Ontario Auto Insurance: The Problem is Compulsion
PC Party Again Ignores Sound Economics, Embraces Price Controls

OSHAWA, July 9, 2003 - Early reports concerning the contents of Ontario's Progressive Conservative White Paper on auto insurance make it clear that the Progressive Conservative plan is entirely missing the mark. "Desperate for a bump in the polls, the Progressive Conservatives are again demonstrating a dangerous and foolish fixation with price controls", says Freedom Party leader Paul McKeever, "and, if the Progressive Conservatives get their way, drivers are going to be worse off than ever before".

The Real Problem: Insurance is Compulsary - Demand Side Broken

McKeever says the real problem is that insurers have a captive market: because all drivers must buy insurance, insurers can crank up rates without fearing a loss of customers. "The Peterson government interfered with demand side of the equation, turning it from a variable to a constant, and leaving the consumer relatively powerless to do anything about the premiums demanded from them. As a result, the price of insurance is determined almost entirely by the whims of insurers, as limited only by the hammer of government. Rather than fixing the demand side, Eves is proposing to do brain surgery with an ice pick, hacking benefits on the basis of an insurance industry wish list. If the PCs hope to fix this problem by hacking away insurance benefits, their 'Road Ahead', will eventually be a toll-road marked 'proceed at your own risk'."

Compulsary Insurance a Proven Failure: US Studies

"Twenty five years ago, it was thought that auto insurance would be more affordable if everyone were forced to buy it", explains McKeever. "However, recent American studies have demonstrated that that economic theory fails in practice". The American studies demonstrate two additional failures of insurance compulsion. McKeever explains that "the American studies show that a greater percentage of drivers buy insurance in non-compulsary states than in most compulsary states, and drivers pay less for insurance in non-compulsary states than in most compulsary states. In non-compulsary states, they even pay less to insure against the possibility that the driver of the other car is not insured. Ontario must learn from that data."

Freedom Party to Release Proposals, Consult Industy/Public

And, as they did with electricity, the PCs are once promising to resort to price controls when their benefit cuts fail to bring down rates. "Look, this is the 21st century for Pete's sake. Economics has come a long way in the last 30 years, but the Progressive Conservatives are still clinging to the mid-20th century practice of bludgeoning the market with price controls. The federal PCs rightly blasted Trudeau for using them. Yet, from health care, to electricity, to auto insurance to education, price controls remain the tool of choice on the provicial Progressive Conservative utility belt. 'Right wing' my aunt Fred."

"If auto insurance is going to be repaired, rather than worsened," says McKeever, "we must repair the demand side, and give greater flexibility on the supply side. Government must stop the practice of holding drivers in a headlock while they are looted by insurers. And they must give insurers greater flexibility to determine how they will distribute risk and associated costs. Let insurers face the prospect of driver who can drive away from an overpriced insurance policy, and it is inevitable that drivers and insurers will themselves establish a variety of solutions and options for coverage at prices drivers and insurers can both afford."

As it did in the preparation of its electricity policy, Freedom Party will soon release a set of auto-insurance reform proposals to the public and industry players. The result will form a supplement to Freedom Party's election platform, "The Right Direction".

"We are confident that both industry players and Ontario drivers will see the benefit of repairing the demand side, and allowing insurers and drivers to establish their own compromises in terms both of rates and benefits" says McKeever. The Progressive Conservatives' leftist 'Cut and Cap' approach is economically unsound and naive, and will only make matters worse."

Paul McKeever (who will be running in the riding of Oshawa, against Sid Ryan and Jerry Ouellette) is available to discuss this matter. You can contact him directly at ***-***-**** (cell).

Freedom Party is expected to run candidates in approximately half of Ontario's ridings in the coming election.

For further information: Paul McKeever, Leader, Freedom Party of Ontario.
Oshawa Office Telephone: 905-721-9772.
e-mail