INDEPTH: INSURANCE
Insurance at a Premium, Part 2
Transcript from The National, October 15, 2003
Insurance: it's not an option, not if you drive, and when rates go shooting up, it leads to a lot of outrage, pain, and suffering. We asked for your stories and questions about what's going on.
On the second part of our special big picture report to help guide us, we have two special guests. In Vancouver, there's Gordon Adair, a former executive director at British Columbia's public insurer, ICBC. Now he's an insurance consultant. In Calgary, we have Ryan Lee an associate professor at the University of Calgary who specializes in insurance.
YOUNG DRIVERS
We're going to get things rolling with one of the stories you sent us. It comes from a young driver facing a big hike. As Margo McDiarmid reports, it's forced him to reconsider some of the biggest decisions of his life.
Changing the license plate on his car has given Lorne Neudorf a whole new perspective on life as an Alberta driver.
"I never expected to be paying as much as I am right now. That is for sure," Neudorf says.
Neudorf is from Manitoba. He moved to Calgary to go to school. When he graduated and got a job, he had to switch his insurance from Manitoba's government-run system to Alberta's privatized one. So he started calling insurance agents.
"When I phoned these people, I would tell them what kind of car I had, and the first thing they would do is just kind of even whistle, just, you know, "whew, wow, you know, if we do provide insurance for you, this is going to be expensive," he says.
Neudorf has a clean driving record. In Manitoba, that lowers his insurance costs, but in Alberta at his age, he's considered high risk. It took him days to find insurance he could afford – 3,000 dollars a year, double his Manitoba rate.
"I just said, 'What? This is how much it costs to insure my car here? This is out of control.' And the thing that's the most bizarre is that I was having this discussion with one of these insurance agents and she told me, she said basically if we do decide to provide you with car insurance, we will advise you never to make a claim on that insurance, and I was just shocked. As a 21-year-old male driving what they consider to be a sports car, I felt that I was very heavily discriminated against because of my age and because of my sex. All right, well, here's a bike that I'm not going to be driving anymore. I can't afford to insure it in Alberta."
Neudorf is saving up to go to law school, so his hobby, this motorbike, is now a luxury. He's putting it away for now.
"With my car insurance going up by over 200 percent, the doubling of my bike insurance is just too much money. I can't afford it. I hear all the time in Alberta that privatization is the answer to everything. It gives you more choice and gives you a better price because there's competition, but all it gave me was a headache," he says.
The high price of driving is actually affecting Lorne Neudorf's plans for the future. He's thinking of leaving Alberta and going to university in a province where the cost of car insurance is cheaper.
"I'm realizing that as a student, I'm not going to be able to drive in Ontario or in Alberta, therefore, I'm leaning very heavily toward the law school in B.C. because of the public system there. This one single issue could directly impact my future as a lawyer here in Canada," he says.
In the next couple of months, Lorne Neudorf will have to decide whether or not it's worth it to stay in Alberta and continue to pay the price of being a young driver.
Peter Mansbridge: So what is it, age or a person's driving record that's more important? Ryan, how do you answer this in this particular case? You've got a guy with a perfect driving record at 21, yet he seems to be being penalized because of that age.
Ryan Lee (University of Calgary): Well, we see a lot of our students in the same situation. The statistics just show that younger male drivers, younger female drivers as well, but more younger male drivers have a higher probability of being involved in an auto accident.
Peter Mansbridge: So what are we saying here, that this is acceptable discrimination?
Ryan Lee: In provinces where we do accept age as a rating factor, we do use that in the pricing of premium, and I wouldn't necessarily call it discrimination as much as it's just a way to characterize the risks properly.
Peter Mansbridge: I'm sure he calls it discrimination. Gordon, why was he paying less in Manitoba under the public system than he is now paying in Alberta?
Gordon Adair (insurance consultant): In Manitoba, Saskatchewan, and British Columbia, they do charge young drivers less than the going rate, shall we say. They choose to subsidize the younger driver and charge the better driver more money in order to subsidize the younger driver. So in Alberta, that is not what the government has chosen to do, although there was an announcement today that they are looking at a different way of the setting rates, so there might be something on the horizon that may save a little money for this fellow if this goes through.
Peter Mansbridge: Right, one of a number of recommendations they're looking at, but it does sound more political, if you wish, under the public system, that they're looking at the broad picture?
Gordon Adair: It's a social policy, I guess, that says that we won't charge this group of people what they're actually causing in claims. If you thought about life insurance, what you would say is the 75-year-old and the 18-year-old should pay the same because neither of them have had that accident, which is dying. So when you relate that to auto insurance, people don't quite understand it. When you think of it in life insurance terms, everybody thinks it's obvious that the 75-year-old person should pay more. It's kind of the reverse here.
POSTAL CODE PROFILING
Peter Mansbridge: We have a question from a viewer in Toronto
Dimitri Belapolski (Toronto driver): When I moved in Toronto, three subway stops to our new house, my auto insurance rate went up 71 percent. My driving record is perfect, has been good for 20 years, but my insurance agent told me the increase was due to the high insurance claims within my new postal code. Now, that makes me ask the question whether this amounts to geographic profiling and whether it's a discrimination based on my location and my postal code.
Peter Mansbridge: This one's going to come as a surprise I'm sure to some people. Ryan, we're not talking moving province to province or even city to city. It could be street to street. Geographical profiling, does that go on?
Ryan Lee: Yes, it does. In certain provinces and when companies decide there is a marked difference between something as small as a postal code, we will see the insurance companies use the location of the insured as a potential way to - not discriminate, excuse me, but to characterize between these individuals.
Peter Mansbridge: Is this something new?
Ryan Lee: No, it's been going on for a while now. We do see it in a lot of places and you still see it in some of the public systems as well.
Peter Mansbridge: So is this, Gordon, something – yet another thing people should consider before moving within a city? Is this something they can call to check on, how their insurance rates could differ depending on the part of the city they may live in?
Gordon Adair: I think if you phone your broker and ask them about different areas of the city where there are more claims, there's no reason they wouldn't give you that information. We always had geographic profiling, it was just in larger groups. We had territories and provinces and now they're getting those little areas finer and finer. This would probably be more towards the collision and comprehensive part of your insurance for theft and that kind of thing, not so much for the third party cost of your premium.
Peter Mansbridge: How do you feel about using the word "discrimination" on issues like this, both the geographical and the age? Is that too harsh a word to use?
Gordon Adair: I think it is, because insurance, basically the idea is to group like people together and then charge them the premium that's appropriate to the risk that that group of people have, and so the insurance companies try to do that to the best extent they can. The idea being that that group should cover the costs of that group, and if you - as they do now in B.C., they have a group of the younger drivers and sort of let them off by saying, we won't charge you, therefore, that means some other group has to pay for the cost of claims of the young driver.
SENIOR INSURANCE
Peter Mansbridge: Let's move on once again, stand by, more questions for you in a moment. The rising cost of insurance had been particularly hard on people living on fixed incomes, seniors living on pensions, for example.
Here's Kas Roussy with a case in point.
For Wally and Lillian Robus, this is what it's all about, retreating to their cottage in Ontario's Muskoka region. A travelling salesman for years, 78-year-old Wally enjoys spending part of his retirement away from the hustle of his hometown of Toronto, but a jump in his car insurance is threatening his time here. Wally and Lillian have been coming here every summer for the last 40 years, but for all of it's beauty, it's isolated. It's a hike to get here and a hike to get around. The nearest grocery store is at least half an hour away, so a car is not a luxury, it's a necessity.
"I do lead a bit of an active life. Not all seniors are sitting on the rocking chair on the porch," Wally Robus says.
During a drive with Lillian in the winter of 2000, Wally skidded on black ice. The car was badly damaged, but the couple wasn't hurt. A few months later, a second accident. Wally hit a car in a parking lot. It wasn't long before his insurance company told him it was cancelling his policy. Wally would have to look elsewhere for car insurance.
"The best rate I could get at that point was just a little over - I think it was $5,000 a year. I had been paying 800 dollars a year. So all of a sudden my insurance went like that," he says.
It's a challenge on a fixed income.
"Can I afford it? Well, let's put it this way, it's a third of my pension at the moment," he says.
A second increase put his rate to almost $6,000 a year. Any higher and Wally might have to give up his car, and that would be devastating.
"Could I live without it? It would be a real blow. It deprives me of a great deal of my independence as a senior citizen," he says.
So Wally embarked on a passionate letter writing campaign contacting his local M.P.P., the premier and even the ombudsman to complain about the rate hike.
"I'm becoming more of a consumer advocate when I see how little that the governments of Ontario that we've had and possibly maybe will have just don't seem to get with it and do something about it," Robus says.
But until something is done about it, Wally knows he'll have to bite the bullet, pay up, and try to enjoy the changing landscape around him.
THE FAULT WITH NO FAULT
Peter Mansbridge: That couple lives in Ontario, which has a privately run system, but there are also problems for people living in provinces with government-run no-fault systems. With more on that, Costa Maragos, the host of Canada Now in Regina.
Laurie Terry's life changed forever at this street corner in Regina.
"My first reaction was just basically to go, 'not again, no,' you know," she says.
Eight years ago, her car stalled here and she was struck from behind. What does this represent to you, this stretch of road right here?
"It represents a total change in my life from an active person who was working and leading a normal life and, you know, having the kids... to a mom who can't play with her kids, to can't do her own housework, can't work," she says.
The pain from the accident persists, she says, and so does the battle with the insurance company.
"Right now I can feel it pulling in my low back and in the middle of my back into my hip…You don't have a life. You can't get a loan. You can't, you know, buy a car like normal people can do. All the things that everybody else has the right to do, your life is not yours. A government agency owns your life."
That government agency is Saskatchewan Government Insurance. S.G.I. introduced no-fault in 1995. The idea is to avoid lawsuits and keep costs down. Accident victims are treated and paid benefits with an eye to getting them back to work. The result, drivers in Saskatchewan enjoy some of the lowest car insurance rates in the country, but critics say the system works well until you get into an accident, and then the battle begins. You versus a huge insurance company, a company that has a monopoly in Saskatchewan with few people to answer to. Laurie Terry has a pile of paperwork to prove it.
For eight years, Terry has received about $800 dollars a month in benefits. Now S.G.I. has decided Terry's injuries are not accident related and they're cutting her off. The mother of two worries how she can pay for her painkillers and everything else.
"It probably means bankruptcy, losing our house. I'm worried about our kids. Probably cashing in what little I do have saved for them for school. Everything. My whole life. We were so frustrated with the system," she says.
Terry's not alone. She helped start a group opposing no-fault. There are now 4,000 members.
"I've lost all my hopes, my dreams, everything that I've worked for, I'm slowly losing it," she says.
Terry says Canadians should be suspicious of no-fault.
"I guess I would say, please, you know, Don't let no-fault come into other provinces. We've been through it, we know what it's all about. Your premiums might be lower, but at what cost? What cost to human lives?"
Terry's case may end up in court. She's hoping for more justice there than she's received from S.G.I., an irony given that no-fault was set up to avoid the legal system in the first place.
Peter Mansbridge: Different provinces, different systems, different problems. It is a patchwork and we want to spend a little time now to explain what's what and where. Gordon, let me start with you. Laurie's story is representative of a fair number of people who are very unhappy with the no-fault system. What's the basis of that unhappiness, do you think?
Gordon Adair: Well, under the no-fault system in Saskatchewan, basically S.G.I. has this ultimate power over you, and it's very difficult, if you disagree with them, to get either medical coverage or a lawyer. You just can't get a lawyer to help you because there isn't any money in the process. So as a result, you're under the thumb of the insurance corporations for the rest of your life, even though you were the innocent party in an accident, you had nothing to do with causing the accident, and for the rest of your life, you're living under doing what they tell you. If you don't tow the line, they'll cut off your coverage.
Peter Mansbridge: Some people call it a deal with the devil for low rates.
Gordon Adair: Well, and the rates are not actually that much lower. You can look at Saskatchewan; the costs in Saskatchewan of wages and other costs are lower. When you take these different things into consideration, I don't think that the difference in the premium is all that much, and not only that, you're transferring a lot of your costs to other parts of the economy. You're transferring it to your health care costs, you're transferring it to your welfare, you're transferring it to innocent parties' personal savings. So while it may appear on the surface that your costs are lower, it really isn't so.
Peter Mansbridge: Ryan, how would Laurie's case, for example, have been different if she had, in fact, been able to take her case to court?
Ryan Lee: Well, in the other alternative to no-fault, which would be the tort provinces like we have here in Alberta –
Peter Mansbridge: Tort provinces, what does that mean?
Ryan Lee: A tort province, which allows you the right to sue a third party that has injured you. In this case, Laurie would have been able to sue the party responsible for the damages. This would allow her to potentially keep on collecting if they found that the other person was responsible. However, we have to keep in mind that this process could have taken three to five years just to get a judgment.
Peter Mansbridge: Is this one of the reasons why the insurance companies at large are kind of keen on no-fault?
Ryan Lee: Well, no-fault should increase the monetary lost payments to individuals injured in accidents and it should also reduce the other costs associated with claims, specifically legal expenses in the accidents.
Peter Mansbridge: Where do you stand on this difference between how it could affect premiums as a result of the claims that could come? Do you agree with Gordon on that point?
Ryan Lee: In a tort province, we could have seen a much greater award given out to the victim in this case, but that would have increased our claims cost and then that would have increased premiums as well if we had many of these cases.
Peter Mansbridge: Do you see any reconsideration of the no-fault process taking place anywhere, Gordon?
Gordon Adair: Well, in the United States where there have been places that have had no-fault, there has been a changing back to the tort system, and that has happened in Colorado, I think, is the latest state that has gone back, and in Saskatchewan, they have just opened what they call a choice system, so you can sign something that says, "I would like to be covered under the tort type of approach", and if you're in an accident, then you would be covered similar to British Columbia. And I believe that Quebec is looking a little bit at backing off on some of the no-fault things they've done. However, on the other hand, in the Atlantic provinces and Ontario, they're increasing the no-fault content in their area by putting these caps on, and Alberta, of course, today has talked about caps, which is a type of no-fault.
Peter Mansbridge: So the patchwork is going to continue?
Gordon Adair: Right.
GOOD DRIVING
Peter Mansbridge: What is the answer to this question from Toni Deplosito in Toronto? What is being done to encourage good driving techniques? Let's focus on road safety so our premiums will go down.
Darrow MacIntyre has the story about a province coughing up the cash to do exactly that.
It may be one of the Canada's most beautiful cities, but when it comes to driving, Vancouver is also one of the country's most dangerous. Partly because of the steep hills and narrow bridges, partly because of the sheer volume of traffic, and partly because, ask anyone on the street, this place is filled with bad drivers.
In fact, B.C., particularly Vancouver, has one of the highest accident rates in Canada. Now, if you think that translates into higher insurance premiums, think again. British Columbians actually pay less for car insurance than most other Canadians. It's because the government-run insurance company here, I.C.B.C., does something no other Canadian insurance company does: every year, it spends millions of dollars, $60 million this year, trying to bring the accident numbers down.
John Pump is a key part of that effort. As an insurance adjuster for more than a decade, he saw firsthand the carnage road crashes cause. It's why his mission at I.C.B.C.'s Road Improvement Department is not just a job, it's personal. Last week, his office gave the city of North Vancouver more than $50,000 to build a new roundabout at a problem intersection.
"Our prime objective is to reduce crashes," he says. "What the round about does for the intersection as opposed to a signal is it slows everybody down and there's no chance of a head-on or a T-bone type collision with a left-turning vehicle. "
This is another project routinely funded by I.C.B.C.; replacing old traffic lights with newer, larger, high tech lights that are easier for drivers to see.
"They stand out a lot more than normal painted lines," Pump says.
I.C.B.C. also pays for high tech reflective strips in places where the road's shoulder is narrow. It installs video cameras at intersections to deter people from running yellow lights. And it builds left-turning lanes at high volume intersections.
I.C.B.C. says at the end of the day, all of this costs the company exactly nothing. For every dollar the company spends on road improvements, it expects to decrease payouts by three dollars. John Pump says so far, the return has actually been even better than that.
"The last evaluation that we did was in 2001: 31 sites were evaluated, and it came back that we had a return of 4.7 to one," Pump says.
But for Pump, road improvement isn't just about money. It's about safety and saving lives, by preventing accidents before they ever happen.
Peter Mansbridge: Making driving safer. With lower rates, where does the responsibility for that lie? Should governments be doing more? What about drivers and the insurance companies themselves? Let's turn back to our experts. Tell me, how much investment in to preventative measures is done by the insurance companies themselves? Gordon?
Gordon Adair: Well, in B.C., I say I.C.B.C. probably leads the crowd. They spend $60 or $70 million a year and have been doing that for several years. In addition in B.C., the government has made changes with regard to graduated licenses and new drivers to try to keep the new drivers driving better on the road, learning better as they get into the process. So as a result of I.C.B.C. being the insurance company, it's easier for them to realize the savings. Take another province like Alberta where they have 60 insurance companies; if an insurance company spends a dollar, it may not be their car that gets saved from that accident that they spend. So in B.C., it's a little easier to do it.
Peter Mansbridge: Ryan, what's your sense of the private companies? Are they investing much time, energy, and money in to preventative measures?
Ryan Lee: Well, I think there is a deterrent that Gord mentioned that for every dollar we would put in as one insurance company, we're not sure if that's going to help our drivers or not. So I think there's a little bit less incentive for an insurance company in a competitive environment to outlay a large sum of money to help with safety. Not saying we don't promote safety. Many insurance companies will, of course, provide discounts for years of accident-free driving.
ADVICE FOR THE PUBLIC
Peter Mansbridge: Now, gentlemen, we've spent the last two nights on this issue, partly because we've seen a lot of anger and frustration from our viewers and those who have been writing to us on this topic. When you look ahead, what's your advice to them? How can they best focus that anger to either change the system or better understand it? What would your advice to them be? Ryan, why don't we start with you.
Ryan Lee: Well, being the educator, I'm going to promote education. I think it's very important that the general public who buys insurance, who spends potentially up to 3,000 dollars a year for insurance coverage, knows what the product is they're buying and they shouldn't be afraid to ask questions. Your agents are there to answer questions, and if they can't answer them for you, find out who can within the company. It's important you know what you're getting in to when buying an insurance contract.
Peter Mansbridge: Gordon?
Gordon Adair: Well, it is true that you should shop around. And you should also, if you're in one of those categories that is an at-risk category, you shouldn't be out buying a big expensive muscle car that is going to be a flag to the insurance company to say this person may be a potential hazard. The other thing that should be done, of course, is in all areas of the country, the government has to be a lot stricter on bad driving. They've got to put in the red light cameras to a greater extent. They've got to increase the fines. We did have photo radar here. It's been taken out. I think it slowed the people down here. There's all those kind of things that need to get done.
^TOP
|
|
 |
 MENU |
|
|
| RELATED: |
|
|
| CBC STORIES: |
N.B. report calls for public insurance system (April 2, 2004)
Alberta freezes car insurance rates for 18 months (Nov. 4, 2003)
Klein ready to freeze auto insurance rates (Oct. 29, 2003)
Ontario freezes car insurance premiums (Oct. 23, 2003)
Overhaul N.S. car insurance industry: consumer advocate (June 5, 2003)
Yukon moves to drop insurance company (May 27, 2003)
N.S. auto insurance hikes justified: review board (May 15, 2003)
Province to freeze car insurance rates (May 5, 2003)
N.B. drivers face more insurance premium hikes (April 29, 2003)
Insurers deny making profits in Atlantic Canada (Feb. 4, 2003)
N.S. Drivers get insurance champion (Apr. 11, 2003)
Atlantic drivers face dramatic premium hike (Jan 7, 2002)
|
|
| EXTERNAL LINKS: |
|
|
| MORE: |
|
|
|
CBC does not endorse and is not responsible for the content of external sites. Links will open in new window.
