Media Releases 2006
December 27, 2006
Automobile insurance: Myths and facts Insurance Bureau of Canada
releases a study on actual automobile insurance premiums
Toronto December 27, 2006 Insurance Bureau of Canada (IBC) today 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. To view
news releases and information, visit the media section of IBC's website
at 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
including A NATION OF SERFS? HOW CANADA’S POLITICAL CUTLURE CORRUPTS
CANADIAN VALUES, released in 2006 by John Wiley & Sons. Milke’s
opinion pieces on taxes, politics, government and insurance have been
widely published in newspapers across Canada.
For more information contact:
Study author: Mark Milke (403) 209-2062
IBC Contact: John Karapita (416) 362-2031 x4351
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 ten
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 BC 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 which 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.
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