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Tue, 05/22/2018 - 13:03

Young drivers’ sky-high premiums add to calls for public auto insurance

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YOUNG DRIVERS IN ONTARIO ARE HOSTAGES: If they want to drive they have to pay sky-high insurance premiums because they are not 25-years old. It’s the ransom they have to pay for being young.

YOUNG DRIVERS IN ONTARIO ARE HOSTAGES: If they want to drive they have to pay sky-high insurance premiums because they are not 25-years old. It’s the ransom they have to pay for being young.

“This is only happening because Cameron is a 19-year-old boy,” says Tony Sottile “That’s it, the only reason.”

Sottile’s existing insurer wanted $6,000 more to add his son Cameron as a principal driver on an 11-year-old car. The story is just another example of the huge penalty for being a young, male driver in Canada’s most expensive car-insurance market.

Insurance companies get away with this kind of discrimination because “it’s only business.” They say their intent is not to punish young people for being young—but the reality is that they do.

Tony Sottile went to work to find a better price. “I got a high of $32,000 and a low of $6,100 per year.

 “I don’t know where these brokers are getting their prices. Some are using the same companies, but there are vast differences in prices for the same criteria. Are they pulling these numbers out of the air?”

“Some kids are paying more for insurance than their car,” says Joe Daly, a spokesman for Desjardins Insurance.

In 2003, a study by the Consumer Association of Canada found, “good young male drivers pay more than bad older drivers with high priced vehicles.”

Unfair to good young drivers

John Podedworny was one young driver who didn’t think any of it was fair. He explained why in an article printed in the Hamilton Spectator in 2014—the day after he got his drivers license. He wrote:

“Here’s a thought, instead of welcoming me with the highest rates of any age group, give me a merciful rate and let my driving history determine how much I will pay in the future.

“If I am a good driver who takes care of my car, reduce my rates. Leave the excessive charges to the Justin Beibers of the world who think it’s cool to drag race and endanger the lives of everyone around them.... the people causing the accidents should be paying for them. Not someone who just happens to be young.”

Gouging Ontario auto insurance buyers

Ontario’s 9 million drivers pay the highest car insurance rates in Canada. They also receive the poorest coverage and the poorest benefits if they are in a serious car accident.

But the big, multi-national insurance companies that administer auto insurance in Ontario, have never had it so good.

A report released in May 2018 provides alarming new data on just how much profit exists in the auto insurance system in Ontario.

The updated report, conducted by York University Schulich School of Business Professor Dr. Fred Lazar reports that Ontario auto insurers made $1.5 billion pre-tax income in 2016, up nearly 60% over the last four years alone.

Lazar also calculates that Ontario drivers continue to pay excessive auto insurance premiums.

Lazar reports: “I estimate that in the last five years alone, the overpayments might have totaled $5 billion.”

Public auto insurance cheaper and better

BC, Saskatchewan, Manitoba and Quebec all have public auto insurance, and drivers in those provinces pay significantly less than Ontario drivers:

  • Quebec has the lowest average insurance rates of any province, ranging between $600-700 annually

  • Manitoba and Saskatchewan come out at around $1,000

  • BC drivers spend approximately $1,100 on average.

Ontario is by far and away the most expensive province, with drivers shelling out on average $1,700 per vehicle. For those who live in some parts of the GTA, that figure increases to over $2,000.

The Consumer Association of Canada report stated: “Finding #1—Public auto insurance systems offer the lowest rates for consumers.”

The first public auto insurance system was introduced by Tommy Douglas’ CCF government in Sakatchewan in 1945. NDP governments in Manitoba and BC in the early 1970s also brought in public auto insurance plans.

In BC, the popularity of public auto insurance has compelled every government since, even avowedly right-wing BC Liberal governments, to declare their support for ICBC. The public insurer’s recent problems are the direct consequence of a decision to semi-privatize the system.

The return of a key election issue?

The NDP surprised Ontario with a victory in the 1990 provincial election. A key to the win was the NDP promise to create a public auto insurance plan. An even greater surprise was the NDP government decision to formally abandon that promise a year later.

Some observers believe the time for public auto insurance in Ontario has come again.

Dennis Pilon, an associate professor at York University, urged a party to come forward with a plan to introduce a public model like BC’s or Manitoba’s. “If you had a party that came out and said, ‘We’re going to do X,’ then I think you would start to see the issue register,” he told CBC.

Adriano Marcoccia, a 28-year-old Toronto resident with a clean driving record,  is one voter who agrees. He told CBC that the position political parties take on auto insurance rates would influence his vote in the June 6 election.

“I don’t think many Ontarians know how much more they’re paying compared to other provinces,” says Marcoccia.

Efforts to widen the push for public auto insurance are also growing in Newfoundland, where drivers pay the highest rates in Atlantic Canada. Trade union representatives there have filed a proposal to an ongoing government consultation to create a public insurer. They argue that this move will cut premiums, and also allow funds generated by the system to be reinvested in the province, rather than going to private profit.

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