TORONTO, ON—Government-run auto insurance
monopolies in BC, Saskatchewan, and Manitoba continue to charge some of
the highest auto insurance rates in Canada, concludes a new study
released today by the Fraser Institute, Canada’s leading public policy
think-tank.
The average auto insurance premium in BC was $1,113 in
2009 (the most recent year for which data are available), $1,049 in
Saskatchewan, and $1,027 in Manitoba.
Ontario had the highest average premium at $1,281, while the lowest average premium, $642, was found in Quebec.
“These
results are consistent with previous reports that suggest
government-run auto insurance monopolies are less efficient than auto
insurance provided by a regulated, competitive market,” said Neil
Mohindra, director of the Fraser Institute’s Centre for Financial Policy
Studies and co-author of
The Personal Cost and Affordability of Automobile Insurance in Canada, 2011 Edition.
“Although
Ontario recorded the highest average premium, that comes as a result of
higher claims costs per vehicle stemming from high levels of insurance
fraud, and relatively severe regulations in rate-setting as well as
mandatory minimum liability and accident benefits laws.”
The study
notes that insurance fraud is rampant in Ontario, with fraud
investigators characterizing Toronto as the center for organized crime
rings that carry out a number of fraud scams. It also points out that
Ontario announced reforms in November 2009 that are expected to lower
the minimum coverage for some benefits, a move that should lower
Ontario’s regulatory severity in 2010.
While Quebec consistently
has the lowest premiums of any province with government-run insurance,
Mohindra points out that Quebec’s public monopoly is restricted to
selling basic coverage only, while the private sector delivers 100 per
cent of the optional auto insurance market. Additionally, Quebec has a
pure “no-fault” system for bodily injuries, which does not allow injured
parties to sue at-fault drivers for pain and suffering or additional
costs. It also requires lower levels of coverage for bodily injury and
third-party liability than other provinces.
Of the remaining
provinces, Prince Edward Island had the second lowest average premium
($695), followed by New Brunswick ($728) then Nova Scotia ($736).
Newfoundland and Labrador and Alberta each had an average premium of
$749.
The study estimates the average cost of personal passenger
auto insurance premiums in all 10 provinces for 2009 using publicly
available data. Varying interprovincial definitions for reported data
make calculating comparable average premiums difficult. Government auto
insurers do not publish audited data in a format that permits a simple
calculation of average premiums in their provinces that can be directly
compared to other provinces. In order to estimate and fairly compare the
average cost of auto insurance in every province, the study applies (by
estimation) the same data definitions that government regulators
require from private-sector insurers in six provinces to the published
data of the government auto insurance monopolies in four provinces.
The
cost of auto insurance in each province is also measured by calculating
the average premium as a percentage of GDP per person, the average
premium as a percentage of personal income per person, and the average
premium as a percentage of personal disposable income per person. In all
cases, Ontario, along with the public auto insurance monopolies of BC,
Saskatchewan, and Manitoba, are among the most expensive.
The
study also points to evidence that taxpayers, including non-drivers, are
subsidizing government auto insurers in some provinces. Quebec was
among the worst in this regard, having accumulated a deficit of $2.6
billion by 2009, a cost equal to $417 per adult resident of Quebec. In
BC, taxpayers help fund the Insurance Corporation of British Columbia
(ICBC) through an infrastructure spending program.
“As long as the
private-sector insurance industry is open to competition and consumer
choice is protected, the portion of auto insurance premiums that are
earned as profits cannot result from excessive prices, but instead come
from cost efficiencies achieved by successful claims management, pricing
strategies, customer service, and good business management,” Mohindra
said.
“Drivers in BC, Saskatchewan, and Manitoba should be asking
why their governments have eliminated consumer choice and are forcing
them to purchase auto insurance at rates higher than necessary.”
