Response to clients' comments on government auto insurance
Response to a client's recent post about an article posted March 25, 2013 concerning government insurance. Please note, the editor to does not profess to be an expert on North American automobile insurance systems and these comments have been formulated after 40 years + in the Ontario insurance business.
A client writes -
Disingenuous to say the least. In provinces with public auto insurance, even right -wing governments have not been able to get rid of it due to MASSIVE popular support!
Reply from Ryan Guthrie -
Yes, I know insurance companies have always been perceived as the big, bad, money-grabbing, captains of business always at the ready to squash the hapless consumer. Honestly though, with over 40 years in this business I can tell you the perceptions are just not the reality, albeit many folks still will never believe it. There are just reams of information out there these days which an internet search would confirm but I just wanted to share a few points with you - - Government auto insurance...sure, it sounds great. Government "works well" here too for WSIB, OHIP, Orange, Gas generation plants...the list is endless. Having the government do or take over anything is never an answer. In Ontario's case it has resulted in a virtually bankrupt province with debt 4 x's that of the beleagured California (about 20 billion if memory serves!). - Throw out a government agency (re "massive support for government insurance")? Never happen. Too many vested interests through unions, management, cushy pensions, protection, smoke and mirror subidization through taxes, licensing, etc. Ask Ontario OHIP patients, those waiting in emergency lines or months for surgery or WSIB claimants how happy they are and put that in the reality of billions of dollars of subsidies paid for by you know who (OPM....other peoples money). Try to replace BC insurance workers? Forget it. - Do voters honestly think that replacing the profit driven motives of private insurance companies with government bureacracy, redtape, pensions, unions, etc., would work out more economically? Could a 5-12% profit really be replaced more economically with government? - BC, MB, SK, PQ, premiums are also lower because of the overall claims experience emanating from population density (less crowded roads), type of policy, benefits provided, all of which result in much lower costs then we have here in Ontario. If Ontario had the same number of cars per road KM as the others and a basic policy such as theirs you can bet our premiums would be lower as well. But, what is the real cost to those who have suffered a major injury? - Most of these current Ontario auto insurance discussions focus on the GTA - highest rates in the province for obvious reasons. Folks up north who pay 50% less than us, sure are not complaining. These rates are already lower and would likely be similar to other "government run" provinces. To reduce our rates in the GTA by the government or any private insurer would require either more basic insurance or averaging i.e. GTA rates go down but N Ontario rates would go up. Insurers don't print money like governments. - Also, some provinces subsidize auto insurance premiums through taxes and license fees such as PQ. I'm no expert of all of the various provinces registration/licensing process but at the end of the day I'm sure the total costs are similar. In PQ the government plan included with registration is a standard "meat chart" for injuries e.g. lose a hand and it's worth $ x regardless of whether you are a surgeon or a homemaker but they also have very high license plate fees to help offset premiums. For example in PQ, the cost of a drivers license goes up the more points you get but starts at $128.41 (Ontario is $75...errr PQ 80% higher) and for a license plate they charge $273.25 (Ontario is $82 and $41 in N Ontario). This still requires PQ residents to purchase non bodily injury damage and other options from insurance companies. - If Ontario were to intro government auto insurance and even managed to bring premiums down, who would really benefit? Most "perfect" drivers already have very competitive premiums and there is just no excessive profits to remove. The drivers that are "less than perfect" or the young, single-males, would certainly benefit. Imagine the traffic chaos, deaths, injuries (based on statistics) if because of pure politics/vote getting, thousands of young, old, bad, drivers could now insure their vehicles for virtually the same as everyone else i.e. without any increase/decrease in premium because of statistical risk? In BC I understand the premiums for underage females and others went up to subsidize lower premiums for underage males. Wondering what the injury stats for males under 25 are compared to Ontario per capita? - Out of the 90 or so privately run Ontario auto insurers most tend to make an average of 5% profit. It's a bit of a crapshoot because despite what the actuaries say, it is too highly competitive a market which keeps premiums down. Each year insurers review and post their premiums - if they charge too much...they lose business. Charge too little and they risk being underfunded with insufficient to cover the previous several years of claims and will require more increases from not-to-happy policyholders who then will cancel and move along. It's a complicated business. - Ultimately, premiums are all about claims. In the event of a serious crash/injuries, the Ontario auto policy offers the best benefits in North America. Loss of income, medical, rehab, attendant care, death, and so on. It's expensive to provide these kinds of benefits. - Why not allow consumers to select just the benefits they want? Nope, doesn't work. Just like allowing people to drive without insurance. Many people simply are not responsible enough to make the right choices and would end up on the government door-step having suffered serious uninsured injuries. Just think how many times you hear about an apartment fire and none of the tenants bothered to carry a $15/month tenants insurance. - In North America there is virtually every conceivable method of insuring automobiles. In Ontario over the past 40 years there has also been at least 5 major revisions. Never in my time in this business have I ever met anyone, regardless of jurisdiction, that was thrilled about having to pay ANY insurance or who felt they were being charged too little. That's human nature. Folks love TV's, smart phones, sports, entertainment, furnishings, all of which they will pay considerably for but proper insurance....?