Public Auto Insurance No Bargain, New Study Shows

Commentary, Crown Corporations, Frontier Centre

Price differences between public and private automobile insurance in different Canadian provinces have been grossly exaggerated, concludes a new study released today. Written by author and consultant Mark Milke, Monopoly Insurance:Unfair at Any Price deplores the fact that provincially owned agencies in Manitoba, Saskatchewan and British Columbia have misled the public about their prices compared to private insurers, and explains how the deception occurred.

“Transparency in price comparisons between the public and private sectors is already a value in short supply,” commented Peter Holle, the Frontier Centre’s President. “We are certainly happy to add Mark Milke’s voice to our long record of insisting on it.”

At the heart of Milke’s report is the observation that the Consumers’ Association of Canada, itself reliant on public funds, has compared apples and oranges when it has looked at prices for car insurance. It used actual averages to report purchases from public insurers, but averages of quotes or bids to inflate what private companies charge. That error can amount to hundreds of dollars, and public officials often cite the false gap to show their prices are lower when they’re not.

Milke’s study also details the various reasons why auto insurance prices can differ from province to province. They include the issue of “no fault,” which means that average claim costs in provinces that have legislated that policy can be thousands of dollars lower, a factor that quickly shows up in prices. When that element is considered, insurance purchases in provinces where the private sector provides the service may actually be a better deal.

For further information, contact the Frontier Centre at 1-204-977-5050 or Mark Milke at 1-403-209-2062. The study in its entirety is available at /main/publication_detail.php?PubID=1682.

Average insurance premium by province, 2001-2005 ($)

2000 727 761 631 616 643 878 707 651 819 961
2001 788 846 718 676 670 953 764 681 879 981
2002 926 1,038 887 777 692 1,119 808 708 1,018 1,073
2003 1,037 1,121 928 868 710 1,355 837 715 1,141 1,139
2004 971 1,103 897 816 721 1,385 897 756 1,076 1,160
2005 934 999 842 811 716 1,319 920 738 1,022 1,153

Sources: Insurance Bureau of Canada, Automobile Insurance Experience Exhibits, and respective provincial government automobile insurance companies based on paid premiums. The above averages result from (where applicable) the combination of government and private premiums.