Monday, April 07, 2008

B.C. Crown Corporation Rip Off

How is it that the government delivers services because it can't trust the private sector to act in the best interest of the public, but then serious consumer rip offs happen anyway? When a crown corporation delivers a service, and insiders rip off consumers, the taxpayer is on the hook to pay compensation.

B.C. has a peoples' monopoly auto insurer, ICBC. ICBC's training facility rebuilt between 30-40 salvage vehicles (those considered by ICBC to be cheaper to write off than to repair) per year, and then sold them. Between 1998 and February 2008, the training facility sold 98 vehicles to ICBC employees and unsuspecting buyers without revealing the vehicles' repair history. As a result of this funny business at the training facility, ICBC no longer sells rebuilt vehicles. Questionable sales from the facility, however, went on for 10 years.

If a private dealer sold rebuilt vehicles without disclosing its history, its license to operate could be suspended, or even cancelled. Getting shut down acts as a big disincentive to ripping off consumers. Will ICBC be shut down as a result of its misdeeds? Not likely. Competition and the fear of losing the ability to continue on in business are two of the most important deterrents to misdeeds in the private sector - which is exactly where auto insurance should be.

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