Done Right, Public Auto Insurance is the Way to Go
The Insurance Bureau of Canada has spent the last four years actively trying to convince British Columbians that a private, for-profit car insurance system would provide better service than ICBC. That argument flies in the face of overwhelming evidence that shows when the government does it right, the choice between public and private insurance is a no-brainer. In this paper last week, Lindsay Olson, on behalf of the Insurance Bureau of Canada, which represents private insurance interests, argued that auto insurance rates in B.C. would actually decrease under a private system. However, when you take a look at research by independent, neutral organizations like the Consumers’ Association of Canada, it’s clear that the IBC’s numbers just don’t add up. CAC studies have looked at how car insurance rates for the same driver with the same vehicle and driving record vary across the country.
In case after case, B.C. and the other provinces with public insurance systems come out ahead of those with private insurance. For example, the CAC found rates in the Maritimes could run up to 45-per-cent higher than Manitoba, Saskatchewan, and here in B.C. Average rates in Ontario were more than double what we pay. As much as the IBC would like you to believe that competition would result in lower rates and that oversight of private insurance is strong, the fact is that these corporations are ultimately beholden to shareholders, not British Columbians. Because of that responsibility and the inefficiencies that result in a patchwork private system that doesn’t benefit from ICBC’s large economies of scale, insurance rates under such a system would almost certainly be higher than those we enjoy under ICBC today. And we could see profits and B.C. jobs leaving the province.
It is true that it’s possible for a few drivers to get cheaper rates in places like Alberta. However, in those rare instances where the driver is deemed low-risk enough by the private companies, the coverage is usually inferior to an ICBC basic package, with low caps set for certain benefits. For example, Alberta’s maximum benefit for medical and rehabilitation benefits is onethird of what ICBC’s basic package offers: coverage that can make a big difference if you or a family member is in a catastrophic accident.
The IBC also argues that provinces with private insurance have better road safety records. The fact is that ICBC makes major investments in road safety -$9 million in 2010 alone.
A public, centralized system also results in a more stable and efficient provincial insurance industry. Public insurance is better able to absorb extreme changes in the marketplace without having to pass unreasonable costs onto consumers. ICBC’s system also makes selling policies and enforcing mandatory registration easier, leading to lower rates of uninsured drivers than we see in other jurisdictions. Even the IBC estimates that up to 15 per cent of Ontario drivers are uninsured.
Many of us have lived with ICBC for long enough that it can be difficult to remember why it was brought in. But those who were around pre-1974 remember the problems ICBC was created to address: large numbers of uninsured drivers causing private insurance rates to skyrocket, rate gouging by some private companies, and rate discrimination based on age, marital status, gender, and area of residence. These are the same problems we see in jurisdictions that have an entirely private car insurance system today. And they’re the same problems that are likely to return if the Insurance Bureau of Canada gets its way. Of course, no system is perfect and ICBC has its issues. ICBC was designed to pass savings back to consumers, but our current provincial government pulled $990 million out of ICBC to cover its own funding shortfalls. This was B.C. drivers’ money that should’ve been spent on insurance rate cuts for those same drivers, and to compensate the employees who’ve made ICBC successful. The problems British Columbians experience with ICBC are problems that can and should be dealt with by the B.C. government. And fortunately with a public insurance system we do have the ability to hold them accountable now, and if need be, in the next election.
David Black is president of the Canadian Office and Professional Employees Union, local 378.