EY clarifies report that rekindled public-private auto insurance debate

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

On behalf of the Insurance Corporation of British Columbia (ICBC), EY managed its Canadian car insurance rate comparisons with a number of caveats and assumptions listed, EY Canada said in a statement Jan. 23. The restrictions explained that auto insurance products, benefit levels and access to benefits (including a range of tort to no-fault models) vary from province to province,

“Furthermore, the comparisons made in the data summary do not attempt to provide a complete representation of available tariff options or consumer costs,” EY said. “Although publicly referenced in discussions of provincial rate comparisons, that was not the intent of this comparison, nor has EY Canada made any conclusions, including the merits of public- and private-owned models.”

EY Canada’s clarification clearly displeased BC’s public insurer. Private insurers saw the explanation as a kind of justification.

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

ICBC also said the findings of EY Canada’s latest report are consistent with another EY report from 2017, ICBC Affordable and Effective Auto Insurance – A New Way Forward for British Columbia.

“[EY’s 2017 report] concluded that a care-based insurance model in British Columbia would offer a large premium reduction and generous benefits to customers,” ICBC said. Enhanced Care has saved customers an average of $490, or 38%, on their comprehensive auto insurance when they first renewed under the model, according to ICBC, and has “some of the best care and recovery services available in Canada.”

EY said it was commissioned by ICBC to conduct a comparison of publicly available public auto insurance rates across Canada for a specific set of customer profiles over the period September-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 linked 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 that 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 construed as a comment on the reform work being undertaken by ICBC,” the company said in its statement.

Overall, the report sometimes showed driver profiles with one or more drivers in provinces like BC, Saskatchewan and Manitoba paying lower rates. But also some private auto provinces like PEI, New Brunswick and Newfoundland and Labrador.

“While there are instances where the minimum cost of car insurance in Ontario is less than the maximum amount paid in a BC city, generally across all profiles, the report shows that BC car insurance is cheaper than comparable provincial cities with private insurance . ‘ said ICBC KU.

The report lists a variety of caveats, rating assumptions, and rate comparisons by city. For example, the assessment assumptions included personal use only and “It was assumed that all drivers would obtain their driver’s license on April 16^th Birthday and progress through tiered licensing programs with no delays/fast tracking.”

Under different assumptions, all drivers were equipped with snow tires and “first listed as a driver on an insurance policy when they turned 16 and were with the same insurer throughout”.

For all profiles, public motor vehicle regulation rates were provided directly by the state insurers. The tariffs for other provinces were collected “from a wide selection of online offers”.

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

The Insurance Brokers Association of Alberta (IBAA) said the report suggests 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 distorted picture of the auto insurance market in Alberta and presents misleading results as to the prices paid by drivers.”

In particular, IBAA was concerned that the online quotes were generated through an online quote tool with a licensed insurance broker. “Using a broker would typically provide additional and cheaper deals,” Haggis said.

The report also didn’t take the lowest bid, but an “average” of the higher prices, IBAA argued. “This is not a realistic or accurate representation of consumer purchasing habits,” Haggis said. “Insurance brokers don’t pick the ‘average’ of higher prices, they choose the best price for the best insurance.”

Eventually, the report rejected any discounts offered, further driving premiums higher, IBAA said. For example, bundling home and property insurance can entitle customers to discounts of up to 20% with many private insurers.

The Insurance Bureau of Canada (IBC) also criticized flawed methodology. “The methodology used in this report is problematic and raises serious questions about the validity of its findings,” IBC said in a Jan. 24 press release. “The report paints a skewed picture of what drivers across the country — and Alberta in particular — are paying for auto insurance.”

IBC acknowledged EY’s clarification and pointed out other methodological issues (in addition to those raised by IBAA). These included the significant difference in coverage between BC and Alberta auto insurance companies (ie Alberta allows drivers to claim additional compensation) and the fact that data from the General Insurance Statistical Agency (GISA) was not used. GISA is the statistical authority for nine participating insurance regulators in Canada for auto insurance premiums and claims data.

“Auto insurance systems are complex and more can be done to make them better for drivers,” IBC said. “But such discussions should be based on facts and not on reports with misleading results based on problematic methods like this that ultimately do more harm than good.”

Countered ICBC: “Any suggestion that ICBC is in any way misleading as to how the information is presented is untrue and unfounded, especially as the reports were prepared by a third party.”

Feature image from iStock.com/stockstudioX