EY clarifies report that rekindled public-private auto insurance debate

EY Canada has issued a clarification to a report it conducted that B.C.’s public auto insurer says show the province’s auto insurance rates are among the lowest in Canada.

Commissioned by the Insurance Corporation of British Columbia (ICBC), EY conducted its Canadian Private Passenger Vehicle Insurance Rate Comparisons with a set of listed limitations and assumptions, EY Canada said in a statement on Jan. 23. The limitations explained that auto insurance products, benefits levels and access to benefits (including a range of tort to no-fault models) vary from province to province.

“Further, the comparisons made in the data summary do not attempt to provide a full representation of the rate options available or what consumers are paying,” EY said. “While it has been publicly referenced in discussions on provincial rate comparisons, it was not the intent of this comparison nor did EY Canada draw any conclusions, including about the merits of publicly owned vs. privately owned models.”

EY Canada’s clarification clearly displeased B.C.’s public insurer. Private insurers saw the explanation as somewhat of a vindication.

“[We are] disappointed with EY Canada’s recent statement regarding the merits of public and private insurance models,” ICBC said in a statement to Canadian Underwriter. “The data in the report clearly shows that among 27 customer profiles covering a broad range of drivers, the cost of auto insurance is generally lower in British Columbia, Saskatchewan and Manitoba, which all have public care-based insurance models, compared to jurisdictions with private insurance models.”

ICBC also said EY Canada’s latest report findings align with those of another 2017 EY report, ICBC Affordable and effective auto insurance – A new road forward for British Columbia. 

“[EY’s 2017 report] concluded that a care-based insurance model in British Columbia would provide a large premium reduction and generous benefits for customers,” ICBC said. Enhanced Care has saved customers an average of $490 or 28% on their full coverage auto insurance when renewing for the first time under the model and “some of the best care and recovery benefits available in Canada,” according to ICBC.

EY said it was engaged by ICBC to conduct a comparison of publicly available public auto insurance rates across Canada for a specified set of customer profiles over the period from September to October 2022.

ICBC said the report, which was also supported by public auto insurers in Manitoba and Saskatchewan, looked at 30 different driver profiles and compared how much their auto insurance would cost in nine provinces. ICBC connected the introduction of its no-fault style Enhanced Care auto insurance model to the lower rates in the report. According to ICBC, EY’s report found provinces with publicly owned care-based models were more affordable than provinces with private insurance models.

EY felt the need to explain. “This statement is intended to clarify EY’s data summary and its limited scope as noted above, and should not be taken as a comment on reform work undertaken by ICBC,” the firm said in their statement.

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Broadly speaking, the report did sometimes show single- or multiple-operator driver profiles in provinces such as B.C., Saskatchewan and Manitoba paid lower rates. But so did some private auto provinces such as P.E.I., New Brunswick and Newfoundland and Labrador.

“While there are instances where the minimum cost for auto insurance in Ontario is less than the maximum amount paid in a B.C. city, generally across all profiles, the report shows auto insurance is more affordable in B.C. than comparable cities in provinces with private insurance,” ICBC told CU.

The report listed a variety of limitations, rating assumptions and rate comparison by cities. For example, rating assumptions included only personal use and “all drivers were assumed to obtain their licence on their 16th birthday and progress through graduated license programs without delays/fast tracking.”

Among other assumptions, all drivers had winter tires equipped and “to first be listed as a driver on an insurance policy when they turned 16, and have been with the same insurer for the entire duration.”

For all profiles, rates for public auto regimes were provided directly by the government insurers. Rates for other provinces were collected “from a broad sample of quotes obtained online.”

Private auto insurers did not share the same conclusions as ICBC, based on the assumptions and limitations of the report.

The Insurance Brokers Association of Alberta (IBAA) said the report suggested Alberta drivers pay the highest premiums in the country. IBAA president Barry Haggis said the report “should be read with a healthy dose of skepticism. We have serious concerns that the methodology used paints a skewed picture of Alberta’s auto insurance market and presents misleading findings as to the prices drivers are paying.”

In particular, IBAA was concerned the online quotes were generated through an online quoting tool with a licensed insurance broker. “Using a broker would typically yield additional and more affordable quotes,” Haggis said.

The report also did not take the lowest quote but took an ‘average’ of higher prices, IBAA argued. “This is not a realistic or accurate representation of consumer purchasing habits,” Haggis said. “Insurance brokers do not select the ‘average’ of the higher prices, but rather the best price for the best insurance.”

Finally, the report declined all discounts offered, further driving premiums higher, IBAA said. For example, bundling home and property insurance may entitle customers up to a 20% discount from many private insurers.

Insurance Bureau of Canada (IBC) also criticized what it says was flawed methodology. “The methodology used in this report is problematic, raising serious questions about the validity of its findings,” IBC said in a Jan. 24 release. “The report presents a skewed picture of what drivers pay for auto insurance across the country — and in Alberta, specifically.”

IBC recognized EY’s clarification and pointed to other methodology issues (in addition to ones raised by IBAA). Among them was the significant differences in coverage levels between B.C. and Alberta auto insurance (i.e. in Alberta, drivers can sue for additional recovery benefits) and the fact that General Insurance Statistical Agency (GISA) data was not used. GISA is the statistical agency for nine participating insurance regulatory authorities in Canada with respect to auto insurance premium and claims data.

“Auto insurance systems are complex, and more can be done to improve them for drivers,” IBC said. “But, such discussions should be based on facts rather than reports with misleading findings based on problematic methodology such as this one, which ultimately does more harm than good.”

Countered ICBC: “Any suggestion ICBC is somehow being misleading with how the information is presented is untrue and unfounded, particularly since the reports were carried out by a third party.”

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