Wouldn't it be sweet if your local congressman threatened to
overthrow the government unless your car insurance bill came
This is exactly what's happening right now in Canada, where
almost half the country buys auto coverage directly through the
government and the rest have politicians willing to put the squeeze
on private insurance companies.
Turn on the news in Ontario -- Canada's largest province, with
38.4 percent of the population -- and see for yourself: One party
threatening to topple government
if the provincial premier doesn't demand that auto insurers cut
their rates by 15 percent, about $220 U.S. on average.
"It's a hot-button issue," says Sean Graham, an executive of
, an online insurance shopping site in Canada. "They're threatening
to call an election on it and overthrow the government based on
What may be even more surprising to Americans: This isn't the
first time the price of car insurance has taken center stage in
Government-run car insurance
As rates have jumped sharply in recent years, consumer groups
and liberal politicians have repeatedly asked whether it wouldn't
be cheaper and more equitable to remove private profits from the
mix altogether. Four of Canada's 10 provinces have already done
In British Columbia, Manitoba and Saskatchewan, there's no such
thing as shopping for a car insurance company. Drivers enjoy
one-stop shopping at their provincial government. (For example,
Saskatchewan Government Insurance
site.) In Quebec, drivers get all their bodily injury coverage
through the government; private insurers take care of property
damage and the rest.
The public systems have been in place since the 1970s in three
of the provinces and since 1945 in Saskatchewan, a midwestern
province that's home to just 3 percent of the population.
Despite four decades of experience, it's just about impossible
to say which setup best serves consumers. Because each province
regulates insurance to its own liking -- as
each state does
in the United States -- what's being sold in each province differs.
So, too, do the drivers being covered.
Andrea Horwath, leader of Ontario's left-leaning New Democratic
Party, has argued that 20 percent to 30 percent profits by private
auto insurance companies are untenable. She has demanded that
Ontario make auto insurers slash their rates by 15 percent, or her
party will trigger an election.
Insurance companies say they want to cut rates but can't afford
to, claiming they're strapped thanks to $1.6 billion a year in auto
No surprise: It's left vs. right
The Insurance Bureau of Canada, an industry association, claims
that the private marketplace is able to offer drivers richer
benefits and higher claims payouts. In addition, government-run
programs have been just as unable to control rising costs as have
private insurers, and some have required taxpayer bailouts.
In 2011 The Fraser Institute, a conservative think tank,
compared average auto insurance premiums and reported that the
three of the four provinces with the highest costs had
government-run auto insurance.
But view the landscape a little differently, and the numbers
become just as compelling for the other side. As supporters of
public programs point out, the highest average auto insurance
premiums are in Ontario, which is a private marketplace. The lowest
are in Quebec, a public market for the mandatory bodily injury
And drivers in those four provinces love their government-run
car insurance. Even when they have elected right-wing leaders,
"none has ever had the nerve to scrap the public scheme," wrote
Thomas Walkom, a columnist for The Record, an Ontario newspaper,
earlier this year. "It is just too popular."
A 2003 study by the Consumers' Association of Canada compared
rates in a town that straddles the border of two provinces, one
public, one private. Those with government coverage paid less.
"It comes down to mostly politics. In terms of actual pricing
and coverage the products would be very similar," says Graham, who
said he has no personal preference in one system or the other.
"What it boils down to is: the perception is that corporations
and profits are bad if you're on the left and, if you're on the
right, government is bad," he says. "It's the same conversation up
here that you have down there."
South of the border
While drivers in Quebec pay about half what drivers in Ontario
do, according to that Fraser Institute study, the disparities in
the United States are even greater. Each state has its own rules,
its own traffic and road conditions, and its own legal climate.
That means huge differences in the price of car insurance.
The same driver in the same car can triple his car insurance
bill by moving from Maine to Michigan. Simply moving across town
can dramatically affect rates as well. (CarInsurance.com's Nosy
Neighbor tool shows average car insurance rates by ZIP code.)
In 49 of the 50 states, car insurers are free to price coverage
as they wish within state guidelines.
But the remaining state, North Carolina, sets a ceiling on the
amount car insurers can charge. That practice is currently under
attack by insurers, who say additional pricing leverage would allow
them to offer discounts to better drivers.
Public insurance pools do, in fact, exist in the United States,
albeit typically for low-income, good drivers and only in a few
states. California's low-cost auto insurance program, for example,
lets drivers with good records but low incomes buy into a publicly
managed program. The state program is not funded with tax dollars
and aims to prevent people from driving without insurance