Milke: We’re overdue for information on auto insurance coverage in Canada

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If Canadians want to perceive the anti-reality, pretend information age that we dwell in, an instance exists in our driveways and parkades — the car, and the spurious claims made about auto insurance coverage.

I’ve adopted media, advocacy and authorities rhetoric about auto insurance coverage prices in Canada for twenty years. The assertions are normally flawed however right here’s the way it occurs: Some advocacy group or “public” (i.e., authorities) auto insurance coverage firm produces a research that claims private-sector provinces have absurdly excessive auto insurance coverage prices relative to provinces the place authorities firms have a monopoly on primary/necessary auto insurance coverage.

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Such provinces (British Columbia, Saskatchewan and Manitoba) are then assumed to be relative bargains. Governments in each sorts of programs typically step in and impose value caps on auto insurance coverage premiums.

Thus, private-sector Alberta imposed a freeze on auto insurance coverage premiums this 12 months simply earlier than the provincial election. Equally, and over the previous twenty years, politicians in British Columbia sometimes order the government-owned Insurance coverage Corp. of British Columbia (ICBC) to freeze charges each time actuality (hovering restore prices, excessive damage declare prices, statistically poor drivers, i.e., the younger, and an absence of competitors) all mix to ship auto insurance coverage premiums greater.

The top impact is similar whatever the province: The actuarial foundation of insurance coverage is thrown out in favour of short-term politics.

However freezing auto insurance coverage premiums doesn’t change the underlying actuality. Auto insurance coverage corporations will then function at a loss, have much less out there capital, or present fewer choices and fewer fascinating protection than they in any other case would possibly. The identical dynamic happens within the public-sector provinces.

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In some cases, such coverage additionally means much less competitors. When the Alberta authorities imposed its value freeze on auto insurance coverage charges, one unnamed insurance coverage firm with 16,000 purchasers introduced it was leaving Alberta. That was unsurprising: When politicians make {the marketplace} uneconomic, capital will flee to different jurisdictions.

There’s a drawback with activist and government-produced or government-contracted insurance coverage stories, and never due to the supply. I’ve just lately written a report on auto insurance coverage paid for by insurers, so I, too, might be accused of bias. The issue is within the methodology used.

A transparent instance arrived earlier this 12 months when Ernst & Younger (EY) wrote an auto insurance coverage report for ICBC. EY used onerous information (precise paid premiums) for provinces the place primary/necessary auto insurance coverage is offered by authorities firms. However EY then used web quotes as an alternative of accessible actual information for private-sector provinces. That apple-banana comparability was an issue as a result of web quotes don’t symbolize actuality.

Predictably, the B.C. authorities promoted that EY report as proof that government-provided auto insurance coverage is preferable to aggressive, private-sector provinces. Improper. Essentially the most correct costs are ones that customers truly pay.

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Between 2012 and 2022, right here’s what the precise information exhibits: Ontario recorded the very best premiums in seven of these 11 years; B.C. recorded the very best premiums in 4 years (2017 to 2020 inclusive); and B.C. would have continued to be the highest-priced province besides that it moved to so-called “no fault” insurance coverage in 2022, a 12 months through which it nonetheless recorded the third-highest common price after Ontario and Alberta.

That Ontario recorded the very best insurance coverage premiums for a number of years doesn’t imply that insurers are gouging shoppers, or that Ontario is a foul deal relative to B.C. Right here’s one instance: In 2022, Ontario’s whole common declare measurement was $13,537, Alberta’s was $12,309, whereas B.C.’s common declare measurement was $4,313. Briefly, you get what you pay for, and in government-run provinces you get much less.

Enter prices matter as do actual information when analyzing auto insurance coverage premiums. Governments ought to base coverage on that, not on what’s greatest described as pretend information and internet-derived information not related to real-world prices.

Mark Milke is an unbiased coverage analyst and the writer of a number of research in vehicle insurance coverage in Canada. His latest report, Actuality Issues: Details about vehicle insurance coverage in Canada, was written for the Insurance coverage Bureau of Canada.

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