Richard T.Landale A, Avenue Surrey, British Columbia. V3R 7T6. 15 th. March 2016

Transcription

1 Richard T.Landale A, Avenue Surrey, British Columbia. V3R 7T6 15 th. March 2016 Ms. Laurel Ross Acting Commission Secretary and Director British Columbia Utilities Commission Sixth Floor, 900 Howe Street Vancouver, British Columbia V6Z 2N3 Dear Ms Ross, Re: 2015 ICBC Revenue Requirements Application Intervener C1 Written Final Argument As per the Commission s Order G wherein the Regulatory Timetable provides for Interveners Written Final Argument, I am filing ahead of the schedule for convenience. Kind regards, Intervener C-1 cc: ICBC Interveners

2 TABLE OF CONTENTS 1.0 REGULATORY TIMETABLE FINAL ARGUMENT INDICATED RATE CHANGE - MANDATED LOSS COST TREND SUM PRODUCT RESPONSE TO ICBCs WRITTEN FINAL ARGUMENT IN CONCLUSION ATTACHMENTS ATTACHMENT A..Components of the Indicated Rate Change 2012 To ATTACHMENT B..Loss Cost Trend vs Indicated Rate Change 8 Page 2

3 1.0 REGULATORY TIMETABLE 1. The BCUC Commission Panel in their letter G dated October 21 st approved ICBCs request to set an Interim Rate Increase of 5.5% effective November 1 st. 2015, with a partial Regulatory Timetable, and then the revised Regulatory Timetable per BCUC Order G For reasons discussed in paragraph 7, I am able to submit my intervener written final argument early. 2 There is no further opportunity for Intervener/s to address the Commission Panel in this current RRA hearing process. So I would appreciate the Commission Panel accepting this moment to address the Regulatory Timetable. 3 In the past the Commission has invited all participants to offer input into the creation of the Final Regulatory Timetable, through participation which was dated December 17 th Wherein I indicated certain preferences based upon information available at that time, and included a Table of Contents to indicate the scope of my intervener evidence. Even during the Procedural Conference, I orally presented this letter, and read it to you. (references: Exhibit C1-3 and Transcript Volume 1, page 51 line 4). What should have been and was intended to indicated, was the scope and breathe of my future evidence filing. Thankfully I started work on my evidence around December 1 st., although a great deal of research had occurred months ahead of that date. 4 The timeline between Intervener Information Request 2 and ICBCs filing their response left very little time to incorporate ICBCs most current responses and new information into Intervener Evidence, just a mere 4 days. It must now be obvious to the Commission Panel that after reading my Intervener Evidence, I ended up filing many (regrettable) grammatical errors, and how I improvised the integration of ICBC IR#2 responses in that evidence. I think I did a poor job, in spite of spending several late night hours, including some 25 hours in cross checking, editing and rewrites. I even erred within my transmitting to meet the 4:00pm deadline on February 3 rd. 5 My thoughts leading to me filing 3 days early my Intervener Response to the BCUC IRs on February 14/15 th., this enabled me to concentrate on my final written argument, which included new analytical evidence based on ICBCs IR 1 & 2 responses. I have to say, as a one man show Senior of 68 years, the Regulatory Timetable was too tight! too many late night hours! I am grateful the BCUC were the only requestor on Intervener Evidence, I cannot imagine how I would have be able to respond to more IRs in a timely scheduled manner. I also learned the hard way, I should have made application for an adjustment/extension to the Regulatory Timetable, to provide for more time to complete my intervener evidence, not realizing the unofficial rules of evidence and the limitations in intervener written final argument, (see paragraph 7 and 41). 6 Thank you for your attention in this matter. 3

4 2.0 FINAL ARGUMENT 7 Following my discussion with Ms. Laurel Ross, the Acting Commission Secretary and Director, every effort has been made not to present new evidence, but to review my evidence in concert / context to ICBCs RRA, Information Requests 1 and 2, their Rebuttal Evidence and ICBCs Written Final Argument. There will be references made to past RRAs, BCUC IRs and evidence, and Special Direction IC INDICATED RATE CHANGE - MANDATED 8 At the behest of ICBC going to the British Columbia Government behind the BCUC and the yet to be appointed Commission Panel for this current 2015 ICBC Revenue Requirement Application, ICBC acquired an Order in Council OIC with changes to Special Direction IC2. Wherein clause 1.2 required ICBC to transfer $450 million from Optional Insurance to Basic Insurance. The design of this transfer when combined with the provision to remove the Lost Cost Frequency Variance (LCFV); clause (3) (c.2) (i) was to effect the reduction in the Indicated Rate Change (IRC) from 11.2% to 5.5% for ICBCs Basic Insurance Premiums, effective November 1 st Thereby circumventing the BCUC Commission Panel s final decision. In ICBCs Rebuttal Evidence, Exhibit B-14 paragraphs 5 and 6, ICBC explains LCFV, which as an explanation appears acceptable, seeing as it matches Special Direction IC2. Nowhere in ICBCs rebuttal does ICBC provide additional clarification evidence, or in ICBCs Written Final Argument, to contest my evidence with facts and figures. Nowhere does ICBC address the LCFV issues discussed in Section 5, 6 and & 7 of my Intervener Evidence. It is note worthy that on February 25 th the Hon. Michael de Jong Minister of Finance briefly outlined changes to the Insurance Corporation Act to give powers to the BC Cabinet to override ICBC Actuaries. (see Hansard ). This is confirmed in Hansard March 9 th. : 9 I cannot understand where in Special Direction IC2 did Rate Smoothing in the amount of 5.8% translate into LCFV, to Capital Provision in Figure 2.2 line (9). In ICBCs Written Final Argument, ICBC described the LCFV and LCT extensively. This is appreciated, but there still remains no actuary facts and figures. So the discussion continues. Also in as much, I do believe history and forecasting, with prospective adjustments are very relevant. I cannot prove it without more numerical evidence being brought forward by ICBC. ICBC will deny me and the BCUC. 10 The Commission Panel has been muted by the actions of the BC Cabinet and ICBC, along with all the Interveners and the public et al, by OIC , to be repeated in 2016 no doubt. 11 It is not so much that I advocate for the BCUC as ICBCs regulator. The BCUC has approved the IRC compounding to over 22% ahead of this current year, that hurts. 12 The BC Cabinet has taken away one of the most important BCUC mandates, which is to SET or FIX the Indicate Rate Change based on accepted actuarial practice, in accordance with Special Direction IC2, section 3. With pending changes to the Insurance Corporation Act, section 26 I believe, the BCUC s legal framework could be curtailed even more. 13 My greatest worry for the Commission is the precedence OIC establishes in the manner in which the IRC is now set. Normally under the BCUC mandate, the Commission after reviewing the ICBC RRA, weighing the merits of the application in conjunction with intervener evidence, Set and Fix rates. What protection is left for the policyholder? None from ICBC. 4

5 14 To my knowledge during this current RRA public hearing process, the Commission Panel have not submitted or presented any exhibits or evidence of objection to ICBC going behind their back to the BC Government to Set or Fix the IRC at 5.5% by legislation in Special Direction IC2. The following is respectfully asking this very serious question: What should all British Columbians understand from here on, is the BCUC an independent regulatory quasi judicial commission mandated to regulate ICBC Basic Insurance business which includes setting and fixing rates (Special Direction IC2, Sections 1 & 3) general rate change order, or more commonly known as, the Indicated Rate Change on behalf of all British Columbians? Reference: Special Direction IC 2 - October 15 th and BCUC Order G October 21 st. 2015, (review all the dates), with an effective date of November 1 st Although ICBCs actions to mitigate the IRC down from 11.2% to 5.5% should be commendable, it raises grave concerns as to the apparent highly influential case ICBC made to the Minister. In my opinion it actually demonstrates the awesome power of ICBC over the BCUC to circumvent the BCUCs mandate. Outside of this hearing, I have brought this matter to the attention of ICBC, the Premier, Hon. T. Stone, Hon. P. Fassbender, and the BCUC in a separate letter. 16 During the Information Request Round 2 ICBC responded to my IR RR RL 217 A- B. Within that IR ICBC provided Table 1 in Appendix A overleaf. At first I did not understand the table (mostly because I am a graphic orientated person). So I created Exhibit RTL-CIRC001 Attachment A in an effort to gain comprehension. 17 What a shock I got, almost like 110V AC shooting through my body. ICBC inserts a column titled Rate Smoothing Provision (ppt of rate) {RSP} So at first I thought that made sense, until I read the graph in Exhibit RTL-CIRC001, where the RSP in green is negative. I m thinking how can that be, I did not see this IRC component is Figure 2.2 copied below to make the point. 18 So I went further on to the description for line item (9)?, guess what, there is no line (9) description. I eventually found para 2 on page 2-1 to explain that Capital Provision is equal to the LCFV. Incidentally ICBC partially addresses this issue in their Written Final Argument, but not with new facts and figures or evidence, which is the essence of my intervener ship. Where are these facts, figures and evidence - ICBC? 19 How did Capital Provision become Loss Cost Frequency Variance to become Rate Smoothing Provision, as presented by ICBC in their Table 1 response? So I went to Special Direction IC2, looking for Rate Smoothing Framework, it does not exist in that document. So onto OIC and , where Rate Smoothing Framework is spelled out a little. 5

6 ATTACHMENT A 6

7 20 My conclusion to the Commission Panel is, ICBC can Turn on or Turn Off like a hot and cold water tap based on Accepted Actuarial Practice within the mine field of the new Capital Management Plan. My questions are, does paragraph 2 page 2-1 explain and satisfy the Commission? Section B - Backgound in Chapter 3 Capital Management Plan, explains the current rules, and Section C Calculations in figures 3.1 and 3.2 explains the MCT. But how did the 11.2% Indicated Rate Change or the BC Cabinet 5.5% come about? How does $450 million translate into $155 million into 108% MCT, back up to 144% MCT? No spreadsheet to explain. No Key Metric Report, quarterly or annually to explain these calculations for interveners, why? 21 Highly questionable!! There is no means for interveners (lay people) like myself to meaningfully participate in accepted actuarial computations, we need facts, figures, evidence. Without a full disclosure, Transparency, the BCUC public record will be void of explanation, and I believe BC Basic policyholders will lose confidence in the BCUC as a regulator. 4.0 LOSS COST TREND 22 It was not until I read ICBCs rebuttal paragraphs 28 to 30, I had no intension of presenting further discussion and argument on this now contentious component in the determination of the Indicated Rate Change. I am obliged to further explain my 2 IRs and Intervener Evidence RR RL.017 introduced Exhibit RTL-LCT001, yes without citation; at the time I did not think it was necessary. My apologies. Along with IR RR RL.217.A-B, surprisingly in ICBC rebuttal paragraph 28, ICBC exactly identified the source material for my exhibit. So why such criticism. I surmise ICBC would like the Commission to discredit the source material represented in my exhibit. For the record, the source material came from ICBC response to IR RR RL.17 all 5 Figures. I choose to tabulate these 5 figures into one table adding columns Indicated Rate Change and Loss Cost Trend, so that the graph in Exhibit RTL-LCT001 could be created in relation to the Indicated Rate Change. Where the Loss Cost Trend is a key component identified by ICBC in their application. In IR round two I did not submit the update to this exhibit, but referred to the updating in my Intervener Evidence paragraph 151 page ICBC added in their rebuttal paragraph 28, quote: In the absence of citations, it was difficult for ICBC to understand Mr. Landale s calculations and methodology, and the following discussion should be viewed in that light. 25 My Exhibit is a true reflection of ICBC data on file within the IRs (the spreadsheet and graph do not calculate anything; they only duplicate published data by ICBC). For verification please see the updated and corrected exhibit, Attachment B, overleaf. The cells highlighted in yellow reflect ICBCs corrected data from Figures 1 to 5 in ICBCs response to IR RR RL.17 This is not new evidence it is redacted evidence based on ICBC evidence. 26 Further to ICBCs response to IR RR RL.17, ICBC considers it would not be appropriate to analyze any trend on the rate indication. Obviously I disagree. 27 The purpose of Exhibit RTL-LCT001 was to record ICBC data graphically, (albeit for me to understand), and to demonstrate graphically that the Loss Cost Trend and BI Severity are well below the inflated Indicated Rate Change since 2012 through to 2015, while also highlighting the very narrow band between the Loss Cost Trend and BI Severity in relation to the Indicated Rate Changes. I contend there is a relationship between history and the actuarial forecasting. And as a lay person, I cannot forecast actuarially. There were no calculations or actuarial methodology. Accordingly, this discussion should be viewed in this light. 7

8 ATTACHMENT B 8

9 5.0 SUM PRODUCT 28 ICBC in their rebuttal evidence paragraphs 31 and 32 are correct in the application of SUM PRODUCT as used within their Exhibit H.1. Thank you. 29 But I bring to the attention of the Commission; ICBC is mute in regard to their use of SUM PRODUCT as applied to the generation of the BC Precipitation Index in their 3 spreadsheet versions. ICBC is mute by virtue of their rebuttal evidence in paragraph 1, quote: ICBC generally disagrees with much of what Mr. Landale has written. I am obliged to address the Commission, my entire evidence regarding the SUM PRODUCT utilization in the creation of any BC Precipitation Index by ICBC is very appropriate. Especially in light of the effort ICBC went to explain their application of SUM PRODUCT in their Exhibit H.1 30 In ICBC s third version, see Exhibit B-8, ICBC deconstructed their BC Precipitation Index spreadsheet. The net result, the index is mathematically correct, yet based on outdated input data, and by combination of Kamloops and Penticton* (Terr L ), see footnote. As a consequence of deconstructing ICBC avoided proving their utilization of the SUM PRODUCT formula as originally employed. I continue to assert my evidence in this regard, and recommendations. 31 It is acknowledged that the 2015 BC Precipitation Index had no impact on this IRC. The whole premise of my evidence was brought forward this year because ICBC has and will continue to monitor BC Precipitation on a quarterly bases. My examination of the methodology and portions of ICBC computations need to be reviewed by the BCUC ahead of future RRA filings that may include BC Precipitation Index adjustments. BC Precipitation would never have come to light if ICBC had not provided the initial information year after year. The acknowledgment that the BC Precipitation Index had no impact on the IRC, does not negate questioning ICBCs methodology. 6.0 RESPONSE TO ICBCs WRITTEN FINAL ARGUMENT 32 I accept full responsibility given the admonishment by ICBC for the vigor (paragraph 109) I have advanced during this 2015 RRA hearing process towards ICBC actuaries. Some of my adjectives in reflective hindsight were quite pointed and inappropriate. Please accept my apology, and commitment to refrain in the future for this tone. I allowed my heartfelt emotions to incorrectly colour and detract from sound argument and comment. I herewith personally apologize to all of ICBCs actuaries that participated in this current RRA. 33 Addressing paragraphs 111 and 112 in ICBC s Written Final Argument, I do not agree with ICBC claiming they have filed Rebuttal Evidence in Exhibit B-14 that addresses the specifics of my allegations. I think ICBC in their Written Final Argument have properly addressed some of the information issues. But have not addressed the actuarial computations with filed numerical supportive evidence, that can be independently viewed. ICBC has gone to great lengths to explain professional judgment, with various checks and balances along the OSFI guidelines. In the absence of actual numerical evidence. I acknowledge ICBCs detailed and lengthy dissertation in their Written Final Argument, with greater appreciation of the complexities of the actuarial process. 34 Finally to address the BCUC, the Commission Panel and staff, along with all Interveners, I also extend my apologies for the aggressive tone throughout my submissions. 35 There are other issues that arise from ICBCs Written Final Argument, but I have come to realize they are out of scope of this hearing, and I leave them at this stage. To that end, accordingly I have removed those issues from this submission. 9

10 36 In my own defense for having an opinion towards accepted actuarial practice, I offer by way of this one example from ICBCs Written Final Argument, paragraph 50, quote: In the 2013 RRA ICBC had used the assumption that the claims initiatives would offset the additional cost pressures arising from accelerating legal representation. While a causal link cannot be proven, subsequent to these changes, the BI severity trend emerged consistent with the historical trend rather than accelerating. 37 We see in this quote words and phrasing that should be questioned; assumption, offset, casual link cannot be proven, historical trend. I will continue to question and challenge ICBC using respect and without impugning ICBC actuarial integrity, that is the job of interveners. 38 I am very concerned with ICBCs comment in their Written Final Argument, paragraph 75; Premium Trend. While I acknowledge ICBC does not appreciate my exhibits, Exhibit RTL- PRC001, RTL-PRC002 and Exhibit RTL-CPPF001. The Premium Rate Change show a completely different history and prospective forecast, which I hope the Commission will take into account. Seniors on fixed incomes cannot afford the forth coming ICBC inflationary rates. 7.0 IN CONCLUSION 39 Given the totality of my evidence, along with my responses to the BCUC IR#1 on Intervener Evidence, there is a huge volume of information to review for consideration by the Commission Panel and the BCUC Staff. I can only hope the Commission Panel will pick up the mantle based on my submissions, to provide a far more reaching direction to ICBC in their final decision this year, and to encourage greater information transparency by ICBC. 40 In ICBC s Written Final Argument, paragraphs 116, 117, 118, I agree there should be proportionality between Applications, the BCUC and Intervener Information Requests. As in this current RRA, and as in the past I/We have seen and read volumes of information requests and responses, evidence and arguments, over and above my intervener contribution. For my part, and in particular, I constrained myself to only items within the actual application (both volumes), and information brought forward from information requests, and ICBC Evidence. ICBC I believe is making the point, that my intervener ship is disproportionate, costly and requiring a high degree of granularity. Again I agree, Along with the BCUC staff, and all the other Interveners, we seek clarifications, accompanied with facts, figures and evidence that we believe will add to the volume of information missing from within the application. Necessitating information requests that in many instances challenges ICBCs application. That is the process. Over and above Information Requests, Intervener Evidence and their respective ICBC responses, the following listing highlight some of the extra ordinary exhibits on the record that were addressed. A5, A6, A7, A11, B3, B4, B6, B7, B8, B10, B12, B15, C1-2-1, C1-2-2, C3-3, in addition Exhibits D1 and E1 to E7. An oral hearing would add a significantly higher degree of granularity, this year we avoided that measure collectively, by choosing a written process. 41 Lastly, referring back to paragraph 7, it is unfortunate I cannot include additional analytical evidence based on IR response information from ICBC. This is due in part to the schedule, my telephone conversation with Ms. Ross, and ICBCs written final argument. I am now obliged to submit this 2015 evidence in my 2016 evidence, given I suspect BC Precipitation (index) will play a more prominent role in ICBCs calculations contributing to the 2016 Indicated Rate Change. I thank you for your attention.! Respectfully, Richard T. Landale Intervener C1 10