Private insurance saves lives

Lawrence Solomon
National Post
October 22, 2003

Canadians plant more makeshift crosses by the sides of roads than Australians or Americans, and far more crosses than the British, whose drivers are the safest in the Western world. Among the English-speaking Western nations, only New Zealanders die more often than we do when measured in traffic fatalities per distance travelled.

New Zealand, a pioneer in no-fault insurance a century ago, owes its high rate of carnage to 1972 legislation that provided public automobile insurance coverage for all, generally at the expense of employers, who became responsible for paying their employees’ personal insurance premiums. Road fatalities soared as the potent combination of no-fault insurance and no-fee-for-risky drivers hit the road.

A hidebound United Kingdom, in contrast, owes its low fatality rate to its fidelity to traditional insurance principles, and to its trust in private insurers. With market forces at work, insurers levy high premiums on young males and other high-risk drivers. Bad drivers stay off the road; good drivers and their passengers stay out of the morgues.

In between the extremes of the hidebound United Kingdom and the Brave New World of New Zealand lie countries whose states and provinces take mid-courses between these opposing paths. In the United States, 32 states provide little or no subsidy to poor drivers, and another dozen aren’t far behind. A handful of especially unaccountable states drives up the national death rate close to Canadian levels. But throughout the United States, the time-honoured insurance principle – the riskier the driver, the higher the premium – keeps fatalities down.

In Canada, all jurisdictions force insurers to keep bad drivers on the road. The insurers in Alberta, Ontario and those in the Maritimes by law must maintain a fund, paid for by good drivers, to reduce premiums for otherwise uninsurable drivers. But because the insurance industry otherwise remains true to insurance principles, and because the number of dangerous drivers covered by the fund remains relatively small, there is a cap on the needless killings that occur in these jurisdictions.

Not so in British Columbia, Manitoba and Saskatchewan, which go the extra mile in making roadkill of their citizens. In these over-regulated provinces, discrimination on the basis of age and gender – actuarial factors that predict the probability of accidents – is against the law. Young males, a very high-risk population, are thus entitled to automobile insurance at the same rate as mature females, a very low-risk population. Rather than agonizing over whether to obtain coverage as a principal driver or as a secondary driver – or whether they really need to drive regularly at all – youths and their parents can largely shuck this responsibility. Mature females are then overcharged on their coverage to allow the state insurer to undercharge the adolescent males behind the wheel.

These kids do well in British Columbia, Saskatchewan and Manitoba. In Ontario and the Maritime provinces, only about 20% of 16- to 24-year-old drivers obtain insurance as a principal operator. In the Western nanny provinces, where money is no object, about 80% do. The grim price to pay comes in the form of maimings and deaths: The youths in these provinces are twice as likely to be injured as youths in provinces that set their premiums on the basis of risk.

Youths, of course, aren’t the only ones to die in large numbers through affirmative action programs for dangerous drivers. In a recent study of British Columbia, the Insurance Bureau of Canada found B.C. suffers 16,000 more injuries and 1,800 more deaths because of its unaccountable premium-setting. Not surprisingly, the provincial economy also bled red ink. With losses boosted by reckless insurance, B.C. logged about $1-billion in direct costs (medical treatment, repairing or replacing vehicles), $1.2-billion in indirect costs (loss of economic productivity through an inability to work) and $4.7-billion in pain and suffering, for a tally that approaches $7-billion. Had the government not gone down this road, B.C. residents would be saving about $2.5-billion a year.

Canada’s accident fatality record, though poor compared to other English-speaking nations, fares well compared to most countries. France, Germany, the former countries of the Soviet bloc and others didn’t inherit the traditions of the English common law, property rights and competitive markets. In combination, these traditions have proven to be unusually successful both in holding transgressors accountable for past wrongs and in deterring future wrongs. Where we haven’t squandered our inheritance, we have been blessed with health and wealth.

AUTO INSURANCE KILLERS: Deaths per billion vehicle kilometres (2001):

United Kingdom 7.5

Australia 9.1

United States 9.4

Canada 9.5

Germany 11.3

New Zealand 12.4

Belgium 12.7

France 14.8

Source: OECD, National Post

Lawrence Solomon is executive director of Urban Renaissance Institute and Consumer Policy Institute, divisions of Energy Probe Research Foundation.; Third in a series.

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