Government-run auto insurance programs in British
Columbia, Saskatchewan, and Manitoba perform worst in terms of
cost, affordability, fair pricing and consumer choice, according
to a new study comparing auto insurance markets in 61
international jurisdictions released today by The Fraser
"Supporters of government-run auto insurance claim these programs
produce lower costs for drivers. But our study shows the few
jurisdictions with public auto insurance are consistently among
the worst performers within almost all measures of market
quality, including cost and affordability," said Brett Skinner,
the Institute's Director of Insurance Policy Research and author
of the study.
The report, Auto Insurance Market Quality Index 2006: Annual Comparison of International Auto Insurance Markets
, assesses the performance of auto insurance markets in 10
Canadian provinces, 50 U.S. states and the United Kingdom using
data from 2002, the most recent year for which complete data was
available across all jurisdictions. Of the 61 jurisdictions
examined, only BC, Saskatchewan, Manitoba and Quebec have public
This study is the first effort by The Fraser Institute to measure
and compare the performance of auto insurance markets across
international jurisdictions. Previous Institute studies only
compared Canadian provinces with each other.
While Manitoba, Saskatchewan and B.C. had the three lowest scores
in the overall market quality index, the scores from all ten
Canadian provinces were ranked in the bottom 12 of the 61
When comparing the affordability of auto insurance premiums as a
percentage of personal disposable income in each jurisdiction,
all 10 Canadian provinces finished in the bottom ranks with B.C.
dead last in the 61st spot, Saskatchewan ranked 59th and Manitoba
58th. New Brunswick joined this group of least affordable
jurisdictions, placing 60th.
The top ten most affordable jurisdictions were all U.S. states
led by Illinois, Texas and Wisconsin.
"The consistent, poor results and low scores of provinces with
public auto insurance programs make it abundantly clear that
consumers are not getting the choice or value for dollar that
they deserve," Skinner said. "Furthermore, if the best Canadian
jurisdiction can only achieve a ranking of 50th out of 61, that
shows auto insurance policy in every province needs to be
Saskatchewan, B.C. and Manitoba had the worst scores within a
sub-index for the cost and pricing fairness of auto insurance
premiums in each jurisdiction. The sub-index was made up of five
variables that separately measured cost, affordability, pricing
sustainability, pricing fairness and the special tax burden
applied to auto insurance premiums.
Saskatchewan also ranked as one of the worst jurisdictions in
terms of the pricing sustainability of its premium rates,
finishing 60th of 61, the result of total insurance claims
exceeding total premiums in 2002. This means that province's
insurance market was in deficit and premium rates in the province
should have been even higher than the already high levels
relative to the 61 jurisdictions studied.
This study also tested for statistical correlations between
regulatory variables and consumer outcomes measures for cost,
affordability and pricing sustainability. The analysis confirms
that in general, more severely regulated auto insurance markets
are linked with worse outcomes for auto insurance consumers on
cost, affordability, and pricing sustainability.
Important Note on Methodology
The study is based on publicly available data obtained from state
government insurance regulators in the U.S., the insurance
industry association and government regulators in the U.K.,
annual reports of public auto insurers in Canada, and data from
the Insurance Bureau of Canada.
The data focused only on private personal auto insurance -
excluding commercial and recreational vehicles. From the data, 15
variables were developed describing the regulatory policy
environments and outcomes in each jurisdiction using comparable
units of measure. From these 15 variables, five indices were
constructed that comparatively measure market quality and
regulatory severity across international jurisdictions.
Two indices measure market quality outcomes from the perspective
of consumers regarding cost and pricing fairness, and choice; one
index gauges market quality outcomes from the perspective of
insurers regarding the business climate for auto insurance; a
fourth index measures the regulatory severity of auto insurance
policy in each market; and the fifth index measures overall
market quality, combining the scores for each jurisdiction across
all 15 variables.