3.19.2013

Pointless, populist politics that help only the wealthiest.

The NDP have called for a 15% reduction in car insurance rates in Ontario. If her demand is not met, NDP leader Andrea Horwath says she will force an election. An expensive election to the tune of an estimated 92 million dollars.

This is nothing more than a populist move by a party that claims to stand up for the little guy. Yet, an across the board 15% reduction will benefit the weathiest people in the province the most. For example, those who drive large expensive cars or who own more than one vehicle. 

What will it do for those who have no car or those who rely on public transportation? Nothing. Reducing rates certainly won't help congestion and gridlock, which costs the Ontario economy more than six billion every year. (The June 2011 board of trade report, Reaching Top Speed, warns gridlock costs the economy $6 billion annually.)

Lowering premiums will mean additional vehicles on our already too crowded streets and more pressure on our aging infrastructure.

Claiming that they will reduce your bills, has always been, and will continue to be popular for political parties (who want to garner easy votes). One of the side effects of having a populist agenda is that these policies frequently have no effect or have unexpected side effects; like shifting wealth to the rich. 

This scheme by the NDP to cut car insurance rates falls into another category: pointless.

Higher deductibles mean lower rates.


Those who want a 15% cut on insurance rates can simply increase their deductible. They will pay less per month, but it isn't free. Along with more money in their pocket they will have taken on additional risk. It's a gamble - a gamble everyone is free to take, if they so choose.

A higher cost policy has a zero deductible. Increase the collision deductible to $1,000 and rates drop by about 14% to 21%. Increase comprehensive insurance to $1,000 and watch rates drop by 17% to 25%. Nowadays, the slightest collision at a low speed will easily cost you more than $1,000 in repairs, so having a higher deductible not only saves you money, but it makes sense.

If the NDP proposal was to force all policy holders to increase their deductibles by $1,000 in order to save drivers 15% on monthly fees, would support for this idea be the same? Or (more likely) would drivers feel it's nobody's business how much risk they want to take? Furthermore, I doubt the NDP will really want to take this to the polls considering that their party promised to nationalize the industry prior to taking power in 1990. Then they quickly changed gears and the shift never materialized. If Horwath really wants to tackle an issue, why not push the insurance industry to tackle the fraud that is driving rates up?

Those who choose to drive need to comparison shop and be informed about the insurance they are buying. The NDP plan sounds nice, but ultimately, it is pointless populist politics.

If you want to save 15% on your car insurance, you can. You'll just have to shop around and take some risk.

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