Insurance Bureau of Canada releases study on actual automobile insurance premiums

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January 11, 2007 — Insurance Bureau of Canada (IBC) has released “Myths and Facts about Automobile Insurance in Canada,” a review of automobile insurance between 2000 and 2005 (the last year for which comprehensive statistics are available). The study examines actual prices during that period as well as misconceptions and myths about automobile insurance for consumers.

Why is this report needed? According its author, policy analyst Mark Milke, the study is an attempt to clarify misunderstandings, poorly understood concepts and plainly incorrect perceptions about automobile insurance prices now in the public domain.

“I certainly favour competition in the pursuit of business,” said Milke. “It’s preferable to government monopolies, and while one may disagree with that approach, at a minimum, a debate must begin with the facts. Far too often this discussion has been based on misleading or inaccurate information about auto insurance prices,” said Milke.

“This study helps debunk the myths that persist despite access to independently verifiable information. The fact is that the private, competitive insurance industry compares quite favourably to the alternative. We continue to deliver value in every province where we operate,” said Stan Griffin, President and CEO, Insurance Bureau of Canada.

“The biggest myth is that competitive private-sector automobile insurance is always more costly than government-run insurance,” said Milke. “The facts show, beyond a doubt, that government auto insurance is often more expensive than private insurance,” Milke added.

“One of my goals in writing this report was to provide clarity and better understanding of the issues related to insurance. I want to explain what such numbers mean (and do not mean) so that policymakers, the media and the public can make informed choices about automobile insurance, both at a policy level and as consumers,” said Milke.

Insurance Bureau of Canada is the national trade association of the private property and casualty insurance industry. It represents more than 90% of the non-government home, car and business insurance in Canada. For more information, visit www.ibc.ca.

Mark Milke is a former executive director (first in Alberta and then in British Columbia) with the Canadian Taxpayers Federation. He is the author of multiple public policy studies and three books on Canadian politics.

Highlights of Myths and Facts about Automobile Insurance in Canada include:

  • The assertion that competitive private-sector automobile insurance is always more costly than government-provided insurance is a myth.

  • Rates vary widely to the point where public-sector provinces can often be found at the high end of average insurance costs. For example, in British Columbia, where the government-run insurer provides all mandatory coverage and most optional coverage, between 2000 and 2005, the average British Columbia premium ranged from the most expensive among the 10 provinces (in 2000, 2001, and 2002) to third-highest (2003) and second-highest (2004 and 2005).

  • Auto insurance premiums in all the Atlantic Provinces were consistently lower than those in British Columbia in the past six years. Prices in Nova Scotia and Prince Edward Island were yet lower than Manitoba premiums.

  • In Alberta, the public has been left with the mistaken impression that insurance in British Columbia is much cheaper. In fact, B.C.’s average premiums were higher than Alberta in every year between 2000 and 2005 save one (2003, when B.C.’s average premium was a mere $2 cheaper than Alberta’s average premium).

  • Proponents of government-run insurance consistently point to Saskatchewan, which had the lowest average premium between 2000 and 2005, but that is not remarkable when the claim side of insurance is looked at as a reason why: Saskatchewan’s average claim for mandatory coverage was $5,453 in 2005 compared to $9,028 in neighbouring Alberta. In short, consumers get what they pay for: higher claim payouts in provinces where the average cost of insurance is higher.

  • Similarly, Ontario is often cited as having the highest premiums levels in Canada. The data shows that Ontario was cheaper than B.C. for three of the last six years. However, in any event, consumers in Ontario were consistently better served by the highest benefit levels in the country. Ontario drivers received on average more than $15,000 per claim on mandatory coverages, a level that far exceeds benefit levels in any of the provinces with government monopoly insurance.

  • Studies and surveys that purport to measure insurance costs by surveying Internet quotes of automobile insurance in private- sector provinces are not reliable indicators of the true premiums paid by consumers. Quotes are merely reflections of “bids”.

  • Media reporting on insurance costs have torqued inaccurate assertions. Even editorials meant to provide analysis of past news stories have missed basic statistical errors contained in flawed studies.