bcuc request for intervener submission on further process ...€¦ · refers to, quote “the...

BCUC Request for Intervener Submission on Further Process September 29th 2014 in the matter of:

ICBC 2014 REVENUE REQUIREMENT APPLICATION From Intervener C1 - Richard T. Landale

Further to the Preliminary Regulatory Timetable schedule, and the completion of the Review Working Session September 26th 2014, Intervener’s have been given only two days to prepare submissions to the BCUC for “Intervener Submissions on further process” due by September 29th 2014 This adjunctive timeline is taking the Streamline Process based on 2010 too far. Although it is appreciated the BCUC issued their letter dated September 24th 2014 Exhibit A-5 with Appendix A outlining four options. Please review my recommendations.

It is worthy to note during the ICBC Informal Presentation and Fridays workshop presentations including Q&A, ICBC responded to a huge array of questions from the BCUC staff and interveners by emailing a 311 page reply late on September 26th. This reply to the BCUC and Intervener MOI’s should have been posted a week ago to give Interveners time to read ahead of the Workshop and the four timetable schedule options posted by the BCUC. There is absolutely no way for me to read 311 pages by Monday morning, just a cursory look demonstrates the complexity of this MOI response with x-referencing to BCUC, GA, Cope, IBC, RL, exhibits here there, and so on. During the Workshop ICBC hands out yet another 28 page Spreadsheet MOI with extensive referencing to the 311 page reply. Then another email from ICBC providing their timetable schedule revisions. It all takes time to properly digest. Is this called the “Streamline Process” ? This Streamline Process is not working today, …… in 2014

On September 18th ICBC submitted their Errata, almost immediately I recognized some key areas of concern. Further research into their zip file of some 4 hours disclosed key operator errors, followed by many more hours of text research, leading to my written response filing September 19th. By 1:00am on the morning of the 19th I pulled the plug, only to resume and complete my 4 page submission on the 19th, in order to email/file my submission with the BCUC Secretary Exhibit C1-4. In summary I had spent over 10 hours in review, research, drafting my response, cross checking and corrections before filing. In my book, no small task.

As a Senior I am appalled how ICBC abuses British Columbians with rate increases each year, and no Officials/Regulators are doing anything to abate their ravaging of our pockets.

The BCUC as Regulators seem poised by these “Preliminary Regulatory Timetable schedules” to permit ICBC to continue on their merry way under the guise of a Streamlined Process.

What’s the hurry ? ICBC has manipulated the system so well that the BCUC issued their

order G-129-14 granting an interim approval of the 5.2% rate increase effective November 1st 2014 Why not have a proper Oral Hearing to discuss over 1100 pages of the ICBC application, and 311 pages of MOI’s ? Even if the Commissioners does approve the 5.2% rate increase in (whenever) 2015, so what. Option “C” coincides within this time frame and beyond. ICBC’s argument of having a PY2014 Oral hearing following closely after the seven month Oral Hearing for PY2013 has “NO” relationship or bearing on this PY2014 application. The questions are so far different this year. But then BCUC does not know that, no transcripts !

I need more time to review the available information relating to the MCT. It is quite clear to me that ICBC has proven by their recent errata updates that their Actuaries and support staff have made serious errors on at least 105 spreadsheet/worksheets. This begs the question, where else ? Without the native files, Chapter 3 exhibits will remain a mystery ….. ?

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C1-5

markhuds

ICBC RR 2014 stamp

A few more examples: 1. The attached RTL Exhibit B.3.1 is yet another example of ICBC’s questionable totalizing in exhibit spreadsheets. See hi-lighted numbers. It should also be noted these number errors are in the millions. I am not qualified to properly investigate ICBC exhibits, (in fact I do not have access to the native files) but I do think the BCUC should be paying more detailed attention. (the devil is in the detail). 2. In Chapter 3 Exhibits B.0.2 page 1 Description of the Average Premium Model, then referencing Figure B.4 695.02 Personal TPB and UMP Forecast Average Premium. I could not verify the source of $695.02 average premium, beyond a nonlinear trend line in Figure B.5 which aligns with PY 2015, not PY 2014 See comments hi-lighted in Figure B.5. 3. In addition by following the Exhibits B.1.1 and B.2.1 and various notes, to my surprise ICBC did not select the Stats Can CPI for the midpoint PY 2014 of April. In fact I believe Ms. Minogue told us during the Informal Presentation following a direct question from me, ICBC has it’s “Own” CPI bucket, and does not use the Stats Can CPI bucket, as reported in Exhibit B.2.1 What is going on here ? It happens to be important as in the Notes; (a) specifically refers to, quote “the midpoint of policy year 2014”, see “Exhibit B.2.1 and B2.2 for compositions of the selected models”. So what is the “Correct” information acceptable to the BCUC and the Commissioners ? Furthermore, this begs the questions, What CPI bucket did the BCUC approve and when for use in ICBC models ? And has ICBC used this approved CPI bucket properly. ? In previous years and in this PY 2014 ?

Again I’ve run out of time to express the need for more time to examine ICBC’s PY 2014 Revenue Requirement Application. I seem to find all sorts of anomalies and spreadsheet errors. And I have not started on the MCT yet, which is a key concern. Neither chapters 4 through 11, while only glossing over chapters 1,2 and 3 in a cursor fashion, no time. In responding to the BCUC for input to the Preliminary Regulatory Timetable schedule, I must make this comment.

At some future point in time the people of British Columbia will wise up to the antics of ICBC and the leniency of the BCUC as a regulator. In just three short years I can honestly say Interveners as a whole body have had almost no impact on Basic Insurance increases. To even compete with the BCUC who in their wisdom increased ICBC request for an increase from 4.9% to 5.2%. last year. Since 2011 the rates have risen 21.6% Thanks for your help. !

Revised Recommendations are:

Transcripts of the Informal Presentation, and the Review Workshop. Transcripts should have been taken (this was a mistake to fair and open applications). Because ICBC and the BCUC were thinking Streamline Process, my IR’s are going to have to cover ground not in the record.

More time… to review the entire application. 11 days (this is only 1 day per chapter) and MOI responses 311 pages with 3 more days.

Two rounds of IR’s, as experience suggests ICBC replies often need further clarifications.

Oral Hearing. Suggest scheduling two weeks, see attached proposal.

These are “Working” days, weekends and statutory days are adders to the schedule.

Option “C” as per attached proposal.

I am not available for the period of December 18th 2014 to January 8th 2015 inclusive. of 3

BCUC Request for Intervener Submission on Further Process in the matter of:

ICBC 2014 REVENUE REQUIREMENT APPLICATION From Intervener C1 - Richard T. Landale

ATTACHMENT INDEX

1. PROPOSED REGULATORY TIMETABLE 2. RTL – EXHIBIT B.3.1 (Composite of ICBC Exhibit B.3.1)

3. EXHIBIT B.0.2 Page 1 (from ICBC PY2014 RRA)

4. EXHIBIT B.0.2 Page 2 (from ICBC PY2014 RRA)

5. EXHIBIT B.0.2 (from ICBC PY2014 RRA)




Page 3 of 3

RTL Intervener Submission on Further Process.docx

Prepared by:

R.T.Landale

Intervener C1

ICBC 2014 REVENUE REQUIREMENT APPLICATION

PROPOSED REGULATORY TIMETABLE

27/09/2014 2:56 PM

FOR REMAINING PROCESS IN RESPONSE TO BCUC EXHIBIT A-5

ACTION OPTiON C -Oral Working Stat

Days Holiday

Commission and September 30 to

Intervener Application 14 **

and MOl Review October 19

Commission and October 20 to

Intervener Information 20 ** Nov-11

(IR) No.1 November 17

ICBC Replies to November 18 to Comission and 19**

Intervener Information December 16

Season Holidays December 17 to

4 Days January 2 2015

Review ICBC Relpies to December 18 to 8

IR No.1 January 2 2015

Commission and January 3 to January

Intervener Information 15 *

(IR) No.2 24

ICBC Replies to

Comission and January 25 to 19 **

BC Family

Intervener Information February 15 Day Feb 9

(IR) No.2

Review ICBC Relpies to February 16 to 5*

IR No.2 February 22

Intervener Evidence February 23 to

20 ** March 22

ICBC Notice of Rebuttal March 23 to March 5 *

Evidence 29

ICBC Rebuttal Evidence March 29 to April 5 5 ** 2 days

Easter Oral Hearing

Apr il 6 to April 19 10 Preparations

Oal Hearing April 20 to April 24 5 Intervener Final

April 25 to May 10 10 * Written Argument

ICBC Reply to

Intervener Final May 11 to May 22 10 * Argument

Note: * Time could be reduced in half (Streamline Process)

** Time span could be reduced by counting weekends days

We should all remember family when designing timeline schedules

C:\Users\Richard T. Landale\Desktop\ICBC\November 2014\RTL Proposed Timeble Schedule for Remaining Process.xlsx

Insurance Corporation of British Columbia Calendar Year Written Premium and Exposure MANUAL BASIC COVERAGES- TOTAL

A. Written Exposure Growth to PY 2014

Third Party Liability I Part 7

Collision I Specified Perils

B. Written Exposure

Coverage Third Party Liability I Part 7

Collision I Specif ied Perils

C. Written Premium ($ OOO's)

Coverage Third Party Liabi lity I Part 7


Total

D. Written Premium Adjusted to Current Rate Level ($ OOO's)

Coverage Third Party Liabi lity I Part 7


Total

2009

44,799

6,249

2009

47599

2,767

50,366

2009

53407

2010

44,484

6,261

2010

43963

2,635

46,598

2010

49012

2,867

51,879

_ lOll 5.3%

.0%

2011

46,319

6,283

2011

45602

2,450

48,052

2011

51633

2,866

54,499

2012

46,254

6,217

2012

50458

2,453

52,911

2012

51795

2,603

54,398

RTL - EXHIBIT B.3.1

2013

47,179

6,222

2013

53283

2,658

55,941

2013

53817

2,773

56,590 "

Ll /

Projected P~

2014

48,351 'I 6,247 ~)

Projected PY l 2014 .

Projected PY

2014

{I l

I "

RTL Revised Average

5.6%

0.0%

45,807

6,246 I i ·'

\ I "\

48,181 "\ 2,593

.) 50,774

1 ~ ~

51,933 l 2,789 .

E. Projected PY 2014 Written Premium ($ OOO's)

54,722 "]

\_.'-___,,_) Coverage 2009 2010 2011

[1] [2] [3]

58,004 52,559 54,344

2012

[4]

53,889

2013

[5]

55,346

Projected PY

2014

[6] = Avg([1] ... [5])

54,828 Third Party Liability I Part 7

Collision I Specif ied Perils 2,835 2,867 2,866 2,603 2,773 2,789 Total 60,839 ~ 55,426 r-.r-...... 57,210 ....y-..__ 56,492 /'\/'- 58,119 /""'f\..

61,079 55,614 57,387 56,574 58,175 Notes:

(A) TPL/Part 7 calculated from the Commercial plate owner exposu re growth in Exhibit B.1.2. Collision/Specified Perils is forecasted to have no growth

(B) Sum of Garage (Exhibit B.3.2 Section A), Fleet Reporting (Exhibit B.3.3 Section A), and other Special Coverages exposure (Exhibit B.3.4 Section A). Projected PY 2014 Exposure = (B) * [1 +(A)], average of 5 years.

(C) Sum of Garage (Exhibit B.3.2 Section B), Fleet Reporting (Exhibit B.3.3 Section B), and other Special Coverages premium (Exhibit B.3.4 Section B) .

(D) Sumo Garage (Exhibit B.3.2 Section F), Fleet Reporting (Exhibit B.3.3 Section F), and other Special Coverages premium (Exhibit B.3.4 Section F). (E =(D) x [1 + A}j -

Exhibit 8.0.2

DESCRIPTION OF THE AVERAGE PREMIUM MODEL

To determine the indicated rate change in Exhibit A.O.O, a forecast

premium at current rate level for PY 2014 is needed. This is obtained by multiplying PY

2014 average premium by the number of policies expected to be written between November

1, 2014 and October 31, 2015. PY 2014 average premium is estimated by interpolating

between calendar year 2014 and calendar year 2015 modeled average premium values.

The midpoint of PY 2014 is May 1, 2015. \~i-1£R.f. ARE THt/ CAl..CuLAT/ONS?

2. Average premium is modeled for plate

Underinsured Motorist Protection (UMP) combined and plate owner Part 7, separately for

Personal and Commercial. This Section describes the models that are used to determine the

average premium forecasts.

3. Multiple linear regression models are fit to 10 years of historical average premium

data, using explanatory variables that relate to the distribution of exposure by business

segment. Correspondingly, forecasts of average premium depend on the forecast exposure

distribution of the business segments, which are described in Exhibit B.O.l. Trailer

exposure is handled separately, and is shown at the end of this Exhibit.

Figure B.4 below provides a summary of the forecast PY 2014 average premium for

each line of business.

Figure 8.4 PY 2014 Forecast Average Premium (Plate Owner)

TP8 and UMP Part 7

Personal Q69T5.Q2)? $63.78 .J.. .,/... o

Commercial -::-$60.73 $1,206.18

Trailer $39.20 $2.59

5. Diagnostic Statistics - A number of diagnostic statistics are calculated to gauge

the quality of the fitted curve produced by the model and are used to facilitate comparisons

among candidate models. The coefficient of multiple determination (R2 ) measures the part

of the variation in the actual average premium that is explained by the independent

variable(s). R2 also provides a measure of comparison between candidate models. The F

statistic is used to measure the significance of a particular model. The F statistic produced

Insurance Corporation of British Columbia August 29, 2014

1

Exhibit 8.0.2

by a particular model can be compared to a critical value corresponding to a particular level

of significance to gauge whether that model meets the selected minimum acceptability

standard.

6. Diagnostic Plots -Three plots are shown for each of the Personal and Commercial

average premium models.

• The first shows modeled versus actual average premium. It indicates how well

the model fits the data.

• The second is a plot of residuals versus fitted values, where a residual is the

difference between the modeled value and the actual value for one data point in

the experience period. This plot is used to test the assumption that the residuals

have constant variance across the entire domain of fitted values. If this

assumption holds, then the dots on the residual plot will be scattered randomly.

• The third and last plot is a plot of quantiles of residuals versus the quantiles of a

standard Normal distribution (Q-Q Plot). It is used to assess whether the

residuals follow a standard Normal distribution. If it is true, the points in the Q-Q

Plot should approximate a straight line.

7. The modeled versus actual plots are shown on an annualized basis, although the

models are actually fit to monthly data points. The residuals versus fitted values plots and

Q-Q plots show these monthly data points.

Forecast PY 2014 Average Premium - Actual historical average premiums and

the selected PY 2014 average premiums are shown in Exhibit B.l.3. The following pages

show this information in graphical form using the diagnostic plots described above. The

selected PY 2014 average premium is depicted as a diamond in the modeled versus actua

plots.

'-------=>


' - - _) --...._) -

2

Exhibit 8.0.2

9. Average Premium - Personal TP8 and UMP - Personal TPB and UMP combined

average premium is projected with a multiple linear regression model. The selected model

has an R2 value of 99% and an F statistic of 1,982. This model is significant at the 99th

percentile for an F statistic of at least 3.0. The PY 2014 Personal TPB and UMP average

premium is expected to be lower than calendar year 2013 due to the continued increasing

proportions of seniors who have lower premiums on average, and drivers with high levels of

discount.

Figure 8.5 Personal TP8 and UMP Average Premium Forecast and Diagnostic Plots

Personal TPB and UMP Average Premium Modeled vs. Actual

720 .-----------------------------------------------------------~

715 +---------------------------------------------------------4 •

685 +-----.-----.----,,----.-----.-----.-----.-----.--~~--~-~

5 4 3 2

iii 1 :::s "C "iii 0 ~ -1

-2 -3 -4

2006 2007 2008 2009 2010 2011

• Actual -Modeled

Personal TPB and UMP Avg. Premium

Residuals vs. Fitted Values 0

4 0 Ill 3

Oo i;j :::s 2

o8"e ~'Q, 0 #o

"C "iii

~~0'0 Q)

" -0 0

~0 fw 0~ j! -1 0 0 0 0 0 0 :g -2

10 0 :::s -3 a

2012 2013

• PY 2014 Forecast

Personal TPB and UMP Avg. Premium

QQ Plot

0

-5 -4 -660 680 700 720

Fitted Value


740 760 -3 -2 -1 0 1 2 Quantiles of Standard Normal

3

3

Insurance Corporation of British Columbia

Projected Premium and Exposure PLATE OWNER BASIC

Policy Year 2014 (PY 2014)

Projected Exposure

Trended Average Premium at Current Rate Level ($)

Trended Premium at Current Rate Level ($ OOO's)

Retrospective Adjustments ($ OOO's)

Projected Premium ($ OOO's)

(d) = (c) x Exhibit 8.4. 1 (iii) (a) (e)= (c)+ (d)

. hG·<-1et ·r3.4 CAt-jflb) ?ft. iN 'i:ltfCN.oAKITL1 \f:F.I~GD? TPB and UMP

Commercial • Personal Power Units Trailers Total Personal

(aK: 2,822,697 230,322 433,312 3,486,330 2,822,697

(b) ' ~95 .02 0 1,206.18 39.20 63.78

(c) 1,961,832 277,810 16,988 2,256,631 180,040

(d) -7,779 -7,779

(e) 1,961,832 270,032 16,988 2,248,852 180,040

Corporate Actuarial and Advanced Analytics Department

Exhibit 8.1.1

Part 7 Commercial •

Power Units Trailers Total 230,322 433,312 3,486,330

60.73 2.59

13,987 1,120 195,147

-392 -392

13,595 1,120 194,755

Insurance Corporation of British Columbia

Calendar Year Average Written Premium at Current Rate Level PLATE OWNER BASIC

A. Personal

Coveraae Average Premium - Third Party Basic & UMP ($)

YearoverYearchange

Average Premium - Part 7 ($) YearoverYearchange

B. Commercial

Coverage Average Premium - Third Party Basic & UMP ($)

YearoverYearchange

Average Premium - Part 7 ($) YearoverYearchange

Note:

JNvi-lr MA 1u f,~~ ~ Calendar Year

2010 2011 704.69 702.75 -0.3% -0.3%

64.55 64.44 64.18 -0.2% -0.4%

Calendar Year 2009 2010 2011

1,217.19 1,202.61 1 '198.33 -1.2% -0.4%

63.27 62.59 61.84 -1 .1% -1.2%

Policy year 2014 is based on the selected models discussed in Exhibits B.0.1 and B.0.2.


Exhibit B.1.3

2012 2013 700.49 698.68 -0.3% -0.3%

64.05 63.97 -0.2% -0.1%

2012 2013 py 2014 1,202.42 1,207.52 1,206.18

0.3% 0.4%

61 .36 60.93 60.73 -0.8% -0.7%

Insurance Corporation of British Columbia Exhibit 8.2.1

Economic and Demographic Explanatory Variables Selected in the Exposure Models PERSONAL BASIC

Explanatory Variable

Rate class groups (Rate classes Included) Pleasure use (1, 21)

Long Commute (2, 22)

Short Commute (3, 4, 23, 24)

Business use (7, 27) Seniors (5)

Motorhomes (51, 55, 58)

Motorcycles (310-324, 710-724)

Collectors (701, 705) Territories

D - Lower Mainland

E - Maple Ridge/Pitt Meadows

F- Squamish/Whistler

G - Pemberton!Hope

H - Fraser Valley

L - Thompson/Okanagan

N - Kootenays

P-Carlboo

R - Prince George Area

S - Northam Coast

V - Peace River

W - Victoria & the Islands

X- Mid Island/Sunshine Coast

Y - North Island

Z - Out of Province CRS/Fieet discount groups

CRS Roadstar 43% discount

CRS 25 to 40% discount

CRS up to 20% discount CRS no discount

Fleet over 50% discount

Fleet 25 to 50% discount

Fleet up to 25% discount

Fleet no discount Other

Disabled

Calendar Year Values of Explanatory Variables 2012 Actual

2013 Actual

Time

..J ..J

..J

..J

..J

..J

..J

..J

..J

..J

..J

..J

N/A

N/A

Demographic

Age 15+ Age 15-64 Age 65+ Territory

-J

-J

3,938,400 3,205,600 732,800 N/A 3,983,900 3,218,300 765,600 N/A

BCGDP Growth

1.4%

1.4%

Economic Jobless Labour

Rate Force

Other Precip (mm)

-J

I w;~Mttno0 rorwv 0~ \P-e~Jv\ ~~"r.s Q~ " ·2Dt4 TA.&£ s ..J CPL ~1-L IT~S NDT S~~f<../..L{ A~ll. i'2.Sc2_ eR,. 2 . r;//~

1/

~~~T~

--, 'Ot -

''2Q(~ ~BtL cO CPT ~l'- HGtMs 'S&A.9::>0Au..r A.~oslf9tf ~PRtL ( 2.2.."1-· ~12. 1 .. 4 cto

6.7% 2,478,858 117.8 1,209 6.6% 2,470,533 900

'P'" 2014 Forecast N/A 4,031,200 3,233,600 797,600 N/A 2.0% 6.5% 2,491,740 ~ 1,246

Year over Year Change

2012-2013

P"" 2013-2014

Source

N/A 1.2% 0.4% 4 .5% N/A 4.9% -2.0% -0.3% N/A 1.2% 0.5% 4.2% N/A 41.3% -1 .2% 0.9%

N/A BC Slats BC Slats BC Stats N/A BC Budget Stats Can Slats Can


_) ~&NaTEs; f'l<-f-III'Ji) B~~l.j

-25.6% 38.4%

Enviro Can

bcuc request for intervener submission on further process ...€¦ · refers to, quote “the...

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