NAIC releases report on state average auto premiums

National Association of Insurance Commissioners

July 28/2003

The National Association of Insurance Commissioners today released the State Average Expenditures & Premiums for Personal Automobile Insurance in 2001. The report provides estimated averages for state annual premiums per insured vehicle for passenger automobile insurance for the years 1997-2001.

Data for the report was compiled from the National Association of Independent Insurers, the Insurance Services Office, the National Independent Statistical Service and the American Association of Insurance Services, as well as state insurance offices.

According to the report:

• In 2001, the nationwide average expenditure was $718, an increase of 4.57 percent from the previous year.

• High-premium states tend to be highly urban, with high wage and price levels and high traffic density, all of which contribute to higher costs. Thus, results from states that are more urban and populous cannot be directly compared to results from more rural states.

• Eighteen states and the District of Columbia had an average expenditure greater than the national average, while 32 states fell below the national average.

The report was compiled by the NAIC’s Statistical Information Task Force and can be purchased by calling the NAIC’s Publications Department at (816) 783-8300.

The NAIC is headquartered in Kansas City, Missouri, the National Association of Insurance Commissioners (NAIC) is a voluntary organization of the chief insurance regulatory officials of the 50 states, the District of Columbia and four U.S. territories. The association’s overriding objective is to assist state insurance regulators in protecting consumers and helping maintain the financial stability of the insurance industry by offering financial, actuarial, legal, computer, research, market conduct and economic expertise. Formed in 1871, it is the oldest association of state officials.

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Paul Martin’s letter to Bob Friesen, President of the canadian federation of agriculture

Paul Martin

July 23, 2003

I expect to be in a position to share some of my ideas about the future of Canada’s agriculture and agri-food industry and the issues affecting people in rural communities.

July 23, 2003

Mr. Bob Friesen

President

Canadian Federation of Agriculture

75 Albert Street, Suite 1101

Ottawa, Ontario K1P 5E7

Dear Bob,

Thank you very much for the input you have provided to me on the state of agriculture in Canada. I am listening carefully to what you and other farmers are telling me. Later I expect to be in a position to share some of my ideas about the future of Canada’s agriculture and agri-food industry and the issues affecting people in rural communities.

I regret that my travel schedule is heavily booked around the July 24/25 period. I am scheduled to be at the United Nations. I would have welcomed an opportunity to meet with your delegates at your semi-annual meeting in Charlottelown. In light of that and pending a more complete policy discussion, I wanted to provide you with some preliminary thoughts by means of this letter.

As a matter of basic positioning, two initial points need to be clear. First, I entirely reject the false notion harboured by some that farming is somehow an old fashioned carryover from the so called “old” economy. In my view, agriculture must be understood as a vital part of the “new” knowledge-based economy and a key sector on the nation’s agenda for innovation, investment and growth.

Secondly, a modern agriculture policy for the 21st century must have the success and well being of farmers at the centre of it. Such policy development is not something to be done “to” or “for” farmers, but “with” and “by” them. Governments must stand prepared to listen and to act in constructive partnerships with primary producers and others to build a stronger, less vulnerable and more profitable rural economy.

In this vein, groups such as the CFA certainly provided valuable insights that contributed greatly to the recent work of the Prime Minister’s Caucus Task Force on Future Opportunities in Farming chaired by Bob Speller. Like various governments and farm groups, I endorse this work and I am anxious to build upon the foundation that has been laid.

While a number of interim recommendations received quick implementation, more remains to be done to ensure that the Task Force’s vision for the Future of the agriculture and agri food industry – and the health and prosperity it implies – becomes a reality. I am making a commitment to you, and through you to Canada’s farmers, to work with our Government Caucus and with farm organizations to take all action reasonably possible to secure the industry’s future.

It is a sad reality that given unjustified tariffs on our grain shipments to the United States, the outrageous border closure against Canadian beef, adverse weather conditions in some areas and perhaps other risks, our agricultural policies and programs are likely to get a severe workout this year. At the bottom line, farmers need tools that truly work for them.

In my discussions with farmers, I am always reminded of the vast scope encompassed within Canada’s agriculture sector – different regions focus upon different commodities; risk factors are not all the same; the degree of diversification, value added and intensification varies dramatically from province to province; producer ages, attitudes and farm sizes cover, a broad range. All of this needs to be recognized, understood and embraced in policy development and program delivery.

Like you, I am concerned about the chronically low (and still declining) prices that too many farmers are facing in the global marketplace, and what this means for farmers’ standard of living and their need for off farm employment. The effects of low world prices are compounded by rising input costs and increased foreign competition from new low cost producers (some of whom used to be among our customers not long ago). I want to repeat my support for the efforts of Minister Vanclief and Canada’s trade negotiators to secure the elimination of direct export subsidies, major reductions in trade-distorting domestic support systems, and meaningful improvements in market access. While I would not pretend that these goals will be easy to achieve, their attainment would result in a more level and disciplined playing field to the benefit of the agricultural industry, and that would contribute to the health of the entire nation.

In addition, as our international negotiators go about their assignment, they need to work particularly hard at effectively defending the Canadian Wheat Board and Canada’s supply management systems. And given our recent terrible experience with BSE, they will also need to focus on more reliable open border disciplines to safeguard established trade flows.

In other policy areas, you will already know of my interest in more truly competitive conditions between and among railways in the movement of agricultural commodities; a growing ethanol industry; a robust agenda for agricultural research; and better tools to meet the development challenges of rural communities.

My objective is the transformation of Canada’s rural economy onto a stronger foundation. I have nothing but the greatest of respect for the food producers of this nation. They rank with the very best on earth. I would consider it an honour to have the opportunity to work with the CFA and with farmers, on a complete agenda for the Canadian agriculture and agri-food sector in the 21st century.

My best wishes for a successful semi-annual meeting.

Yours sincerely,

Honourable Paul Martin, P.C., M.P.

 

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Proposal for a directive of the European Parliament and of the Council

Commission of the European Communities

July 23, 2003
Amending Directive 1999/62/EC on the charging of heavy goods vehicles for the use of certain infrastructures.

Click here for .pdf file

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Supply crisis looms

Tex Enemark
National Post
June 20, 2003

The federal government’s last budget made a serious commitment to housing – a further $320-million in 2003 added to the $680-million in funding allocated in 2001 for subsidized housing. This is a billion dollars – big money in any league – to be matched by provincial contributions. But it will build only about 20,000 new rental units of the 150,000 needed to accommodate Canada’s economic growth, and even that will only happen over five years, and only for “poor” tenants.

What of the 90% of tenants who live in ordinary rental housing provided by the private sector, tenants too “rich” to qualify for subsidized housing and too poor to buy?

In large cities in particular, many tenants are trapped in rentals that are deteriorating prematurely and they frequently pay more than they should because of the discriminatory tax burden the federal government imposes on rental investors – taxes borne ultimately by tenants.

Most of the ills in the private rental housing market stem from one cause: Private investors cannot build new “market” rental housing because federal tax changes made in the early ’70s actively discriminate against rental housing investments, especially by small investors who provide most of Canada’s rental housing.

The most significant change in 1971 – other than the accelerated depreciation then allowed – was to no longer allow for the “rollover” of a rental investment upon sale.

Before 1972, there was no capital gains tax and building owners could postpone paying taxes due upon the sale of a residential property if they reinvested in a like property within a year. “Rollover” continues to apply to most other businesses, and to motels, hotels and family farms. It is the tax law for rental housing in the United States and most other countries.

“Rollover” simply reflects how rental investments grow, not by adding another floor but by selling something small and using the equity to build something larger. The liquidity provided by rollover is essential to an operating rental marketplace because every investor has to consider an exit strategy. The huge penalty of the capital gains tax – as high as 75% over the past 30 years – and the tax on capital cost allowance recapture, has made selling a rental building – as long as the investor was going to remain in the rental business – a bad investment.

Then there is the fundamental unfairness of applying the capital gains tax against properties held for many years, because much of the notional increase in value simply reflects inflation. Considering that we’ve had a 377% increase in inflation since 1972, few rental buildings have increased that much, outside of a few “hot markets.” Most building owners have lost capital after they pay the tax upon sale.

Compare the tax consequences of holding an apartment building for 20 years versus a common stock for a year. For the latter, the increase in value is likely due to something beyond inflation. The sale is made, the capital gains tax is paid, and the investor then searches for another undervalued or promising stock to invest in.

For the long-term investment in a rental, the sale triggers the tax, but where is the lower-priced rental in which to reinvest? It does not exist because all the properties tend to have about the same increase in value. Because Canada’s capital gains tax is not indexed for inflation, long-term investments are discouraged.

“Rollover” helped keep rental housing well maintained because vendor tended to do repairs before sale, and new owners would improve the property to improve rentability. With few sales now taking place, that reason for renovation and maintenance is lost, as seen in the state of many rental buildings.

Although a rental business should fit the criteria for being a “small” or “active” business, federal tax law treats residential rentals as though they were large businesses – with twice the income tax rate, and as though they were stocks or bonds, rather than operating businesses. Rental businesses are even discriminated against with respect to the GST.

Ultimately, the tenant and not the owner/investor, pays. A 1999 study of these extra federal taxes on rents compared a stream of income from a motel – which can take advantage of rollover, small business tax treatment, and so on – and apartments. It found that on an average Victoria, B.C.-area one-bedroom apartment renting for $608 per month, the extra tax – not the tax, but the extra tax – was $113 per month. Added to those tenant costs are higher rents because of tight markets and lower maintenance.

Study after study done by everybody except Ottawa demonstrates that federal tax laws specifically pick out rental housing from other similar investments for adverse tax treatment.

The tax rules discouragement of maintenance of older buildings also leads the tenant to ask, “Why should I look after my suite, if the landlord does not care about the building?”

More threatening, over the long term, both to tenant housing choice and to the shape of our cities, is the incentive caused by punishing taxation for investors to just get out of the rental business entirely when an alternative land use – commercial or condo development – presents itself. In a new condominium versus a comparable rental, an owner would pay at least $200 per month less than the tenant, or about $2,400 per year. At the end of 25 years, the tenant has paid shelter costs of $60,000 more than the owner, who by then has paid off the mortgage, lives rent free and has a very large tax-free capital gain upon sale.

That few are investing in the building of new “market” rental housing, despite historically low interest rates, is not news. But given current trends, within a very few years many tenants will be unable to find rental housing at all, and will be moving home with mom or doubling up.

One of a series; Tex Enemark is a Vancouver-based public policy consultant and a former B.C. deputy minister with an interest in housing issues.

Related articles:
Rent control’s wreckage
Homeless by decree
Homeless in paradise
Parasites in the walls
Widening the gap

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An urban coup

Lawrence Solomon
National Post
June 12, 2003

The great majority of Canadians – 70%, according to an Ipsos-Reid poll released earlier this week – favour NAFTA, Canada’s free trade pact with the United States and Mexico. Supporters of the major national political parties show even greater support: Tory voters come in at 75%, Liberal voters at 77%, Canadian Alliance voters at 79%.

Not surprisingly, all three of these federal parties, on this, the defining economic issue of the day, represent the great majority of their constituents. Canadians, and their federal parties, speak as one in strongly backing free trade.

The provinces, in contrast, don’t represent their citizens’ desire for free trade. Provinces threw spanners into the works in the 1980s and ’90s when the federal government negotiated free trade pacts with our southern neighbours, and the provinces are still throwing spanners today as the federal government tries to broaden free trade to include trade in services. Provinces are so hostile to free trade that they won’t even permit free trade among Canadians. The competition that free trade brings upsets the insular worlds of provincial politicians and weakens their power to distribute largesse to those they favour.

To protect their private fiefs, each provincial legislature has erected trade barriers to block Canadian businesses that try to come in from other provinces. The barriers cover financial services, they cover construction. They cover electricity, gas distribution, transportation, health, education and architecture. Most of all, they cover the resource industries. The provinces’ agricultural marketing boards, for example, eliminate competition in dairy products and eggs, poultry and other products, raising the cost of basic foodstuffs and hurting Canada’s poorest. No sector is too small, no interest too petty, to escape the notice of provincial protectionists. Quebec bans coloured margarine at the behest of its dairy industry forcing Unilever, which makes Fleischmann’s, Monarch, and Becel margarines, to maintain separate production runs and inventories at its Ontario plant for the margarine shipped to Quebec. The annual price-tag for Unilever alone – about $1-million – is passed on to Quebecers.

The provinces’ inward outlook, and their failure to speak for their citizens, survives in a globalizing world because of one factor: Rural resource ridings are grossly overrepresented in provincial legislatures. In Alberta, the residents in the rural riding of Dunvegan (population 24,202 and falling) rates a legislator; in Calgary and Edmonton, populous ridings exceed 40,000 or 50,000 residents and one riding exceeds 80,000. Yet fast-growing Edmonton is actually slated to lose a representative in order to artificially sustain the political power of Alberta backwaters. Four northern Alberta ridings more resemble a territory: This wilderness occupies 49% of the province’s land mass and supports just 3% of the population. Yet, like the tail that wags the dog, its votes in the provincial legislature, like those of other wilderness ridings, often save the day for protectionists.

The clash between the economic powerhouse that is Alberta’s urban economy and the economic stagnation in its rural resource towns creates “rural alienation,” in the words of the Alberta Electoral Boundaries Commission. To address rural alienation, the commission has decided to trash the principle of “one person, one vote” in favour of a more scientific “matrix”: a hodgepodge of factors – from the number of dependent children and seniors in a riding to its geographic distance from the provincial capital – each scored through a complex mechanism involving deviations from the mean. Through this effort at inclusion, the commission hopes to appease rural citizen’s alienation from Calgarians and Edmontonians. To help vent the major rural seething it forecasts for the future, as people continue to flock to Alberta’s cities, the commission recommends more draconian forms of appeasement.

In fact, appeasement never works: The more dependent people become, the more resentful they become. As seen in a study released by the Canada West Foundation earlier this week, rural Westerners have become more and more wards of the state, less and less able to stand on their own two feet. Rural Westerners, and rural people everywhere, would be best off if the rest of society, including well meaning urbanites, stopped coddling them. And that can only come by breaking the cycle of dependency between the disempowered resource workers and provincial politicians that support them from cradle to grave.

In an ideal world, the provincial level of government would be abolished to let free enterprise prosper. But because the abolition of provinces is not about to occur – provincial politicians control that decision – Canadians must do what’s next best: Weaken the power of provinces to undermine free trade. This weakening is inevitable, and will occur as soon as a provincial political party realigns itself to appeal to the urbanized majority: The 80% of the Canadian population that lives in urban areas and the 75% of Canada’s rural population – in the rural commuting lands adjacent to cities, in cottage country and in other rural playgrounds – that depends on urbanites.

Here is a revolutionary political plank for this new, free-market-focused urban party:

– One-person, one vote. After rural people count for no and no less than urbanites, many resource ridings, stripped of subsidies, will become progressively depopulated as rural workers move to municipalities that need their talents. Both cities and countryside will benefit from the exchange.

– Protection of provincial resources. Instead of privatizing their natural resources, provinces socialized them, leading to their destruction: Most of the logging in B.C.’s coastal forest occurs at a loss to extend the life of a few logging towns, most mining in recent decades has only occurred because of subsidies, most of the destruction of prairie wilderness came courtesy of subsidies that permit farming on marginal agricultural lands. Even the oil and gas industry – the only resource sector that still turns a profit – has been depleted by uneconomic exploitation that prematurely brought hydrocarbons into production.

– Protection of Canada’s wilderness. Because many remote farming, logging and mining operations will cease, our remaining wilderness will be protected from future uneconomic exploitation. And as resource towns become ghost towns, Canada will reclaim its lost wilderness.

– Protection of the farm belt around cities. Unlike the low-value, commodity farms on marginal lands that the government brought into production to produce export crops, the quality lands in the farm belts around cities are inherently economic: They are best equipped to supply local markets with high-quality, high-value fresh fruits and vegetables, fresh milk, and niche crops for the cities’ diverse communities. The farm belt around Toronto, despite the land already lost to uneconomic sprawl, produces 67% more farm produce than all of P.E.I.

Under this realignment the provinces will cease to dominate their cities. Instead, the cities will effectively be taking over their provinces, and running the rural areas as their territories, much as the federal government runs its three northern territories. In Alberta, the prosperous city region between Calgary and Edmonton – the only region in Canada more affluent than the United States – would become more prosperous still when relieved of the burden of supporting benighted resource towns. So, too, for Vancouver and the lower mainland in B.C. and Canada’s other city regions.

Our economy will be protected, our environment will be protected, our resources will be protected, and rural alienation – once it fails to extract concessions – will dissipate. The province as we now know it – an inefficient middleman that does little more than redistribute grants collected from city residents and the federal government – will end, too.

Last in a series; Lawrence Solomon is executive director of Urban Renaissance Institute, a division of Energy Probe Research Foundation. www.urban.probeinternational.org,

E-mail: LawrenceSolomon@nextcity.com.

Related articles:
Rural separatism
Alberta: Who needs it?
America’s 51st and 52nd states

Readers respond

Some months ago, the City of Toronto council passed a motion urging senior governments to strengthen the political rights of urban voters compared to their rural counterparts. They then made representations to the provincial re-districting commission to narrow variances between Ontario’s electoral district populations to plus or minus 5%.

The commission’s report acknowledged the representations of the city, but proceeded to leave the city’s 22-and-a-fraction electoral districts with an average of 13.4% more people per riding than for the whole country, and a whopping 31.7% more population than the 10 Northern Ontario ridings.

Going into the current redistribution, the 22 least-populated ridings in the national Parliament serve 1,155,122 people, the 22 MPs for the Toronto ridings serve 2,481,494 people.

Lawrence Solomon‘s two articles on a proposed urban party are the first, vital leadership among Toronto newspapers to remind indifferent provincial and federal politicians that one person one vote has immense acceptance with the unwashed electorate.

The beating up of urban voters in Ontario and across the country will continue indefinitely unless our voices, the National Post and others raise a lot more hell on this neglected issue.

Alan Heisey, Toronto.

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