Car Insurance And Government Incompetence - High Taxes, Fraud And Regulatory Waste.
By Stew Mayers
Car insurance. A recent study maintains that in the good Canadian Democratic Republic [D.R.] car insurance rates are only 30% higher than in the US, and only, [in the industrialized heartland of the communal paradise], running at $1300 per year. Sure they are. I don’t know of one single person amongst say 100, which has a car insurance rate that low in Canada’s urban heartland. Car insurance rates are far higher than some accounting ‘mean’ average and as government regulation increases, so does fraud, rates, and consumer frustration. In Canada alone I counted 59 regulatory bodies and agencies involved the car insurance market – am I to believe that all of these are to protect me and to benefit me? Doubtful.

Maybe 85 year-old Pastor Paul living in nowheresville driving a 1960 Ford tractor, or a Sherman tank pays these so-called average rates. No one in an urban center under the age of 60, driving anything newer than a 1988 Dodge pays anything close to $1300 per year. La raison? C’est simple – in most provinces and states, car insurance is a massively regulated and government controlled market. This leads to nothing but higher costs and misery. Where there is government, there is consumer pain.

Car insurance rates vary by state and province and by urban and rural center. Some jurisdictions have state–owned insurance firms providing coverage [the socialists in British Columbia prefer this]; a mixed private – government regulated system [most US states and Canadian D.R. provinces have this]; or a free-market unregulated system [Texas, South Carolina].

Guess which ones has the best rates and most competitive pricing markets? Well done. Texan rates for car insurance average about $800 US per year. South Carolina after 30 years of regulatory nonsense, went to a free market system. Rates plummeted to $760 on average. Texas and South Carolina have pretty much the lowest car insurance prices in the US. Big surprise. [For teeth gnashing Marxists these low rates are of course calibrated to the death penalty.]

It should be said that lower car insurance rates are not even indicative of a good system – but lower regulatory, bureaucratic and fraud costs are. Texas and South Carolina have the lowest rates of fraud, abuse and regulatory oversight in the US. They also have real market-set prices, not government managed ‘ranges’.

For the average urban Canadian – the fictitious one from the Fraser Institute study – who paid ‘$1300’ in Toronto, the average big hat Texan paid $350 CDN less per annum for his car insurance. There are many reasons why rates might differ between 2 locations. Rate calculation factors such as age; urban density; number of accidents in that jurisdiction; the number of claims in that area; ethnic demographics; and individual driving and payment history all influence rates of course. Common sense stuff.

But is a driver in Dallas, a $350 per annum better driver than some guy on the outskirts of Toronto? Maybe he is, maybe the laws in Texas for bad driving are tougher, maybe the Texans have a lot more of those studly looking Highway Patrol officers on the look out for fast driving cowboys. Maybe the average Texan drives slower than the average maniacal Canadian zooming in to town on ice covered roads. But then again maybe some other factors are driving the differential in rates.

A key factor never covered by the media and one which most consumers don’t consider is the cost of state interference and fraud. Do you see on your insurance bill, ‘taxes collected by government’? Or, ‘your share of this year’s fraudulent claims’? Or, ‘regulatory fees paid by you to the insurance industry’? Or, ‘amount paid to support government employees regulating the workers in the insurance regulatory agencies’?

Of course not.

Like socialized health care, the costs of big-mommy state regulation are never disclosed to the poor schmuck writing checks to insure his car. For socialist health care recipients it is the same - have you ever received a statement saying, ‘this is what you paid in a health tax, and this is what you consumed in health services’? Such transparency is not even discussed within government regulated markets.

A large component of government burden in regulated markets? All the little fees and taxes included in your car insurance price, which are never disclosed. In almost any regulated, non-market competitive jurisdiction, insurance rates only go up – they never go down. And there is very little price competition between insurance vendors.

As Doug McClelland of the Insurance Corporation of B.C., which has a monopoly on basic car coverage recently stated: "It's not the private sector that sets the insurance rates in any province, it's the regulator that does." This is not entirely true since in some Canadian provinces the market does help set rates. But his point is valid. Across Canada and most of the US it is the government that is defining the car insurance product and rate ‘ranges’ or tables of acceptable pricing. Included in these prices are the costs of regulating the industry. These costs add up to billions each year.

In most areas there are hidden taxes, usually around 2-5% of the premiums value that are paid directly to the government. Regulatory costs to pay for the massive bureaucracy to manage the industry are added but never disclosed. In non-state owned jurisdictions, car insurance firms must pass on fees and regulatory costs to the consumer. They are never disclosed to the buyer.

The consumer is being jerked around.

Another component of your insurance price that is never disclosed to you? Fraud of course. In the US about $8 billion in car insurance fraud is committed annually – with most of it coming from highly regulated states like NJ or Taxachusetts. The more regulation, the less competition, the higher the rates, and the greater the consumer fraud.

Witness New Jersey and Massachusetts which had to use government power to keep insurance companies in the state. Car insurers started to flee these states for the turnpike to avoid massive car insurance fraud which was sinking their profits. Since most insurance companies offer a wide portfolio [house, car, health, disability etc.] regulated jurisdictions have the power to force insurance companies to abide by government rules. Keep in mind that many insurance firms do not make a healthy return or market average profit on car insurance [contrary to media reports].

According to Insurance bureau’s in Canada and the US, on average only about 15 % of drivers made a claim or were accused of abusing the insurance system last year. Yet this varies significantly depending on how much government is involved. In British Columbia according to the Fraser

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