Canadian Study Examines Government Role in Auto Insurance

December 1, 2003

The Centre for Spatial Economic and Shift Central Inc. have released a study, commissioned by Insurance Bureau of Canada on behalf of brokers, agents and insurers in the Canadian Province of New Brunswick, that sheds new light on the debate around “Public vs. Private Auto Insurance.” The bulletin indicated that the findings should be “taken into account in further discussions.”

“A government-run auto insurance system in New Brunswick would have significant negative effects on the provincial economy and the government’s fiscal position,” according to the study. “The negative effects include a net loss to the real GDP of C$64 million (U.S.$49.26 million) per year and the loss of more than 800 jobs. In addition, the report suggests that the provincial government would be saddled with lower tax revenues, a drop in its budget balance of C$17 million (U.S. $13.08 million) on average, over the first decade and start-up expenditures in the first year of operation of C$102 million (U.S. $78.5 million).

Mario Thériault, CEO of Shift Central, told members of the Saint John Board of Trade that a government-run auto insurance system would result in short-term economic benefits realized in the start-up year due to government investments in real estate, equipment and overhead, and that the city in which the head office was situated would see a net increase of 232 jobs.

“This debate needs to be built on facts,” Mr. Thériault stated. “Any discussion around a Public system needs to take into account the significant number of jobs that will be lost across all communities in New Brunswick as well as the negative repercussions on the Provincial Government’s financial situation,” he added.

The study concluded that “half of the 833 jobs lost would be insurance related and the other half would be lost from other sectors of the economy. In addition, a government-run system would have a particularly harsh impact on rural New Brunswick. Under a government system small rural communities in New Brunswick would lose 61 percent of overall jobs. Outside the head office city, women would suffer more job losses than men since more than 73 percent of the people employed in the insurance industry in New Brunswick are women.”

Peter Johnson, President of the Insurance Brokers Association of New Brunswick (IBANB), indicated that, although the study addressed the provincial and regional economic impacts of government-run insurance, only the provincial findings were released today. “Early in the new year, as brokers, we will be sharing this information with every community in which we work and live,” he stated. The impact will be dramatic in some regions, Mr. Johnson continued. “One northern county in this province will see half of the more than 140 currently employed as insurance brokers, agents or staff, lose their jobs. That hurts, and these communities need to know the truth.”

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