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Is Government run insurance really “The Answer” to Auto Insurance problems?



When I made the decision to purchase my first car, I of course had to start thinking about car insurance.  Since I live in Ontario where auto-insurance is not government owned and operated, I had plenty of options to choose from and sat down to get as many quotes as I could for the car I was about to buy.

It didn’t take long for me to find an insurer who could provide a rate I could afford with the options I wanted as far as deductibles and coverage.  My information was mailed to me and I was set to go happily on my way.  

Lately I have seen a lot of talk in the local media about the high cost of Auto Insurance in Ontario – particularly in the GTA and have been a little concerned with the questions raised about what a turn to Government owned and operated auto insurance to “help”.                                                                                                     

The Insurance Bureau of Canada has addressed some of the myths related to government-run vs. private auto insurance systems:

Government – run Auto Insurance

Huge start-up costs.

Depending on where you are in Canada, the average cost to establish a government-run insurance company would be $300-$500 million.
 Huge bail-outs. All government-run auto insurers in Canada have required taxpayer subsidies as a result of charging too little in premiums and having insufficient start-up funds.

Reduced private sector investment.

Private home, car and business insurance companies directly invest in the provinces in which they do business. In Ontario, for example, insurers’ investment in the province totals more than $6 billion.

Limited choice for customers

Government-run auto insurance provides a “one-size-fits-all” solution for consumers (e.g. no multi-vehicle discounts).

Lack of product innovation.

Government-run auto insurance companies a captive market share. Product innovations such as first-accident forgiveness, replacement cost coverage, and roadside assistance were all available in privately run auto insurance systems long before they were adopted by government-run auto insurance companies.

Fewer benefits.

While it is true that the government-run insurers in Manitoba and Saskatchewan have lower premiums in dollar terms, consumers in these systems have far fewer benefits. In Manitoba, for example, an accident victim who is catastrophically injured has no right to sue for economic losses – including future lost wages – that are over and above a predetermined amount.  Drivers are able to opt out of no-fault and chose to be a tort system as of 2003, however very few drivers choose this option.  British Columbia is a tort jurisdiction and on paper the benefits are quite rich as there is no cap.

Private Auto Insurance

 Competition works.

Auto insurance is priced competitively in almost every jurisdiction in North America.

 Insurance rates reflect true cost.

Premiums in a competitive environment reflect the real cost of insuring a driver. Auto insurance premiums are set based on a host of factors that affect the frequency and cost of claims.


Private auto insurance systems provide vital injections of investments, jobs and taxes into regional economies. The private insurance industry in Canada employs almost 100,000 people, either directly or through its support of a broker workforce.

What few people realize is that insurers provide car insurance within a strict framework of provincial laws and that they are supervised by a number of government agencies, including rate review boards and both federal and provincial regulators. Car insurers deliver a product that is defined by these laws and regulations.