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Car insurers eyeing your wallet

Few drivers will have much sympathy for automobile insurers set to send premiums spiraling upward yet again. Citing investment losses and higher costs, the industry is looking at increases of an average of 7.8 per cent this year, with some spiking twice that much.

As the rate notifications go out, we can expect to hear another round of calls for public auto insurance in Ontario, where premiums are the highest in the country. In 2008, the average annual premium in this province was $1,313, followed by B.C. at $1,166 and Alberta at $1,052.

The last round of large increases prompted the provincial government to temporarily freeze rates in 2003, with an attempt to roll back costs by about 10 per cent. Partially successful, the regulations are now under a steady attack from the insurance industry, which is eager to pass on its investment losses to you, the driver. Your mutual funds may have taken a beating in this economy, but you have no recourse. Insurers, on the other hand, have your wallet to fall back on, and they’ve been getting the go ahead for the last year or so to do just that.

Currently, insurers in Ontario are pressing for caps on payouts for, among others, injuries sustained in collisions. The idea is to limit claims for minor injuries, the so-called nuisance claims. The move has met with a positive reception at the government level. Alberta, New Brunswick, Nova Scotia and PEI all have caps in place, although each uses a different definition for “minor injury.”

Although the stance has some merit – there are people who try to milk the system – it is seen as another step by insurance companies to reduce coverage while continuing to boost rates.

Proponents of public auto insurance say such a plan would take greed and profit out of the mix, leading to the elimination of predatory and discriminating practices and offering coverage at lower prices.

Almost all of the criticism has come from the industry itself and its supporters on the right, essentially negating their position.

One big bogeyman remains, however: the specter of yet another mismanaged government program. You can’t blame Ontarians if they’re a little skeptical about a public system given the possibility of corruption, bureaucratic bloat and a culture of workplace entitlement in the government sector, all of which could easily erode some of the benefits to consumers.
Like health care, however, the benefits of a public system outweigh the risks.

As the Consumers’ Association of Canada has pointed out, public auto insurance systems in other provinces provide far more stability at rates far below what drivers pay to private insurers.

Facing increasing energy costs across the board, higher taxes and expenses outstripping inflation – and many private-sector wage increases – consumers are primed for getting something back from the government (recent reports have shown Canadians are paying more in taxes and getting fewer services in return). A public car insurance system would reap immediate rewards for all drivers, in many cases cutting premiums by at least half.

The only impediment is political will. Unfortunately, Queen’s Park has a long history of ignoring the needs of Ontarians, and the current crew has shown absolutely no resolve. In the current economic climate, this kind of change becomes even less likely.

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