24 ~ Friday, February 19, 1993 - North Shore News

7 ereeral

Public insurers set |

& MU

wt ners

up to operate on
break-even basi

ANY INCREASE in auto
insurance premiums sparks
a considerable number of
editorials and letters to
B.C.’s newspapers.

Some writers, especially those
who have rot had claims, say the
fact their rates have been steadily
going up over the years is proof
that public auto’ insurance does
not work, and they conclude with
a call for the return of private in-
surance.

There is, however, evidence that
suggests private insurance com-
panies would have an exceedingly
difficult time in delivering lower
premiums.

‘The reason for this is found in
some of the fundamental dif-
ferences between private and
public auto insurers.

The first difference is profit
motive.

Private insurers are owned by
shareholders who have invested
money with the expectation of a
return’ on that investment. That
return, of course, comes by way
of profits — the excess of income
over expenses.

. Public insurers are set up to
operate on a break-even basis.

_ Another difference has to do
‘with operating efficiency. Many
people automatically think that
anything ‘‘run by the govern-
ment’? is inefficient, whereas
private companies are kept sharp
by competition.

One statistic that compares the
relative efficiencies of private and

Ken
Hardie

AUTOTOPIC

public auto insurers is called the
“expense ratio,’ which is the per-
centage of total income an insurer
needs to pay administration costs.

The average private insurance
company needs between 26¢ and
30¢ of every dollar for these costs.
sa ICBC, that amount is about

¢,

In addition to premiums, every
auto insurer generates income by
investing funds set aside to pay
claims.

ICBC uses its investment in-
come to pay administration costs
— motorist’s premiums are used
only to settle claims. Private in-
surers can, and do, use their in-
vestment income for purposes
other than to lower premiums for
their customers.

These factors indicate that if
private insurance companies at-
tempted to duplicate ICBC’s
coverages and services to B.C.
motorists, they would have to
charge, On average, an extra $200
or more per policy than we are
paying now,

In addition, there is evidence
that motorists being served by
private insurance in other areas
have their own complaints about
rates and other issues.

We will have some examples
next week. 4

eading,

© 190-horsepower double-overhead

cam VTEC engine

¢ 5-speed manual transmission

© Gas-pressurized shock absorbers

© Fronec and rear stabilizer bars

® Variable-assist power rack-and-pinion steering
# 4-wheel double wishbone suspension design

© Powe

ssisted 4-wheel dise brakes

® Anti-lock braking system (ABS)
© P205/55R15 Michelin XG'T V4 Radial tires

¢ Allay wheels
¢ Front chin spoiler
© Rear spoiler

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