(PS032)
February 8, 2007
Monopoly Insurance: Unfair at Any Price
Executive Summary
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Government automobile insurance companies in Manitoba, Saskatchewan, and British Columbia have used data to produce insurance premium comparisons which exaggerate estimates of insurance costs in private-sector provinces.
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The claim that the cost of auto insurance is lower in provinces where government requires it to be purchased from a government provider is not accurate in the case of Manitoba and British Columbia. In the case of Saskatchewan, the average premium is lower than private-sector provinces.
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Average premium comparisons mask a number of reasons why prices differ.
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Claim costs vary greatly by province. Such costs (which include payouts) affect the cost of insurance. With insurance, consumers do indeed get what they pay for.
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Some private-sector provinces have less expensive average insurance prices than other provinces where government is the main insurer.
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Insurance policies must reflect risk in order to send signals to drivers about their potentially dangerous behaviour and the relative risk of their age and gender cohort.
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Governments should end taxes that apply only to insurance products.
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Consumers should be offered a choice between no-fault or tort insurance.
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Full competition should be allowed in provinces where it does not now exist. There is no price or product advantage to monopoly-provided insurance.
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Consumers in search of a fair system of comprehensive auto insurance should demand hat it be competitive, that it reward good drivers and penalize poor ones and that they receive adequate comparative information from agents.
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Mark Milke
is the Director of Research for the Frontier Centre in Public Policy, a lecturer in political science at the University of Calgary, and chairman of the editorial board for Canada's online journal of ideas (C2C Journal). In addition to authoring three books on Canadian politics, Mark has written policy papers on corporate welfare, equalization, Aboriginal treaties, the Canada Pension Plan, Alberta’s Heritage Fund, automobile insurance and the flat tax. His doctoral dissertation at the University of Calgary was on the effects of anti-Americanism on deliberative democracy in Canada and his Master’s dissertation at the University of Alberta was on human rights and democracy in East Asia. Mark is a Sunday columnist for the Calgary Herald and his columns on politics, hiking, nature, and architecture have been published across Canada including in the National Post, Globe and Mail, Reader’s Digest, Vancouver Sun, Edmonton Journal, Winnipeg Free Press, Montreal Gazette, the Victoria Times Colonist and the Washington DC –based magazine, The Weekly Standard.
Feedback:
- RE:
Monopoly Insurance: Unfair at Any Price
— February 13, 2007
These days, insurance is a significant expense. In exchange for our money, we expect to have access to this coverage when we need it. What we have seen elsewhere in Canada is a growing public anger among people who fork out insurance fees but then are afraid to access their coverage for fear of surcharges.
Manitoba Public Insurance provides comprehensive insurance coverage that people are not afraid to access because MPI does not penalize them for doing so. MPI only surcharges when they are responsible for a crash. Private insurers penalize customers for accessing coverage whether they were at fault or not. --
MPI President and CEO Marilyn McLaren
Mark Milke responds: Ontarians can sue for pain and suffering and if they don't like their accident payout. That's why Ontario has higher average premiums. In contrast, Manitoba consumers must simply accept their MPI payouts and tough luck if one doesn't agree. . . .Given that Manitoba's average claim cost is about 17% that of Ontario's while its average premium is about 70% of Ontario's, and given that Manitoba's urban density is less than that in Ontario or Alberta, MPI's insurance prices and coverage are no bargain.
Full text of exchange
