COPE Update The Pricing Journey Supporting 2014 Strategy through the Transformation Program

1. COPE Update The Pricing JourneySupporting 2014 Strategy through the Transformation Program Kellee Irwin- VP Underwriting October 22, 2010

2. Today’s Agenda • Introduction • Objectives of Today • ICBC’s Pricing Strategy- Why are we changing? • Pricing – What are we doing? • New Pricing Model for replacement of CRS • Improvements to Fleet • Enablers for New Pricing Models • Insurance Purchase Experience

3. Today’s Meeting Objectives • In today’s session we hope to give you a better understanding of the following: • ICBC’s current insurance model • Why we need to change it • What the future model might look like • What our customers and employees have to say about where we are going • How we want to enhance the Insurance Purchase Experience

4. Agenda • Recap • Objectives of Today • ICBC’s Pricing Strategy- Why are we changing? • Pricing – What are we doing? • New Pricing Model for replacement of CRS • Improvements to Fleet • Enablers for New Pricing Models • Insurance Purchase Experience

5. 2014 Strategy Improving pricing and purchase of insurance “moment of truth” will help improve customer perception.

6. Why Change: Customer’s Current Perception of Price/Value

7. CRS Discount Distribution Why Change: Need for a New Model CRS does not adequately differentiate and recognize safe driving records Confidential Strategic Policy Advice

8. Discussion Exercise – Why Replace CRS • Case for Change Discussion

9. Agenda • Recap • Objectives of Today • ICBC’s Pricing Strategy- Why are we changing? • Pricing – What are we doing? • New Pricing Model for replacement of CRS • Improvements to Fleet • Enablers for New Pricing Models • Insurance Purchase Experience

10. ICBC’s Pricing Portfolio Pricing Insurance Purchase Experience

11. Overall: # of Policies – 3.5 million Premiums earned - $3.6 billion Transactions Processed – 6.5 million Personal: # of polices – 2.8 million Premiums earned - $3.1 billion Commercial (CRS & Fleet): # of polices – 650,000 Premiums earned -$528 million ICBC’s 2008 Insurance Book of Business

12. Pricing: ICBC’s Book of Business Commercial

13. ICBC’s Approach to Pricing Changes Goals for 2014 Priorities for 2014 Key Initiatives • Implement pricing model acceptable to customers • Improved customer price value perception • Rates become more reflective of driver (vs. vehicle) risk to increase fairness of rates • Personal Pricing: • DRM (Driving Record Model) • Evolution of DRP (Driver Risk Premium) • Commercial Pricing: • Fleet • Personal Pricing: build and implement new pricing model • Commercial Pricing: implement foundational changes for improved pricing 13

14. Easy to understand Easy to administer Rate stability and predictability Respect our historical mandate - universality and accessibility Respect social and legislative/regulatory framework Customer feels model acknowledges their past Guiding Principles 14

15. Agenda • Recap • Objectives of Today • ICBC’s Pricing Strategy- Why are we changing? • Pricing – What are we doing? • New Pricing Model for replacement of CRS • Improvements to Fleet • Enablers for New Pricing Models • Insurance Purchase Experience

16. New Pricing Model – CRS Replacement

17. Driving Record Model (DRM) • What it is: • New driver based insurance rating model to replace Claims Rated Scale (CRS) • Incorporates key elements that customers can control • Addresses both insurance premium on vehicle and driver’s licence 17

18. Table Exercise – CRS Replacement • Rating Variable Exercise

19. Driving Record Model (DRM) • What it is: • Incorporates key elements that customers can control: • 1. At-fault crashes 19

20. Driving Record Model (DRM) • What it is: • Incorporates key elements that customers can control: • 2. Driver Experience 20

21. Driving Record Model (DRM) • What it is: • Incorporates key elements that customers can control: • 3. Driving Convictions 21

22. Driving Record Model (DRM) • What it is: • Post 2014 • Evolutionary Approach – continue to evolve after implementation • Fine tune variables • Additional variables will be considered 22

23. Key Differencesbetween CRS & DRM

24. Key to DRM Success - Consultation • Comprehensive consultation strategy • Customer, employee, & broker input critical • Learning from the past • Early consultation results – we are on the right track

25. DRM Consultation Completed to-date

26. Customer Focus Group (June) Key Findings Customers… • are used to CRS but have many misconceptions • view insurance as rewards and penalties not an assessment of future risk • have no common definition of a high and low risk driver • support the idea of shifting some of the insurance impact of unlisted operator crashes away from the vehicle owner toward the driver who had the crash • but the degree of the shift depends on whether the driver has a vehicle of their own

27. Customer Survey Approach (July) • Insights from the focus groups were used to develop a survey • Methodology • Online survey • Sample size = 808 • Representative of BC population

28. Customer beliefs about how ICBC determines premiums More customers believe ICBC sets rates to recover the cost of past claims than basing them on risk.

29. Convictions and Risk Customers believe there is a connection between convictions and the risk of having a crash.

30. Convictions and Premium 7 out of 10 customers believe convictions could impact their vehicle insurance today.

31. Customers were first shown a list of more than 30 traffic convictions that are in DRP/DPP. They were then asked about the fairness of considering additional traffic violations (also shown) for the purpose of a conviction-free discount. Conviction Free Discount – Convictions List • 75% of customers believe it’s fair that a driver must be free of all the traffic convictions listed in order to receive a conviction-free discount

32. Unlisted Operator Crashes • Customers were told to imagine a scenario in which Joe (a licensed driver with a vehicle of his own) has an at-fault crash in his wife Mary’s vehicle.. Most customers said it would be fair if Joe pays more for the insurance on his own vehicle and Mary’s insurance is unaffected.

33. Unlisted Operator Crashes Continued • Customers were told to imagine the same scenario but this time Joe did not have a vehicle of his own. In this scenario, most customers support a modest charge on Mary’s vehicle insurance.

34. Customer Survey – Other Key Findings Weighting of Crashes 8 out of 10 customers believe at-fault crashes should have different effect on their insurance—the older the crash, the less impact it should have on their insurance Rating Based on RO and PO 7 out of 10 customers think it would be fair for ICBC to consider the driving history of both the RO and PO in determining their insurance cost

35. Employee Focus Group Employee Panel: Total of eleven participants from both bargaining unit and non-bargaining unit staff Representing Claims, IT, Broker Enquiry Unit, Customer Contact, Training, Driver Licensing, Customer Relations and Collections Participants were asked to provide feedback from both an employee perspective and from the perspective of the customers they interact with

36. Employee Focus Group (June) – Case for Change • Employees largely receptive to the case for change and the general direction but cautioned that… • Change should not be too dramatic • Make DRM simpler than CRS to explain • Ensure tools developed to explain DRM available to customer-facing employees across the company – particularly Claims • Make link for customers between behaviour and premium • Need to look at rewarding good driving behaviour

37. Employee Focus Group (August) – DRM Components • All supported the movement towards driver-based • Current vehicle based system is very confusing • Cautioned about the impact on multiple vehicle owners and how they are transitioned • Employees’ views are similar to customers regarding treatment of unlisted operator crashes: • The driver should bear all responsibility for an at-fault crash if he has a vehicle of his own

38. Employee Focus Group (August) – DRM Components • Employees’ views are similar to customers regarding treatment of unlisted operator crashes (cont.): • If the driver doesn’t have his own vehicle, the RO should pay a modest one-time insurance surcharge on vehicle involved in crash, while the driver’s insurance will be impacted the next time he insures a vehicle. • Concerned about consistency re: impacts to RO in different scenarios- getting too complicated • Other panel comments: • Needs to be easily explainable, less complicated than CRS • Balance between consistency, accountability and perceived fairness • Transition gradually

39. DRMNext Steps • Broker/customer/employee consultation – 2010 2011 • Finalize high-level DRM model and pricing changes – 2011 • High-level internal DRM communication – ongoing • BCUC review and approval of DRM – 2011 – 2012 • Broker and employee training happening 2013/2014 • DRM Implementation – 2014

40. Agenda • Recap • Objectives of Today • ICBC’s Pricing Strategy- Why are we changing? • Pricing – What are we doing? • New Pricing Model for replacement of CRS • Improvements to Fleet • Enablers for New Pricing Models • Insurance Purchase Experience

41. Improvements to Fleet Commercial

42. Need to increase fairness in our pricing for fleets Make rates more reflective of the risk of each fleet Fleetplan changes being implemented Jan 2011 Changes ongoing/evolve after implementation Improvements to Fleet

43. Agenda • Recap • Objectives of Today • ICBC’s Pricing Strategy- Why are we changing? • Pricing – What are we doing? • New Pricing Model for replacement of CRS • Improvements to Fleet • Enablers for New Pricing Models • Insurance Purchase Experience

44. Enablers: New Rating & Underwriting Engine (NRUE) Why: • Current system is 30+ years old • Updates and changes cumbersome • Needed for DRM • Flexible technology • More responsive to customer needs What it is: • Calculates customer premiums • Uses rates, rating variables and rules and the customer’s risk profile

45. Agenda • Recap • Objectives of Today • ICBC’s Pricing Strategy- Why are we changing? • Pricing – What are we doing? • New Pricing Model for replacement of CRS • Improvements to Fleet • Enablers for New Pricing Models • Insurance Purchase Experience

46. ICBC’s Pricing Portfolio Pricing Insurance Purchase Experience

47. Delivering on Customer Expectations: Move from transaction focused to customer focused experience Help brokers deliver customized products and experience to customers Allow more timely changes/new products Address legacy systems Supporting delivery of new pricing model Making it Happen at the Insurance Purchase

48. Short Term Changes- Rate Quote Longer Terms Changes - Insurance Sales Administration Systems Insurance Purchase Experience Projects

49. Why: Current system end of life Needed to support implementation of DRM 2nd most used system next to ADC What it is: Important tool brokers use to provide customers with quotes Tool for manual transactions when point-of-sale system is unavailable Launch in November 2010 Streamline Online Rate Quote

50. Why: Customer Perception To improve the customer experience and maintain our competitiveness Offer choice, convenience & service while reinforcing value Employee Experience Employees and brokers need better work tools to improve their experience and the customer’s experience Financial Stability Other insurers improving POS Need to be able to bring new products & changes to customers faster Insurance Sales & Administration Systems