Auto Service World
Feature   October 1, 2003   by Jim Anderson,Editor

Outrageous Insurance, Part 1

They say that the only two things that are sure in life: death and taxes. I think that the old saying should be updated to include insurance rate increases. Auto insurance is big news in most province...


They say that the only two things that are sure in life: death and taxes. I think that the old saying should be updated to include insurance rate increases. Auto insurance is big news in most provinces, as well it should be. There are few other household costs that have gone up so much and delivered so little as insurance. The idea of insurance is simple: you buy into a pool or money that spreads the risk of some catastrophe over a large number of people or businesses. Ideally, high-risk persons or activities pay higher premiums and people or businesses that demonstrate no claims for a period of time get lower rates. It seems simple, but in the auto insurance market, rates are skyrocketing at a time when per capita injury and death rates have never been lower. What’s going on? There doesn’t seem to be a clear answer, except that vehicles are expensive to repair and that legal costs are going through the roof. My insurance was upped some 20% and I’ve heard some horror stories here in Ontario that have forced people out of driving altogether. I personally know of a couple of cases of families that have gone from two cars to one because insurance rates put the budget over the top. This is an ominous trend for our industry; once the expense of a second or third car drops out, it will be very difficult in this economy to get an additional car into that driveway again. And it’s the second or third car that tends to be older, out of warranty, and needing our services the most.

How do we reverse this trend? If I were in control of auto insurance, (no one has asked, but call your MLA/MPP!) the first thing I’d do is to stop the multi-million dollar payouts. Over the national average income, people should carry their own supplementary coverage if they want a bigger payout, leaving lower rates for the majority of our customer base. The next thing I’d do is split the risk factors between the type of vehicle and the person driving it on your insurance bill. Basically, it should break out as insurance for you personally, regardless of the vehicle, then a separate component for your vehicle. Different vehicle insurance ratings should appear on the window sticker of new vehicles so that buyers can choose cheap-to-fix models if they want to save on insurance, like the Transport Canada fuel efficiency stickers already required. The next change I’d use is to use a modified “no-fault” scheme backed by stiff criminal fines for at fault drivers in accidents. This would stop the “lawyers’ welfare system” we have now, while hitting lousy or criminal drivers in their pocketbooks instead of all of us. This idea has been discredited in the mass media, probably because it hurts the interests of Canadian lawyers, but it has worked everywhere it’s been tried, the Fraser Institute notwithstanding. And that brings me to the next step: provincially run auto insurance. I’ll comment on that important issue next month. In the meantime, if you live in British Columbia, Saskatchewan or Manitoba, consider yourselves lucky.


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