New study sheds light on personal cost of auto insurance across Canada

It may come as no surprise, but government-run auto insurers in BC, Saskatchewan and Manitoba charges some of the highest insurance rates in Canada, according to a new study by the Fraser Institute, Canada’s leading public policy think-tank.

“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.”

Due to regulatory severity and rampant insurance fraud driving up claims costs per passenger vehicle, the study indicates that Ontario was the province with the least affordable auto insurance.

The study also notes that Quebec consistently has the lowest auto premiums; however, this is a result of two factors: the limitation of the public monopoly to bodily injury claims coverage and less severe regulations.

There is also evidence, according to the study, 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.

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