QUAIL &WORTH BARRISTERS AND SOLICITORS

Septennber17, 2014

British Colunnbia Utilities Connnnission Sixth Floor, 900 Howe Street, Box 250 Vancouver, BC V6Z 2N3

www.qwlaw.ca

Leigha Worth Law Corporation james Quail Law Corporation

our file 14-015

via ennail: Connnnission.Secretary@bcuc.conn

Attention: Ms. Erica Hamilton, Commission Secretary

Dear Mesdannes/Sirs:

Re: Insurance Corporation of British Columbia - 2014 Revenue Requirements Application Commission Request for Parties "Matters of Interest"

The Insurance Corporation of British Colunnbia is an organization in a state of internal crisis. The extent of the problenn is nowhere revealed in the Corporation's Application to the Connnnission. The fornnat set for Septennber 26 is not sufficient to do nnuch nnore than begin to chart the scope of the issues which need to be investigated. As we advised at the Septennber 1dh session, in addition to this letter flagging our client's Matters of Interest, we will be filing in a separate docunnent a series of questions seeking prelinninary discovery of a nunnber of issues that we expect will assist in any consideration of the appropriate scope of the process on the 26th.

We represent the Canadian Office and Professional Ennployees Union, local378 in this proceeding. COPE 378 represents approxinnately 4,ooo Unionized ICBC staff. These are the people who provide the Corporation's services to the public and keep the organization running despite all the turnnoil and resource-starvation ofthe past few years. Sadly, "turnnoil" is a particularly apt descriptor. ICBC has gone through seven Chief Executive Officers since 2001. The organization and its systenns have been in a state of flux for years, the latest wave being a deluge of inadequately-innplennented changes under the catchword of "Transfornnation." The result? The Corporation's quality of service to the public is suffering badly, and increasing nunnbers of dissatisfied clainnants are retaining legal counsel: driving up the cost of settlennents, costs COPE notes are ultinnately borne not by governnnent or the Corporation itself but by ICBC's policyholders.

ICBC's current staffing levels have been set to innprove optics rather than operational necessity. Perverse and purely political decisions to understaff the Corporation have produced dennonstrable cost innpacts which significantly outweigh any payroll savings. Another effect is that ennployee nnorale, nneasured by the Corporation's own "engagennent" nnetric, plunnnneted to 33% in 2012 and has rennained stuck at that abysnnallevel. This nnetric has fornned part of the connpensation bonus systenn for nnanagers. The Corporation now says that they intend to change the way they nneasure it.• As we said at the Septennber 10th Infornnation Session, a 33% ennployee engagennent score

1 Exhibit B-3, Application, Appendix 11-C, p. 22

405-510 West Hastings St. Vancouver BC V6B 1L8 tel (604)424-8631 fax (604)424-8632

located on unceded territory of the Coast Salish people, whom we thank for their forbearance

C3-2

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demonstrates an internal crisis and if management is incapable of recognizing and addressing this, except by gaming their engagement metrics, that is an even greater problem.

The Union hears from its members on a constant basis about growing dysfunction within the Corporation. Frankly, the Union and ICBC's employees are deeply concerned. The state of internal operations at ICBC is approaching a crisis point, with poorly-implemented and under-resourced system changes producing a growing backlog of work and deteriorating service levels that translate directly into rising claims costs.

The Commission and customers should be alarmed too.

Matters of Concern - Claims Contact Centre Operations

One of COPE's areas of focus in this proceeding will be the newly-launched Claim Center system and its Claims Contact Centre operation. Nomenclature gets confusing here. ICBC has implemented a new computer system for processing insurance claims, a modified version of an off­the-shelf package called Claim Center. It has also established a centralized facility for adjusters to handle telephone calls from claimants ("Dial-a-Claim"), known as the Claim Contact Centre. Finally, ICBC continues to maintain a chain of facilities in communities across BC with adjusters, estimators and other staff, which continue to be known as claim centres.

At this point we are addressing the problems with the implementation of the Claims Contact Centre, which operates on the ClaimCenter system.

There, deficiencies take the shape of vicious circles - self-reinforcing performance degradations. Even though the information filed by the Corporation provides a glimpse of the problem, that limited data is presented in a manner that masks rather than reveals the scale of what is happening. Thus, the first goal of our client's intervention will be to bring to light the data necessary to show the true state of affairs within ICBC.

The new Claim Center system has been operating for the better part of a year, and fully operational since May, but we know from ICBC's workforce that the downward trend in ICBC's quality of service continues, even though the normal learning-curve for procedural changes of this nature is complete. This prolonged efficiency-loss does not fit a normal pattern, but no effective measures have been taken to rectify it. COPE's members who work at ICBC report their frustration as their ability to meet customers' needs continues to slide. It is difficult for them to accept that although the new system is up and running and staff are now trained and familiar with their jobs, things are still getting worse and worse.

1. Incomplete and Selective Data- Customer Wait Times

A troubling issue with ICBC's Application is the use of averaging. Averaging can misrepresent and hide performance problems. The danger of averaging can be illustrated with the analogy of someone having his head in the oven and feet in the freezer -- the average temperature may be within the normal range, but the two extremes do not bode well for the subject's survival. Given what COPE's members are reporting, the Union submits that reporting service as averages is hiding some dangerous extremes and masking real and unsustainable problems in the Claims Contact Centre and throughout the organization.

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The only real glimpses of ICBC's growing operational failure the Application provides are plummeting New Claims Initiation call metrics (Table 10-1} and the collapse of employee engagement (Service Plan 2014-16). The true significance and reliability of the NCI numqers are unclear in the absence of any explanation how the scores were derived. The absence of data beyond the single "8o/10o" measure makes it impossible to tell how serious the problem really is and at this point we have no indication of the actual profile of waiting-times at the Centre. How many callers wait 5 minutes? How many wait 20 or more? To what extent do the scores taken in off-peak hours hide serious performance issues that occur when things are at their busiest? Are the averages weighted properly to compensate for this?

The Union's expert notes other data measures that are crucial indicators of the operational effectiveness of the Claims Centre that are conspicuously absent from the Application. For example, the Abandonment Rate - what are the numbers and profiles of customers giving up in frustration while on hold? How many claimants hang up and try again repeatedly, and how does this affect performance efficiency and service quality? How does all of this influence the Representation Rate? These are just some of many questions that go to the heart of the issues flagged by the Union that remain unanswered.

2. First Call Resolution

Section B.1.4 of the Application (page 10-7} seems to attempt to explain away the failure to meet speed of answer (service level} goals by placing a heavy emphasis on First Call Resolution (FCR) achievements. The Application claims at page 10-7, para. 24 that "amongst call centers in North America, ICBC is an industry leader in First Call Resolution."

There is industry evidence that FCR is the metric most closely correlated with customer satisfaction. In other words, getting the call completed in just one contact drives customer satisfaction more than any other factor. Resolving customer issues in just one contact is also obviously more efficient than a multi-contact resolution situation. So from both perspectives - the Call Centre's and the customer's - FCR is critical.

FCR is one of the most important call centre metrics, but unfortunately also one of the most difficult to measure. It is not a simple single metric automatically generated by the ACD for things like handle time or other service level metrics. To pick one obvious question, how does ICBC determine that a customer's problem is "resolved"? We are given no answer. There are many different ways to measure FCR that basically fall into categories related to customer opinion, agent opinion, and call statistics. Most organizations employ a combination of techniques to track and quantify FCR. Repeat-call calculations, agent logging and tick sheets, and call quality-monitoring determinations are all approximations of customer experience.

In this process, COPE intends to probe into the facts behind these numbers in the Application and develop a more meaningful analysis of the quality of service provided to the public.

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3· Average Handle Time

Average handle time (AHT) is a number that denotes the beginning to end-time of a call from an agent perspective and is one of the components of agent workload. Average handle time is made up of three components:

1. Talk Time

2. On-Hold Time (during call)

3· After-Call Work Time

Average handle time will vary according to the time of day and day of week, and certainly by the type of call. It should be tracked carefully and actual numbers used for workload calculations. AHT multiplied by the number of contacts yields staff workload to drive resource requirements and schedules.

Average handle time can be impacted by a number of factors, including but not limited to the following:

Customer issues (introduction of new services, pricing, etc. that generate more questions and talk)

System problems and issues (down time, slow processing times)

Processes (new call flow, addition/deletion of call content, documentation requirements)

Technology (new technology, technology alternatives such as new self-service options)

Agent Skills (new agents on floor driving up AHT, acquisition of new skills, coaching)

Staff Occupancy (understaffing or overstaffing)

Time of Day/Week (mindset of customers and/or agents)

Outside Factors (news events, weather, political environment, competitive environment, etc.)

There can also be procedural changes directed by management to mask the degradation of service levels and distort AHT metrics. COPE has received anecdotal evidence of such practices and we intend to probe into that issue in the hearing of this Application.

A new system, based on the ContactCenter package, in the Claims Contact Centre was implemented beginning in November 2013, with a full rollout in April 2014- Typically, a new technology rollout results in longer handle times for a short period of time (3 months) as agents overcome a learning curve. The Application refers to this increased handle time expectation and the expected deterioration of service level. However, there is no indication in the Application that AHT has recovered to levels that are at least equal to those before the implementation of the new system. We say "at least equal" because a new system which does not result in net improvements over previous levels is obviously a failure .

Average handle time could be improved with increases in staffing, but there are limits to what this can achieve because of problems inherent in the ClaimCenter computer system itself. Not only

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does the new system fail to streamline case management, it increases processing time and AHT. There are adjusters who have been deployed to the ClaimCenter system since its inception in November of 2013, and who are thoroughly familiar and adept at operating it, but they report that it is impossible to make substantial progress on the time it takes to process claims. Their work continues to fall farther and farther behind.

Increased staffing is essential to shorten the queue of calls waiting to be answered and claims waiting to be processed, but the system itself is a part of the problem.

The Claim Center system is incapable of generating many of the reports that adjusters must provide to their managers. Therefore they have to create them manually, further depleting the resources available to attend to claimants.

All of this is having a devastating impact on morale, reflected in the shockingly low Employee Engagement scores at page 22 of Appendix n-C to the Application. We are instructed that staff turnover has increased significantly and the lag between an employee's departure and the recruitment and training of their replacement (if indeed they are replaced) is another contributor to the "vicious circle."

This is not working. The failure of Chapter 10 of the Application to disclose the scale of the problem should trouble the Commission deeply. Whether this is due to inadequate performance metrics or to inadequate methodologies for tracking them is one of the issues COPE intends to pursue in this proceeding.

4· Staff Occupancy

One of the most important metrics in any call centre is agent occupancy or staff occupancy. This metric is a measure of how busy the staff are during the period of time they are logged in and available to work and provides a useful signal as to the work conditions in call centres.

It is desirable for occupancy to be high since it is essentially a measure of human resource utilization. Staffing costs represent the biggest ongoing operating cost of running a call centre, and therefore it is essential to make the most of this resource. The higher the occupancy rate, the more efficient the centre. However, there is such a thing as too much of a "good thing". It is critical that the occupancy rate not be too high. While it's desirable for the agents to be busy with work during their shift, there is significant evidence demonstrating that it is detrimental if they approach wo% occupied or busy. Study has shown that it is desirable to have a bit of a breather in between calls in order to perform at maximum potential. Most call centres aim for an occupancy rate of 85% - 90% to balance the two competing goals to achieve maximum effectiveness and service.

Calculating the occupancy rate is simple: it is simply workload hours divided by staff hours (or bodies in seats). For example, if between w:oo -n:ooam a centre handles 400 calls and each takes 6 minutes or 360 seconds to handle, that is a workload of 40 hours. If there were 45 agents in place to take calls during that hour, the occupancy rate would be 40/45 or 88%.

It is common to see rising AHT if occupancy rates are chronically high. It is also common to see agent adherence to schedules decrease when occupancy levels are high, and high occupancy rates can also impact quality of service. As agents feel rushed to get to the next call, some of the quality

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processes may break down and it is not unusual to see a negative correlation with quality scores as well as customer satisfaction ratings.

We are instructed, for example, that adjusters have been directed not to determine or record callers' claims history, in order to shave a little time off each call. The direct result of this corner-cutting is a lot of unnecessary duplication and confusion, frustrating claimants who blame Corporation staff for their lack of awareness of critically relevant information about their claims, and frustrating the staff themselves who are left to navigate the labyrinth of information created by a system that forces their coworkers to cut corners. We note that when we raised this concern at the September 10th Information Session, the ICBC representatives who were there did not deny it and appeared to attempt to justify this measure.

5· Impact of Inadequate Implementation of E-Claims System

ICBC has introduced and promoted its "E-Claims" system, permitting customers to submit claims over the internet. While this may seem like a concept that would relieve system delay, it was badly implemented and has made things substantially worse.

TheE-Claims system cannot talk directly to the Claim Center system and the Claims Contact Centre. There is no data integration between the two, and the Corporation has not even begun the task of implementing it.

A policyholder entering information on the E-Claims system on their home computer may think they are entering claim information into ICBC's database, but they are not. Essentially, what they are creating is an email message to an adjuster in the Claims Contact Centre. It does not find its way into the system until the adjuster manually enters the information. That makes E-Claims considerably more labour-intensive to process than telephone claims, and all the more so because the information the adjuster obtains from the message is often incomplete and requires a follow­up contact (which becomes yet another task waiting in a backlog).

At any given time, there is a backlog of about 1,500 of unattended E-Claims, which represents about a week's wait for attention.

This pseudo-automated system was implemented without adding any staff to run it. The same cohort of adjusters who are already being overwhelmed with the volume and complexity of calls must also process E-Claims.

E-Claims has created an expectation on the part of policyholders that their claims will be responded to promptly; under-resourcing means that these expectations cannot be met. Customers who grow frustrated waiting for their E-Claims to be addressed wind up phoning the Claims Contact Centre or their local ICBC claim centre, plugging up the system still more. A direct contributor to the surge in E-Claims volume is people's frustration trying to get through to the Claims Contact Centre over the phone. The diversion of adjusters away from answering the phone to deal with them has the effect of worsening the telephone access problem, and therefore increasing the volume of E­Claims. Frustrated E-Claims users then go back to phoning, increasing the caseload and call backlog for that service.

The downward spiral is obvious.

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Matters of Concern - Spillage of the Problems into Other Departments and Functions

This is only the start of the problem. As we noted above, frustrated claimants will frequently phone their local community claim centre, which because of re-organization is no longer equipped to handle calls initiating claims. Staff at those centres are then required to re-route grateful customers back to the Dial-a-Claim orE-Claims queues. If the customers are particularly displeased, they may be re-routed to adjusters in the local Claim Centres, removing them from their own caseloads and plugging operations at that level as well.

The blockage of the intake system through ClaimCenter radiates out through the organization. For example, delay in having claims processed creates a growing backlog of vehicles awaiting repair estimates at the Central Estimating Facility. A telling anecdote is that the parking lot at that facility, designed to hold the inventory of vehicles awaiting the attention of estimators at peak times (winter storms) is today nearly full after a long stretch of perfect driving weather.

Part 7 Accident Benefits are also suffering as a result of the gathering dysfunction of ICBC's claims intake system and the understaffed administration of this service itself. Part 7 benefits, providing rehabilitation services which are key to mitigating the escalating cost of bodily injury claims, are now typically subject to a 30-day queue before they are given any attention. Adjusters who handle Part 7 benefits carry caseloads of approximately 300 claims each. If there is any follow-up at all, it typically takes approximately six months. Due to staff shortages and overwhelming work demands, ICBC is not providing an adequate level of assistance to bodily injury claimants in obtaining the medical and paramedical services they need to optimize their recoveries.

The Commission should contemplate the disparity between the cost-savings ICBC achieves by providing minimal staffing for services like Part 7 and the impact on premiums of the Corporation's deepening failure to promote optimal injury recovery.

Optics are trumping sound administration when it comes to resourcing the organization to fulfill its mandate properly.

Another example: one strategy ICBC has adopted to improve the management of major injury claims is to assign to a small group of adjusters the main responsibility for dealing with particular high-volume private legal counsel. ICBC has tended to avoid filling vacancies or backfilling these adjusters during leaves of absence; for example, this group is currently short of a full complement. ICBC is saving minor salary costs and paying the price of retreating from this case management strategy.

The payment of vendor accounts is also becoming increasingly backlogged, to the point where we are instructed that there are towing companies who refuse to release vehicles in their custody until they receive payment for their services from ICBC. The new System has added a proliferation of new steps which must be executed to settle even a routine account. Body shops, car rental outlets, taxi companies and other vendors typically wait two months to receive payment from the Corporation. Occasionally an account becomes sufficiently urgent that a manager authorizes expedited treatment (the staff who run the system do not have that discretion) which means that the urgent account jump the queue at the expense of those waiting for payment.

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Other Staffing Considerations

There are many direct and indirect costs associated with understaffing in a call centre. Some of these costs associated with understaffing can include:

• Additional Workload. As previously noted, understaffing results in higher occupancy and typically increases handle time. Angry customers who finally get through to the Call Centre often preface their discussion with the adjuster by venting their displeasure, creating one of the vicious circles that expand handle time and lengthen the time others then spend in the call the queue.

• Increased Representation Rate. With long delays associated with understaffing, claimants are likely to become frustrated and dissatisfied with the apparent unresponsiveness of the Corporation and therefore more inclined to retain legal counsel.

• Increased Telecommunications Costs. If toll-free services are used to bring calls into the centre, the company foots the telephone bill for these calls. There is a cost not only for the talk time of a call, but for all the minutes of delay on the front end while the caller is waiting in queue.

• Schedule Non-Adherence and Absenteeism. As understaffing gets out of hand, call centres will find that schedule adherence decreases and employee absenteeism increases. There is a significant cost of replacing staff, because typically the only option available in the short-term is to offer overtime to replace missing staff.

• Turnover (Attrition). As staff numbers decrease due to attrition, there is a significant replacement cost. This cost includes advertisement of positions and direct hiring costs including interview time as well as testing, screening, and training costs.

• Impact on Quality. With understaffing, staff tend to rush through calls as contacts are backed up in queue, resulting in a reduced quality of service.

• Damaged Reputation. With long delays, customers spread the word about bad service. What used to be a few word-of-mouth bad reviews has increased exponentially with the spread of social media.

• Decreased Customer Satisfaction. With longer wait times, customer dissatisfaction goes up. Dissatisfied customers may be more likely to employ legal counsel in their dealings with ICBC whereas a satisfactory contact may have prevented some of these legal interventions.

• Undermined Social License. The Province of BC and the public generally rely upon ICBC to deliver effective service as the monopoly provider of Basic insurance. ICBC is also the government's agent in the delivery of licensing, road safety and other services. Public confidence in the Corporation is a vital ingredient of the social license which is one ofiCBC's most valuable resources.

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Scope and Format of Application Review

The Union has engaged a leading expert in call centre management, operations and metrics, Penny Reynolds. She is certified as a Call Center Management Consultant by the Call Center Industry Advisory Council (CIAC), and the author of the leading industry textbooks on call centre management. We intend to file evidence in this process from Ms. Reynolds analyzing the performance levels and resource needs ofiCBC's Claim Centre operations.

Ms. Reynolds advises us that ICBC would have the data available to it that she will need to prepare her evidence. We are seeking a hearing sufficient in its scope and process to enable us to obtain the information that is needed to produce a rigorous analysis of the performance trends of the new Claims System, to identify specific deficiencies in the way the utility is being resourced and managed, and to indicate the remedies that need to be applied.

As we have noted, we have received indications of a growing tide of serious operational deficiencies at ICBC, problems that, ifleft unchecked, could push the Corporation and its workforce to the point of breakdown. COPE says that the Commission needs to establish a proceeding capable of identifying and diagnosing these problems and of enabling the Panel to give the direction necessary for the Corporation to move its operations back toward a state of equilibrium. The Commission cannot properly fulfill its public duty in the superintendence of ICBC's Basic insurance business with a cursory examination of the service trends which are only fleetingly revealed in the information provided in the Application.

The Union asks the Commission to establish an oral public hearing, at least regarding the matters which are covered (or ought to be covered) in Chapter 10 of the Application, Performance Measures.

All of which is respectfully submitted.

cc: parties of record, via email