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 oneÂ vehicle in Toronto.
MyÂ first car, whichÂ 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 Raeâ€™s government break its promise to implement this eminently sensible policy in Ontario? I have heard a few explanations. The dominant one, highlighted in Raeâ€™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 Macleanâ€™s (dated April 19): â€œHalifax has the second-highest concentration per capita of insurance employees of any Canadian city (only Regina has more).â€ 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 Saskatchewanâ€™s million people. Similarly, the City of Toronto has about 20% of Ontarioâ€™s population (2.7 million out of 13.1 million).
The fact that Regina is Saskatchewanâ€™s auto-insurance hub and Toronto is Ontarioâ€™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 Ontarioâ€™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.
Reginaâ€™s leadership may reflect employment supported by SGIâ€™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.