if the government does allow the corporation to move back in that direction when its so-called freeze is lifted, I would like the minister's advisers' numbers as to what percentage change we would have to expect in the various regions of British Columbia.

That is, if we went to a true regional loss-experience rating system at the end of the freeze, it's my understanding that Vancouver premiums would rise substantially and premiums elsewhere in the province would drop substantially. I wonder if we could be given the actuarial percentages -- which should not be a matter of future policy. I believe the corporation keeps very accurate track of where its claims are coming from and how much it's spending.

I hope the minister can give us an idea of what percentage increase the lower mainland and other areas might experience, and what percentage decrease my area and others would experience.

Hon. A. Petter: I don't have that information at hand, hon. member. I think last year another member raised the issue of rates in Peace River being higher than the claims experienced, and my recollection is that the member referenced this member in saying that. We went on a huge hunting expedition with ICBC to look at the actuarial experience and found out that that in fact was not the case. The claims experience in Peace River showed that the rates were set in a way that the premiums tended to correspond with the claims experience.

Obviously these issues of geographic costs and other indicators are ones that ICBC will look at as we move forward and as we consider possible rate structures in conjunction with the freeze coming to an end. But I want to say, and I want to caution the member, that this government remains determined to ensure that rates do not rise unduly, that rates remain affordable. We are not prepared to see the same kind of experience that has occurred at times in the past, where British Columbians have been asked to pay inordinate increases year after year to fund ICBC.

K. Krueger: Again, with respect, it should not have taken a huge hunting expedition. ICBC should be able to give you those numbers -- like that. They did flush $38 million down what has been described to me as a rathole on this NGIS, and long before that they were spending millions of dollars on their computer system. They can sort claims by postal code, so ICBC should be able to tell the minister in a heartbeat what the claims experience is for a given area, how many vehicles are insured there and what their premium would be if they were only paying for their own loss experience.

I urge the minister not to accept that answer. I ask for his commitment to give me, within a month, a region-by-region breakdown of what the premium change would be if within those regions people paid premiums according to the regional loss experience.

[G. Brewin in the chair.]

Hon. A. Petter: I'm now reminded that in fact we went further last year and made some premium comparisons with Alberta to correct the misapprehension that somehow Alberta rates were preferable to B.C. rates when one takes the accident ratios and claims experience into account. I will certainly ask ICBC to provide the member with what information it can concerning the claims experience, and have ICBC communicate the information that it's able to, to the member in due course.

K. Krueger: My thanks to the minister for that commitment.

ICBC went into a new mode of windshield claims handling in the not too distant past. Perhaps the minister could ask his advisers for the effective date. As I understand it, in this new scheme of things the shops that replace and repair the windshields handle the claims themselves rather than ICBC's staff handling them in the claims offices. There are always questions that arise as to whether that's appropriate; certainly a great deal of good faith is involved when an arrangement like that is made. Can the minister tell the House whether the number of windshield claims went up dramatically after that change, compared to what it was before?

Hon. A. Petter: As I understand it, this is a pilot initiative, not dependent upon goodwill but based upon a certain protocol or arrangement that ensures there are checks and balances in the way this is administered. The claims experience within the pilot indicates that there has been no increase in claims in windshield repair as a result of this arrangement. The pilot provides a basis to control that against other claims experience, and the indication was that the claims experience within the pilot did not indicate that this change in arrangement resulted in any increase in claims over the conventional or traditional arrangement that had been in place.

K. Krueger: Then could we know the scope of the pilot; that is, what area is included and what date it began?

Hon. A. Petter: I understand the pilot is being expanded. I would again offer to give the member more details as to how it has unfolded, but initially, I think, it's been within the Vancouver area that the pilot was undertaken.

K. Krueger: If he has this information with him, I'd appreciate it from the minister; otherwise, perhaps it could be procured at the same time.

In the experience before and during that project, I'd like to know whether the average cost of windshield claims handled in that area rose, and by how much. Some windshields are much more expensive than others, and some profit margins are much higher than others. I'd also like to know whether the repair percentage changed at all. I'll explain what I mean by that. If a windshield receives stone bruises, and they haven't cracked the glass -- the cracks haven't begun to run -- repairers can inject a little solution, or through various techniques, repair that mark so that it doesn't run.

This is much less expensive than replacing an entire windshield and is a substantial saving to the corporation. So could the minister

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tell me, or will he commit to tell me later, of any change in severities in the area where this pilot has been run and any change in repair percentages?

[5:00]

Hon. A. Petter: Well, the pilot was designed to take advantage of these kinds of cost-saving alternatives. If the member wants more details, indeed I'd be happy to arrange a briefing for him on these kinds of issues so that he can get into the kind of nitty-gritty that he is obviously interested in getting into. I don't have the details at hand right now, but I'd be happy to arrange a briefing or provide that information in some other way.

K. Krueger: Referring back to the table on page 1 of the annual report, we note that the unpaid claims number went up by almost $300 million in '96 over '95. I wonder if the minister could account to the House for that.

Hon. A. Petter: This is an actuarial reflection of the increase in accident rates. If the member looks at the table, he will see that there have been similar increases in previous years in exactly the same range, which is part of the problem.

K. Krueger: I agree it's part of the problem, but I wonder if the minister really wants to accept that the trend should continue. When he sees premium income rising by $23 million year over year and he sees unpaid claims rising by $300 million, obviously those graphs are not charting in the right directions. I would like to suggest to the minister that he have a hard look at that and the whole issue of claims incurred and why the corporation increases its reserves for claims arising out of incidents that sometimes happened years before.

What the minister should be aware of is that ICBC ought to reserve to the ultimate probable cost of claims. They ought to have a pretty good idea of what that is -- certainly by two years after the loss. I don't raise these issues to annoy him but rather to say that these are numbers that the opposition is watching. We think British Columbians would be well served if the minister had a really good handle on them, so we will be raising them in future, as well.

Investments are up by $345 million; assets are up by $343 million. People wonder if there really is a loss or if this is a shell game with numbers. There will be a lot more canvassing of these numbers in future estimates, and this is fair warning.

The premiums actually fell, on average, according to this chart, from $917 each in 1995 to $890 in 1996. Could the minister account for that?

Hon. A. Petter: I must say that I am astounded by the first comment the member made with respect to unpaid claims. This member has spent a good amount of time in this House using a bunch of unrelated numbers -- numbers that were used somewhat provocatively in the newspaper -- to try to suggest that there isn't a claims problem. Then he turns around in the last question and notes, at the end of all that, quite correctly, that the experience year over year of unpaid claims is of serious concern, and he hopes the government is going to do something about it.

Well, welcome to reality. That's exactly the concern that the government is doing something about, and that's the message I have been taking to the public for the past year: that if we don't do something, we're not going to be able to sustain affordable rates. So I'm glad the member, after his tortuous -- and I am tempted to say tedious -- line of questioning earlier to try to disprove that there was any claims-rating problem . . . . I am glad he has finally come to the conclusion, along with most British Columbians, that there is a problem and we need to address it.

In respect of the reduction in the average premium, it's a direct consequence of the rate freeze. The rate freeze has meant that premiums have not gone up. In some cases, they have come down marginally. As a result, British Columbians are paying less per premium. It's a happy consequence for those who pay premiums that they are paying less in 1996 than in 1995. As I commented earlier, it's one of the reasons why rates of inflation in this province are below those of other provinces and Canada; it's because of this containment of costs in auto insurance premiums.

K. Krueger: I'll continue to manfully resist responding in kind to cheap shots by the minister.

The point I've been trying to make is that the answer is not to just continue to charge people more money every year as their claims costs escalate. I know he understands that and accepts it. It's part of the answer to implement road safety programs and actually get them up and running, instead of just talking about them and reannouncing them year over year and never actually delivering them.

Respectfully, part of the problem is also management issues. Some of the bizarre management decisions at ICBC I have talked about in this House today and on other occasions: people with very little proven ability and far too much authority being allowed to make major changes to the way the corporation is run and does its business, with disastrous financial consequences.

I'll give the minister another example. He has a vice-president responsible for public affairs and road safety, who was hired out of Calgary and, as far as I know, knew nothing about road safety -- or insurance, for that matter -- when she came to British Columbia. She promptly made a decision to eliminate ICBC's road safety programs in elementary schools. Her expressed rationale at the time was that those children don't drive. Well, very soon now those children will be driving, and they won't have had the benefit of really valuable programs that had been in place and had been serving their purpose long before her arrival.

Once again, I'll resist the temptation to respond in kind and just make the point to the minister that there are management issues that we are discussing, here, as well as dollars-and-cents issues and driver behaviour issues and highway engineering issues. It's all part of the package. If he only addresses some of the issues and not the management issue, he won't have resolved it. Claims reserves should not have to dramatically increase many months after the claim was first reported. We'll get to ICBC's key measures, probably on Monday, I think.

I'd like to ask the minister: in addition to the initiatives that were announced last week, are there any other major initiatives planned or being developed at ICBC with regard to saving the public these funds and forestalling future premium increases?

Hon. A. Petter: I think the announcement was sufficiently comprehensive that it captured all of the elements of what ICBC is contemplating. The announcement referred, for example, to administrative savings, educational programs and the like. Not all of what is being contemplated is captured in legislation, because not all of it requires new legislation. But

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I think the announcement was structured in a way that it captured the full range of initiatives that ICBC is planning to undertake to ensure that we have a very aggressive and comprehensive road safety program in this province.

K. Krueger: Were there any initiatives or programs recommended by staff or management at ICBC with regard to product changes or loss reduction that the government has not decided to include in its package of reforms?

Hon. A. Petter: I'm not sure what recommendations the member is referring to. The process that has given rise to all of this has been one in which various options have been put forward by the corporation, by consultants and by others. Those have become the subject of public discussion. Certainly there are things that have been suggested by the public and others -- some that have been adopted and some that h