Urban Renaissance Institute

Shannon Hagerman
The Daily Gleaner
November 13, 2003

The Insurance Bureau of Canada brought in Lawrence Solomon to talk to the committee examining a public auto insurance system Wednesday. (The Daily Gleaner Stephen MacGillivray Photo)

A legislature committee with the job of choosing the ideal public automobile insurance regime for New Brunswick drivers was urged to scrap the idea by most presenters speaking Wednesday at a hearing in Fredericton.

Most officials who testified in front of the select committee on public automobile insurance didn’t want to talk about public auto insurance, but instead warned of potential problems for drivers and the taxpayers if a government-run system is adopted.

Liberal MLA Bernard Richard said it is the same message the committee has heard around the province, orchestrated by the insurance industry.

“It is clear that there is a strategy from the industry, that they have been sharing talking notes,” he said.

“I think there is a lot of overkill, to be honest with you.”

On Wednesday, the Insurance Bureau of Canada picked up the tab to fly to New Brunswick a columnist who has blasted the idea of public insurance in national newspapers.

Lawrence Solomon, of Energy Probe, was also accompanied by a media relations agent.

Richard said insurance companies can appear, or pay individuals to appear, as many times as they wish under the public hearing process.

However, he said, it won’t change the mandate of the committee, which has been asked to recommend the best public insurance model for the province.

“It is just the same presentation, essentially that is being made over and over again,” he said.

“I think it’s almost counterproductive. You get tired of it. It is very redundant and repetitive.”

The organizations warning of problems in the public system on Wednesday included the Canadian Federation of Independent Business, the New Brunswick Law Society, Olmstead Insurance and the Insurance Brokers Association of New Brunswick.

Don Olmstead, owner of St. Stephen-based Olmstead Insurance, told committee members Wednesday that moving to a public system would hurt his company.

He said it would cut out more than a half of his business, even if the committee adopts a system, such as Quebec’s, in which brokers sell public insurance to drivers.

“The Quebec system is the best of the bad lot,” Olmstead said after his presentation.

He said there will be higher accident rates if New Brunswick moves to a public system, citing statistics showing drivers use less care when covered by public insurance.

Bruce Noble, from the Law Society of New Brunswick, said the group would like New Brunswick to hold onto its tort-based legal system, which allows accident victims to sue for compensation.

The law society is urging the committee to choose a “public tort” system that would see insurance delivered by a provincial corporation, but allow victims to sue for accident benefits. This is similar to the public auto insurance system in British Columbia.

If this approach won’t bring rates down far enough, the law society wants the province to create dual insurance systems.

Private-sector insurance coverage would continue for some drivers, while other drivers could get insurance from a “parallel public insurance” regime.

It would be up to drivers to choose which system they want to be covered by. This model would also be cheaper to implement in New Brunswick, the law society argues.

“By choosing such a parallel system, the individual would be foregoing his or her common-law right to sue for full compensation, and would be agreeing to whatever caps or no-fault regime is in place,” states the law society’s written brief.

Richard said the lobbying won’t affect the committee’s final report, which will recommend the best public system to adopt in New Brunswick.

“It doesn’t hurt, but it doesn’t help at all either,” he said. “We know what our mandate is and at the end of the day, we will respect that mandate.”

The Fredericton hearings represent the final public sessions for the committee. It has been on a cross-New Brunswick tour since Oct. 21.

The hearings wrap up today at the Sheraton Fredericton Hotel, where almost 10 insurance companies and associations are expected to testify.

The committee will make recommendations to the Conservative government, which will decide whether the group’s findings will be implemented.

No date has been set as to when the committee will release its recommendations.

NDP Leader Elizabeth Weir said it will depend on the length of time it takes for an actuarial study to be completed that will gauge potential insurance premium savings under the model the committee recommends.

CBC
November 13, 2003

Fredericton: The words of one speaker left a sour note at meetings Wednesday of the legislative committee looking at auto-insurance in New Brunswick.

Lawrence Solomon told committee members that public insurance puts dangerous drivers on the road.

“It’s young males, for example, who are the very riskiest population. They don’t like to pay rates that reflect the risk of having a souped-up car,” Solomon said. “Also older people, they don’t always want to accept that as they get older they lose some of their faculties.”

Solomon, a researcher who calls himself a consumer advocate, appeared before the committee on behalf of the Insurance Bureau of Canada, who paid for his trip to appear before the committee in Fredericton.

He says he was hired by insurance companies because they have a stake in private insurance.

“They are in deep deep trouble. They need help and that’s why they asked me to come,” Solomon said.

However, for that reason, the head of the legislative committee – NDP leader Elizabeth Weir – said Solomon had misled the committee. She says Solomon didn’t originally tell the committee he was being paid by the Insurance Bureau of Canada. Weir also takes issue with his research because she says it doesn’t include data from New Brunswick.

“We’ve read his presentation, he was specifically asked if he had anything new to contribute to the committee, in terms of New Brunswick experience; there’s nothing in his presentation to the committee,” Weir said. “I don’t see why someone from Toronto, Ontario should be making recommendations to New Brunswick citizens.”

Mary Lou O’Reilly of the Insurance Bureau of Canada defends Solomon’s research, “We certainly didn’t formulate his ideas. We did not fund his research. We only facilitated his travel and his arrival here in New Brunswick.”

The standing committee wraps up its hearings Thursday. Committee members will deliberate on which system of public insurance they like best and submit a report by the end of December.

Fredericton, New Brunswick, November 12, 2003

Thank you, Mme. Chair, for the opportunity to address this Select Committee. I appreciate your courtesy in accommodating my request to appear, so late in the hearing. You are charged with a very important responsibility, and I will attempt to be of assistance to you and your fellow members.

Let me first introduce myself and tell you a little bit about my organization. I am Managing Director of Energy Probe Research Foundation, one of Canada’s largest consumer and environmental organizations, and Executive Director of its Consumer Policy Institute division. You know our foundation best, perhaps, because of Energy Probe’s work on Pt. Lepreau and NB Power. I know that you and my colleague at Energy Probe, Tom Adams, have had a productive relationship over the years and for that we have been extremely appreciative.

As you and other members may know, our foundation runs a wide variety of programs. In most programs, our work involves strengthening regulation by removing the conflicts of interest that prevent government from policing industry. Basically, we believe that government and industry should not be in bed with each other, but must operate at arms length from each other.

We have some 30,000 financial supporters across Canada, about 400 of them in New Brunswick. Our foundation’s family of Web sites draw a great deal of traffic from members of the public who come to us for our perspective. We receive approximately 30,000 hits per day, which may makes our sites Canada’s most heavily travelled consumer and environment sites.

Ordinary Canadians represent the single largest source of our foundation’s funding, through small charitable donations that average about $40. We receive very little in the way of grants from either governments, corporations or unions – these three sources combined amount to about 2% of our funding.

In the 25 years since I helped found Energy Probe, insurance companies have never provided a grant to us, or a payment of any kind. This trip to New Brunswick is an exception. The Insurance Bureau of Canada is paying for my expenses and my time. The Insurance Bureau contacted me after seeing my recent series of articles on automobile insurance in the National Post, where I am a columnist, and asked me if I would agree to come here on short notice to express my point of view to a group at a luncheon. I agreed, on condition that I be paid. I also requested that the Insurance Bureau attempt to arrange that I šppear before you, and I am grateful that it agreed to do so, and that you have agreed to hear me.

My foundation has been involved in insurance issues for a quarter of a century now, mostly in the area of nuclear power, brownfields, political risk insurance related to our Third World work, and of, course, road safety. We see the insurance function as a cornerstone of a democratic society like Canada that operates in a market economy, because the insurance industry is, essentially, a regulator of risky behaviour. In the case of risky behaviour by large industries – multinationals that destroy the Third World’s forests, for example, or the nuclear industry – the private insurers have historically acted to rein in bad behaviour, much to the chagrin of the multinationals. In the case of auto insurance, the private insurers act to rein in risky behaviour by inexperienced youths, or the elderly who are beginning to lose some of their alertness, or drunks.

A male teenager doesn’t want to believe that he represents a greater risk on the road today than he will represent when he’s 25 or 30 years; a 75- or 80-year-old woman doesn’t want to believe that she isn’t as alert, or her reflexes aren’t as quick, as when she was 50 or 60. No one wants to pay more for the privilege of driving because an insurer tells them they’re likelier to get into an accident.

At this hearing, my foundation has two road-related goals in any coming reforms in auto insurance: To promote public safety and financial soundness. Both of these goals depend on one factor: strict accountability.

When other jurisdictions moved to public insurance, or away from systems that stress full accountability, the death rate immediately went up, typically between 5% and 10%. In Quebec under a no-fault system, according to a University of Toronto study, it climbed by almost 10% within a decade. In B.C., which has a tort system but not a system to actuarially determine price, an extra 140 people a year die, according to an IBC study.¹ Similar findings have been found for various U.S. jurisdictions and an Australian jurisdiction, and in New Zealand, which saw a 16% increase in fatalities after its switch to public insurance in 1972.

If New Brunswick moves toward a public system, the legislature should be careful to minimize the loss of life that will almost surely accompany this move. I believe a determined province could do much better than other jurisdictions have done but courage and integrity would be required. To avoid needless loss of life, politicians would need to stand up to seniors and youths – the same groups that now complain that private insurers are discriminating against them.

Private companies have a strong incentive to stand up to the lobbies – they have the profit motive. In some cases, the profit motive does harm. In the case of insurance, the profit motive helps the insurer resist calls to let dangerous drivers on the road.

This is the challenge in a public insurance system: In a system that decides rates politically, it takes great courage for politicians to tell their constituents that they are risky drivers. But if they don’t level with their constituents, innocents will die.

The record to date is not good. Politicians are human, and they succumb to special interest groups. No public insurance system I’m aware of has performed as well as private tort systems that are faithful to actuarially based premiums.

Let me provide some statistics from the OECD, which compares death rates among various countries. I have shown the English-speaking nations in blue bands. As you can see, these countries tend to outperform the rest of the world. The reason, it is widely accepted, is the British system of torts and strict liability, and market-determined pricing. The British system is one which Canada, the U.S., Australia and New Zealand inherited. These legal and economic traditions have served us well. Please refer the Road Fatalities in Selected Countries (2001) chart at: www.urban-renaissance.org/urbanren/images/Insurancechart.pdf [Adobe Acrobat format]

The UK, which has remained truest to insurance principles, has an especially low death rate. The UK doesn’t have an equivalent to our Facility Association that keeps poor drivers on the road at the expense of good drivers. In the UK, drivers are most accountable because they face premiums the reflect the true costs that they foist on society.

Canada and the U.S., which have some jurisdictions that have strayed far from the strict accountability we see in the UK, do well but less so. The worst of the English common-law nations is New Zealand, which abandoned accountability for a fully public system..

Countries that do not have a common law system like that of the English-speaking nations tend to do poorly compared to us, as you can see in the chart. If we abandon our legal and economic traditions in auto insurance, and the accountability that accompanies them, we will need other accountability mechanisms.

I suggest that any public system that New Brunswick adopts build in iron-clad mechanisms to minimize the loss of accountability in a move to public insurance. For example, if the death rate increases, the minister in charge and the responsible deputy ministers should face penalties, perhaps they should be forced to resign, or have significant pay cuts. To show that New Brunswick is serious about minimizing the loss of life that typically accompanies public insurance, these penalties should be legislated, and be a litmus test of responsible government.

More is needed, too. Generally, when governments operate businesses, they are held to a lower standard than the private sector. For example, it is much easier to prosecute a CEO whose reckless policies lead to loss of life than a government minister, or government employees, who can claim to be merely following government policy. New Brunswick shouldn’t tolerate this double standard, particularly when we are dealing with public safety. I recommend that any public system of auto insurance hold government workers, and elected officials, to the same standard that would apply to a counterpart in the private-sector. By making the operators of a public system fully liable for policies that lead to loss of life, including criminally liability should it come to that, we are less likely to see politicians succumb to pressure from the electorate. If the elected officials and the bureaucracy do not become fully liable, then I fear that nothing will prevent carnage on New Brunswick’s roads.

As an additional measure to ensure accountability, the public insurer must be open and transparent. As you may be aware, the insurers in provinces with public insurance tend to be secretive, a secrecy often justified on grounds of commercial need. A public, non-profit monopoly insurer has no need to retain secrets on the basis of commercial need. This policy of secrecy is subject to abuse – in the hands of some politicians, it can aid a coverup. New Brunswick, if it adopts a public system, should set a precedent by having a fully accountable automobile insurer with a fully transparent system, in which all relevant information is available through Access to Information Laws, and all rate setting criteria and rate information, as well as detailed accident and fatality statistics, are posted on a publicly accessible Web site.

Safety issues aside, my foundation has concerns about the financial impact of going to a public insurance system. One factor is the high start-up costs. As you know, the Bob Rae government in Ontario was elected on a promise to bring in public auto insurance but then decided against it after discovering it was unaffordable. A smaller province would have even more difficulty. No province, in fact, has adopted a public system since the 1970s, when BC, Manitoba and Quebec went public. No other Canadian province has gone public in the last quarter of a century. No other country has done it since New Zealand in 1972. No U.S. state has public insurance. Outside Canada, no western jurisdiction that I’m aware of, in fact, is considering public insurance. The experiment of the 1970s simply did not catch on anywhere.

If there is any trend, it is toward a return to more accountable traditional insurance systems. Several U.S. states abandoned no-fault and went back to a tort system. The Saskatchewan Party, which came within two seats of forming a government in the recent elections, has vowed to move to a tort system. Quebec’s new Liberal government has been looking into it. BC’s Liberal government is considering opening up BC auto insurance market to the private sector. A recent national poll found that Canadians who have public insurance want to go back to private insurance. This is the same poll that found Canadians in provinces with private insurance want to switch to public insurance. Providing insurance is a thankless task, whether it is the government or the private sector that is providing it.

My foundation has another concern, as well. We are strong backers of a single payer, publicly funded health care system. Public auto insurance can potentially harm public medicare in two ways. One, the additional casualties will increase health care costs at a time that the health care system is under attack. This could require more funding, giving opponents of publicly funded healthcare a club to wield. At the same time, quite apart from the one-time costs of going public, the province would lose substantial tax revenues on an on-going basis from the loss of this industry, which is a substantial taxpayer. Because health care is by far the biggest provincial expense – 35% in New Brunswick, almost 40% in the other provinces, and growing fast in all provinces – enormous additional pressure will be put on our health care system. Across Canada, provinces are grappling with the difficult choice of whether to cut existing programs in order to save medicare. New Brunswick’s challenge will be all the more difficult if you try to rescue medicare while at the same time swallowing one of the province’s largest industries. For this reason I recommend that any public system not short-change taxpayers. The premiums charged by the public health insurance system should thus be sufficient to pay for the capital costs of start up, and sufficient to pay a dividend to the provincial purse equivalent to the taxes that the private industry would have been paying.

Those are my prepared remarks, Madam Chair and members of the Select Committee. If you have any questions, I will be pleased to answer them.

¹ Kovacs, Paul and Leadbetter, Darrell, “The Influence of the Social Pricing of Insurance on Road Safety in British Columbia.” Insurance Bureau of Canada. June 2003.

Lawrence Solomon

November 12, 2003

One of Canada’s lynchpin industries is at risk. If it goes, Canada’s economy and society will suffer lasting harm and Canadians, as individuals, will suffer mortal harm. I am speaking of the insurance industry, an inconvenient industry for those who are inconvenienced by the truth.

Take nuclear power manufacturers such as GE and Westinghouse. Insurers in Canada and around the world realized early on that nuclear reactors were too risky to insure – a nuclear meltdown or other serious accident could cause hundreds of billions of dollars in damages, quite apart from injuries and loss of life. The GEs and Westinghouses likewise didn’t want to put their own shareholders at risk by self-insuring: As nuclear manufacturers testified, they themselves feared that an accident could bankrupt them. To protect shareholders against the risks that the insurers identified, the nuclear industry successfully lobbied governments to exempt them from liability for the risks that they foist on innocent members of society. As a result, you and other Canadians have no protection in the event of a nuclear accident – check your homeowner’s policy and you’ll see that your government has taken away your rights to compensation in order to allow the nuclear industry to operate unaccountably.

Or take exporters, especially those providing goods to unsavoury projects such as logging Third World rain forests, or to unsavoury dictators such as Saddam Hussein. Private insurers balked at backing these risky ventures, except at sky-high rates that would accurately reflect the extreme risks involved. Exporters – unhappy with this verdict from the marketplace – lobbied governments to create a government insurer that would cover risky export loans, willy-nilly. The result – a federal crown corporation called Export Development Canada that happily backs bad loans, enabling environmentally destructive or ethically challenged projects to proceed without regard to fiscal prudence.

Rapacious industries and heinous dictators aren’t the only ones who lobby governments to evade the insurance industry. Members of the public, too, don’t want to accept the numbers that sit, in black and white and for all to see, on actuarial tables. “The numbers lie,” claim 20-year-old male drivers, who refuse to believe that they represent a greater risk on the road today than they will when they are 30 or 40. “This is age discrimination,” claim 75 and 80-year old seniors, who refuse to believe that they may not be as alert, or have the same reflexes, as when they were 50 or 60.

Politicians then turn their focus away from the numbers on the actuarial tables and onto the numbers at the voting booth. And, when it suits them, they turn on the insurance industry, which in Canada has few friends and many detractors.

Four provinces – British, Columbia, Saskatchewan, Manitoba and Quebec –turned to public automobile insurance in the past to keep premiums low for dangerous drivers. Today, more provinces are at risk. In New Brunswick this week, the Select Committee on Public Automobile Insurance will conclude its hearings. Its purpose is to decide whether the government should expropriate the entire private auto insurance business, or only part of it. Its mandate, incredibly, excludes any investigation that would compare the merits of public versus private auto insurance.

Movements are afoot in other provinces, too, to expropriate the private auto insurance market. This expropriation would be massive: Auto insurance represents more than half of the business of private insurers. And after auto insurance, another unaccountable industry, or another unaccountable group of Canadian citizens, will doubtless emerge to demand that it, too, be allowed to shuck its responsibilities. Private insurers now represent assets of some $66-billion, sales of some $21-billion, and employment of some 100,000. How much of that will remain in several year’s time is anyone’s guess.

Canada is the only country in the developed world that attacks the insurance industry. The last country to turn to public auto insurance –New Zealand in 1972 – has been regretting it ever since. Deaths soared, service declined. The automobile insurance system then endured one revision after another in an attempt to fix its problems. Just recently, it made another revision – after three decades of turmoil, the private sector is being allowed back in.

Some day, the Canadian provinces that went public will revert to an accountable, private system. One recent poll, in fact, shows that residents in provinces that have gone public want out – they want to switch back to a private system. That will be a great day for the great majority of Canadian citizens and Canadian corporations, who would otherwise continue to be subsidizing dangerous driving, and for the Canadian economy, which will then be able to recover some lost ground. That great day, however, will be bittersweet. The lives lost under public insurance, the people maimed, the livelihoods destroyed, will never be recovered.

Lawrence Solomon is executive director of Urban Renaissance Institute and Consumer Policy Institute, divisions of Energy Probe Research Foundation. E-mail: LawrenceSolomon@nextcity.com; Last in a series.

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Readers respond:

Letters to the Editor
National Post, November 24, 2003

Larry Solomon manages in his column (Killing the Industry That Saves Lives, Nov. 12) to make a misrepresentation of nuclear liability and its insurance coverage. All Canadians are covered comprehensively for damages from nuclear events by the Nuclear Liability Act. Far from “exempting them from liability,” the act requires all operators of nuclear facilities to be absolutely liable for damages arising from a nuclear incident. By doing so, Canadians are spared the necessity of having to go to court to show who was to blame for an accident; they need only demonstrate injury to person or damage to property.

Hence, the exclusion in insurance policies is essential to avoid double jeopardy. Insurers instead participate in a domestic insurance pool that provides coverage to all licensed nuclear installations under the terms of the Nuclear Liability Act. It needs to be emphasized that through the Act, Canadians receive greater assurance that their claims will be honoured expeditiously than would be possible under tort law.

For more than 40 years, nuclear power has been a safe and reliable source of electricity for the people of Canada.

Colin G. Hunt, director of research and publications, Canadian Nuclear Association.

The rights of Canadians to compensation following a nuclear accident are entrenched in the federal Nuclear Liability Act (1976). The act streamlines the claim process by channelling liability directly to the operator and removing the need to prove negligence.

The operator, in turn, is given a liability cap of $75-million. If this limit were ever reached (there have been no claims to date), the government is authorized to oversee the balance of claims.

Note that the industry’s liability coverage is provided by a consortium of the private insurance industry, and this is precisely why you won’t find “nuclear accident” coverage in your homeowner insurance: The insurance industry is particularly sensitive about indemnifying people twice.

One can debate the level of the liability cap, and such discussion is underway at the federal level. It is irresponsible, however, to report that no protection exists.

Furthermore, to suggest the government allows the nuclear industry, possibly the most regulated sector of the Canadian economy, to “operate unaccountably,” is absurd. The safety and environmental performance of nuclear generating plants are second to none, and a matter of public record.

Jeremy Whitlock, president, Canadian Nuclear Society and reactor physicist, Atomic Energy of Canada Ltd., Deep River, Ont.

Lawrence Solomon responds:
The Nuclear Liability Act does cover Canadians in the event of a nuclear accident, as the letter writers state. What they don’t state is that the act limits the total coverage available to all Canadians to $75-million. Since damages from a catastrophic accident, according to government bodies in Canada and the United States, could exceed $300-billion, the coverage Canadians would obtain amounts to one-quarter of one-tenth of 1% of their loss. Someone who loses a $200,000 home to a nuclear accident would, in other words, be entitled to the grand sum of $50 in compensation, and nothing else. Mr. Whitlock’s tricky language about the government being “authorized to oversee the balance of claims” notwithstanding, the government has no obligation whatsoever to pay Canadians anything else.

For this, we should be grateful, the nuclear industry tells us. We will be “spared the necessity of having to go to court” to collect the $50, and we will get the $50 more quickly than we otherwise might

CBZ-AM Radio (New Brunswick)
November 12, 2003

Gary Mittelholtz: (Host) New Brunswick auto insurance rates have jumped substantially in the last few years, of course, and that’s led to the government capping settlements on minor injuries and, now, holding hearings on public auto insurance. Those hearings make their final stop in Fredericton starting today. Lawrence Solomon will be making a presentation on behalf of insurers. He’s the managing director of the Energy Probe Research Foundation and a consumer columnist for The National Post. Mr. Solomon, good afternoon.

Larry Solomon: Good afternoon.

Mittelholtz: What do you think of public insurance?

Solomon: Well, I’ve looked at public insurance in the different jurisdiction around the world where it exists. It doesn’t exist in very many places. New Zealand is the one country that has a national public insurance scheme, and then, apart from that, it’s really just a few Canadian provinces. But in these jurisdictions, and in fact in all the jurisdictions that stray from traditional insurance premiums, the traditional insurance approach, the result inevitably is a much higher fatality rate. Typically, the fatality rate is between five and 10 per cent more when the insurance system strays from the traditional approach. In the case of New Zealand, it actually went up by 16 per cent.

Mittelholtz: Fatalities. So we’re talking about car accidents? Fatality rates in accidents?

Solomon: That’s right. It goes up for the very reason that people demand public insurance. They don’t like to be held accountable for the risks that they incur on society. So, the typical situation are young males. They don’t want to believe that when they are 20 years old they represent a greater risk to society than they will when they’re 25 or 30 or 35 years old, so they put pressure on the political system to make it easier for them to get into the car earlier, and for them to get insurance for souped-up cars at a lower cost. So, even though a 20-year-old might be able to get affordable insurance for, say, a typical used car that isn’t souped up, that’s not what they want. They want to get insurance for a souped-up car, and our system obliges them . . . In fact, even under private insurance in New Brunswick, the way our system works is that there’s a hidden tax on the premiums of good drivers, so good drivers are overcharged by government order, and what the government does with the excess revenue that they earn is they . . . that money goes into a pool, and from that pool high-risk drivers receive subsidies. So, in New Brunswick, the high-risk drivers are getting their insurance at about 45 per cent below the actual cost, an actual cost that represents the risks that they really incur on society.

Mittelholtz: But here in New Brunswick, you know, it’s not just young people, or even seniors. Rates have gone up for everybody, and in some cases for good drivers who have got a spotless record, they . . . all of a sudden they can’t afford to pay their insurance, they can’t afford to drive their car. There’s something wrong there.

Solomon: There definitely is something wrong. There’s something the worst-regulated [missing text] insurance systems in the world, whether it’s public or private. In the United States, for example, insurance is not at all controversial. In the United States there’s a lot of competition, there are a lot of different products. Consumers have choices. Rates are kept reasonable. In the most recent survey in the United States, 86 per cent of consumers, of drivers, are happy with their auto insurance system. The previous year, 96 per cent were happy. So, it’s just not a controversial issue in the United States where there is competition. And this involves small states and large states. Whether small or large, the insurance industry is just not a controversial issue because consumers have choices and there’s competition which keeps rates well . . . keeps rates down. That works well. Here in Canada, we have systems where good drivers are taxed so that bad drivers can be on the road. The extra . . . When bad drivers are on the road we get more collisions, including with good drivers, so then their rates go up even more. It’s just a vicious circle, and our regulators . . . our regulators set these rates and they approve these rates, and they have been doing a bad job. And, instead of moving in the direction of giving consumers fewer choices, we need a regulatory system that gives consumers more choices and encourages competition in order to keep rates down.

Mittelholtz: You know, I must say Mr. Solomon, I’m surprised . . . given your background as a consumer advocate, I’m very surprised to hear you speaking out, in effect, against public insurance and for private insurance here.

Solomon: Well, public insurance was at one point popular. It was [missing text] and that’s when New Zealand went for it. But, after that, jurisdictions around the world who had been thinking of it looked at what the results were and they realized that there were a lot of problems, so we haven’t seen any jurisdiction anywhere in the world in the last 30 years, the last quarter century, going for public insurance because it simply . . . it simply doesn’t deliver the results.

Mittelholtz: If the status quo isn’t really working satisfactorily, you don’t want to go to a public system, what has to be changed?

Solomon: We need better regulation. I think we need U.S.-style regulation because there you get more products for consumers and you get fewer deaths.

Mittelholtz: No one knows what the outcome will be here in New Brunswick but, if we do go to a public system here, what’s that going to mean in the long term, do you think?

Solomon: Well, I think it depends on the type of public system. And, in my presentation to the Weir Commission, if the government removes the accountability from the system by going from private to public, they should take measures to inject accountability back into the system, and one measure of injecting accountability back into the system is to have the elected officials and the civil servants who administer the new public insurance scheme be held accountable for their system. So, for example, if death rates go up (as is almost certain to occur), they should face penalties. They should be forced to resign. They should be legislated. The private section, if it acts negligently, can be criminally liable. The public sector is not criminally liable, ordinarily, because they say, “Well, we were just doing it because it was [missing text] that’s not our fault.” And you can say that as a public official. You cannot say that as a private official; it’s never a good enough excuse. I don’t think we need a double-standard. If our officials, elected officials, bring in a system knowing that it’s going to be, in effect, a death sentence for many New Brunswickers, they should have to be held accountable to at least the same standard that the private sector is held.

Mittelholtz: Pretty strong words there, “A death sentence for many New Brunswickers.” You really feel strongly about this. You believe that.

Solomon: Well, the evidence, from academic studies around the world, are incontrovertible. There are literally dozens of studies that show that more people die. It is a death sentence, and we’re talking about people’s lives here. And, if the government, for ideological purposes, wants to take risks with people’s lives, then it should . . . If it truly believes this, they should . . . they should put themselves . . . make themselves accountable.

Mittelholtz: All right. Lots to think about there. Mr. Solomon. Thank you very much.

Solomon: You’re welcome.

Talkback: Auto insurance, CBZ-AM, November 13, 2003

Gary Mittelholtz: Yesterday on the show we spoke with Lawrence Solomon. He’s a consumer columnist for The National Post and a director with Energy Probe in Toronto. He appeared before the New Brunswick legislature committee on public auto insurance and his message was that public auto insurance is a dead end and it’s dangerous. After that interview we got these calls to Talkback.

Caller: Hi Gary and Mainstreet. This is Larry Lack(?) in St. Andrews, and I listened to . . . I think his name is Lorne Solomon, the guy that is billed I guess as a consumer advocate, trying apparently to stop us from having public insurance in New Brunswick. And I couldn’t understand his analysis. There’s to me something very definitely missing from his . . . the way he presents this issue. It’s the same system that he says the U.S. consumers are very happy with and I don’t doubt that . . . I’m an American immigrant and I think a lot of people there do like the system. But essentially this is the same system with private insurers that we had here, and in fact we have a broader range of private insurance available to us in Canada than the U.S. does in the sense that there are a number of European companies that offer insurance here that I don’t think do business in the United States. So we have even more, in that sense, competition, the thing he says will help us. But that’s the system that, this same bunch of private insurers, as the one that raised rates astronomically high in the Maritimes and [missing text]. And it hasn’t just affected the high-risk drivers that he talked about, like the young guys with powerful souped up cars. It’s affected, I think, many more people of all ages who have clean or very safe driving records, people who are just now unable to in many cases afford to get insurance for their cars because their cars are more than 10 years old, for example, or for no apparent reasons whatsoever, rates have been raised to where people can’t afford insurance. So is this the system that Mr. Solomon wants us to continue with? Is that what he, you know, thinks as a consumer advocate that we should settle for in New Brunswick? I don’t understand it and I think he needs to explain why the system that he wants to have, you know, of private insurers and competition, should continue if it’s going to drive people . . . make it so that perfectly good drivers can’t afford insurance anymore. It doesn’t do that in the United States. Why is it doing it here? Thanks a lot, take care. Bye.

Caller: Hello, this is Stephen Boyce(?), I’m calling from Moncton. With regards to comments made by Mr. Solomon, consumer advocate, on the matter of auto insurance. I believe that Mr. Solomon, when quoting increased deaths on highways pertaining to insurance systems forgot to mention one important factor. I’m familiar with studies that show an increase in deaths occur immediately following the implementation of no-fault systems. This is the case, has been the case in studies that I’ve seen from the U.S., as well as studies that I’ve heard of from Quebec when no-fault was implemented there. The death rise toll on highways and roads slightly, the year after the implementation of no-fault. [Missing text] with the public insurance system because you can have a public insurance system that is basically a tort system, such as B.C. where no-fault doesn’t exist. So really this matter of a death rise should have no bearing whatsoever on the discussion of whether or not we should have a public insurance system. And I would agree that I wouldn’t want a public no-fault insurance system. But I would certainly encourage the implementation of a public insurance system which would maintain tort and maintain responsibility to drivers in the system. Thank you very much.