Public Auto Insurance

A recent visit by some Regina friends reminded me how affordable public automobile insurance is. They insure two cars, one of which is newer than my car, for about the same rate as my one vehicle in Toronto.

My first car, which I registered with Saskatchewan Government Insurance (SGI), cost about $500 per year. My sense is that an under-25 male would have to pay several times that amount for private auto insurance.

So, why did Bob Rae’s government break its promise to implement this eminently sensible policy in Ontario? I have heard a few explanations. The dominant one, highlighted in Rae’s own memoirs, is that public auto insurance would have eliminated thousands of jobs in the insurance industry.

Public insurance is cheaper largely because it eliminates the duplication inherent in multiple private insurance companies. A more efficient, streamlined public system can indeed deliver the same amount of insurance with fewer employees. Taking over auto insurance might also scare away companies providing other types of insurance.

However, I recently stumbled upon an interesting fact on page 24 of the current issue of Maclean’s (dated April 19): “Halifax has the second-highest concentration per capita of insurance employees of any Canadian city (only Regina has more).” Apparently, the capital of the first province to enact public auto insurance leads the country in insurance employment.

A seemingly obvious explanation is that SGI is based in Regina. This insurance employment may appear high per capita because Regina is a small city. But that explanation alone does not wash.

Regina is not particularly small relative to its auto-insurance market. It has about 200,000 residents out of Saskatchewan’s million people. Similarly, the City of Toronto has about 20% of Ontario’s population (2.7 million out of 13.1 million).

The fact that Regina is Saskatchewan’s auto-insurance hub and Toronto is Ontario’s auto-insurance hub does not explain why the former has more insurance jobs per capita. (Economies of scale are not necessarily much different because Ontario’s larger market is divided between several insurance companies.) Indeed, if Toronto is the insurance centre for the whole country, one might expect it to have more insurance jobs per capita.

Regina’s leadership may reflect employment supported by SGI’s sale of home and commercial insurance in other provinces through SGI Canada. The Government of Saskatchewan also induced Crown Life to relocate from Toronto to Regina (by buying a majority of its shares). When Canada Life bought Crown Life, it kept the operation in Regina.

The lesson for Ontario seems to be that public auto insurance did not stop Saskatchewan from attracting other types of insurance business. Indeed, provincial policy succeeded in delivering both low rates for drivers and insurance jobs.


  • Those thousands of jobs eliminated by switch to public insurance in Ontario would have been replaced by other jobs within or without the insurance industry, but it would have taken time. The real problem was the Ontario was in a serious recession and the loss of all those jobs would have made things even worse.

  • Bob Rae’s explanation for keeping jobs is the same one used right now in the US for keeping their insane private health insurance. The main point here is that people are paying for those jobs through higher rates. Why not make it public, raise taxes a bit and put those people (that worked for the insurance industry) to work (through the governments raise taxes) doing public services rather than trying to make more profit for the private companies.

    The net effect would be that we pay the same amount (insurance + taxes), not loose any jobs, but get more public services.

    Plus there is the added incentive for the government to make sure there are less accidents (keeping road maintained, policing reckless driving not just speeding, etc) so that they don’t have to pay out so many claims

  • You have hit the nail on the head. There are surely better ways to create jobs than having consumers pay more for a bloated private insurance system.

  • I wonder if much of the private insurance in Ontario has head offices elsewhere, e.g. the US. One advantage of public provision of services is that jobs associated with them will be by definition local.

    In theory, if much of the Ontario auto insurance business is foreign-based (including not just head offices but, for instance, call centres) then making the system public could actually increase Ontario insurance jobs even if it required far fewer jobs in total to provide the service.

  • I’d always thought the reason Rae backed down was the prospect of a NAFTA challenge from American insurance companies. Is that not the case?

  • NAFTA came into force at the start of 1994, a couple of years after Rae pulled the pin on auto insurance. The original Canada-US Free Trade Agreement did not provide for investor-state challenges. However, Rae’s memoirs do indicate that he was concerned about potential legal battles (in Canadian courts) over expropriation.

  • hello, i’m in need of insurance, i’m a high risk driver, i have three tickets for one, driving without insurance, two, failure to stop, at stop sign, three, speeding, ten over!

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