Competition and Choice Benefits Consumers

Competition and Choice Benefits Consumers

CHOICE: In a competitive environment, consumers have options.

• In a competitive environment, consumers can shop around to find the best mix of price, product options and service delivery to meet their needs.
• Competition and choice in auto insurance provides powerful incentives for insurers to offer the lowest possible rates, strong service delivery and a wider range of policy options in order to meet the needs of their customers and compete for business.

ACCOUNTABILITY: Insurance companies are accountable to consumers in a competitive environment.

• The dynamic effect of competition and choice ensures that companies who do not provide quality service to their customers will soon be out of business. These dynamic effects do not exist in a monopoly.
• The financial reporting required from government-run insurers is inferior in level and detail to that required from private insurers, who must file detailed financial information, including provincially mandated statistical plans, with regulators and rating agencies. All of this information is publicly available and accessible to consumers, investors and government, which ensures greater access to information for, and accountability to, consumers than exist in government-run insurance systems.

CLAIMS SETTLEMENT: There are no conflicts of interest in the claims settlement process in a competitive environment.

• In a government-run auto insurance system there is a built-in conflict of interest for the government insurer in settling claims: The government insurer is always suing itself. The insurance company that is fighting a claim in court is also supporting the other side with benefits. As a result of this conflict of interest, claimants in BC have a (government) insurer that may not be motivated to get the best settlement attainable, but rather to settle the claim as quickly and cheaply as possible.

PRODUCT INNOVATION: Competition and choice spurs product innovation and has led to improved services and more product options for consumers.

• Competition and choice in auto insurance provides powerful incentives for insurers to develop products and services that meet the changing needs of consumers.
• Recent product and service innovations, such as first accident forgiveness, roadside assistance, combined home and auto coverage and payment plans, were first developed by competitive insurers. In some cases, these innovations were later adopted by ICBC, as it responded to competition in optional coverages.
• Competition has also led to the development of a wider range of policy options, including lower deductibles and replacement cost coverages.

COMPETITION AND CHOICE IN OTHER JURISDICTIONS: Auto insurance is delivered privately in almost every jurisdiction in the developed world – except for three of Canada’s provinces.

• Because of the benefits for consumers, government and the economy, the dominant delivery model for auto insurance internationally is competition and choice.
• In the more than 30 years since ICBC’s establishment, no other major auto insurance jurisdiction in the world has adopted a public monopoly delivery model. The last province to consider the implementation of a government-run system was New Brunswick in 2003. The idea was eventually dropped in favor of some of the most forward-thinking reforms. As a result, New Brunswickers have enjoyed a 31.3% decrease in average premiums (including savings in 2006 projected by the New Brunswick Insurance Board) since the reforms were implemented.

ROAD SAFETY: Competitive insurers have pioneered road safety initiatives that have contributed to a reduction in injuries and deaths on Canadian roads.

• Significant reforms to prevent accidents and save lives, such as graduated licensing, typically emerged first in private-sector provinces. Indeed, provinces that encourage competition among insurers, such as Ontario and Nova Scotia, are among the best in Canada when it comes to road safety records, as measured by the frequency of accidents, injuries and fatalities.