FOR THE SAKE OF ARGUMENT

Russell A. Plumley says: “I’m fed up with talk about ‘the high cost of car insurance.’ It’s cheaper now—and I can prove it”

December 1 1967

FOR THE SAKE OF ARGUMENT

Russell A. Plumley says: “I’m fed up with talk about ‘the high cost of car insurance.’ It’s cheaper now—and I can prove it”

December 1 1967

FOR THE SAKE OF ARGUMENT

Russell A. Plumley says: “I’m fed up with talk about ‘the high cost of car insurance.’ It’s cheaper now—and I can prove it”

I SELL CAR INSURANCE for a living and I’m tired of being regarded as a gouger or a crook. I consider myself a public benefactor, ready to help any of my clients who become involved in an automobile smash-up. I’m also fed up to the teeth with hearing people complain about the high cost of car insurance. This is the No. I Big Lie now' being broadcast across Canada by uninformed people in both high and low places.

Having just completed a study covering the years 1946 to 1967 inclusive. I’m prepared to argue with absolute conviction and certainty that the cost of car insurance is cheaper now than it was 21 years ago.

The study incorporates statistics from a number of unimpeachable sources — General Motors of Canada. Canadian Underwriters Association, Ontario Department of Transport, and the Dominion Bureau of Statistics. Statistics have been part of my life for 21 years, but the idea for this particular study took shape at the beginning of 1967 when the fourth consecutive annual increase in the price of car insurance was announced, followed by the usual public outcry against the gouging tactics of the big insurance companies.

For the fact that the outcry is becoming louder, we can thank the New Democratic Party, especially (he Ontario branch which would like to import Saskatchewan’s plan under which you buy certain minimum coverage with your license — and then have to buy a separate policy to obtain the insurance you really need. It’s a neat way of disguising the fact that there are certain irreducible expenses in any insurance operation. But when the facts and figures are analyzed, even the most ardent government-insurance advocate will be forced to concede that a government plan would have raised the price of insurance to the same degree as private companies. In fact, the only qualm I have about my analysis is that the car industry and the insurance business will emerge as paragons of virtue. I know there are many areas for improvement, but when it comes to the price of the product, both enterprises can more than match other major goods and sources.

The facts can be explained in a few paragraphs.

In 1946 a new Chevrolet Fleetmaster two-door cost $1,459 in my home town of St. Catharines, Ont. This car was classified as A-A-4 by the Canadian Underwriters Associa-

tion and adequate insurance cost $45.50 for 12 months. This premium was based in part on the fact that in the preceding year in Ontario there were 13.458 reportable accidents. 598 people were killed and 9.804 injured, property damage amounted to $2.249.271 and there were 662.719 vehicles registered; the average weekly wage would equal the full price of the car in 38.4 weeks; and. as a final bit of information, the cost-of-living index (expressed in relation to the 1949 standard of 100) was only 77.5.

Similar figures were produced for each succeeding year, and while there were a few' "downs’’ along the way. the long-term trend was sharply upward. The 1967 figures came out like this: a new Chevrolet Bel Air. sixcylinder two-door now costs $3.000; it is classified as B3-B3-4 by the CUA. and a year's premium is $124: the premium is based partly on the knowledge that in the preceding year there were 139,781 reportable accidents. 1.596 people were killed and 65.210 injured, property damage has skyrocketed to $72.953.427 and there were 2.637,266 vehicles registered; the average weekly wage has risen to $109.27 and you would have to work 45.4 hours to earn the premium (or 2.5 hours less than two decades ago). The full price of the car can be earned in 27.5 weeks (nearly II weeks less than in 1946) and the cost-of-living has just about doubled to 146. (All figures as of January I, 1967.)

Now the final act is to express the 1967 statistics as a percentage of the 1946 figures to produce a relativity

index.

Price of car 205%

Insurance premium 272% Reportable accidents 1.038% Persons killed 266%

Persons injured 655%

Property damage 3.243% Vehicle registrations 413% Weekly wage 287%

Cost-of-living 188%

When the price of everything entering into the cost of a product goes up by leaps and bounds, and yet the price in relation to wages is actually less than it was 21 years ago, then you have discovered an industry that is remarkably efficient. In this case you have discovered two — the automotive industry and the insurance business. But instead of praise, we find (on the subject of insurance in particular) carping criticism, royal commissions, combines investigation, price-fixing charges, and threats by political / continued on pave 42

ARGUMENT continued from page 14

More people pay—so everyone benefits

parties to nationalize insurance. Such activities are monstrous, totally unwarranted and hypocritical in view of the facts.

My study is only for Ontario, but Ontario has more than a third of all motor vehicles in Canada, and I believe the figures are applicable, in greater or lesser degree depending on

traffic density, right across Canada.

A few more explanatory items will help in assessing the validity of some of the statistics. For instance, the insurance classification selected for the study represents a car that is used chiefly for pleasure, including driving to work less than 10 miles one way. where there are no drivers under 25

years of age and there have been no claims in the previous three years. More people fit into this category than in any other, making it the best one for statistical purposes. I could have used a Class A3 driver (low mileage, not driving to work) which would have produced an even more favorable Relativity Index, but that might seem to be stacking the results in favor of the insurance companies. Incidentally, the same insurance classification applies not only to the Bel

Air 6 but also to GM’s Biscayne. Chevelle and Corvair, to Ford’s Fairlane, Fairlane 500, Falcon Futura and Comet, to Chrysler’s comparable cars of the Dodge and Plymouth lines, to American Motors’ Rebel and Rogue, as well as to numerous imported cars in a similar price range.

Insurance coverage includes $100,-

000 inclusive third-party liability, $1,000 medical payments, $100 deductible collision and $25 deductible comprehensive. (“Comprehensive” is a term dating from 1952, so I have used the nearest equivalent in previous years, consisting of fire, theft, miscellaneous and plate glass.) The coverage chosen is a fair composite average, but personally I would pay a bit more to get higher liability limits and then use the premium-reducing device of $250 deductible collision to save 45 percent of the cost of this item.

How is it possible for the cost of a typical automobile-insurance policy to go up only 272 percent when the number of accidents is up 1,038 percent and property damage is up 3,243 percent? One answer is the increase in registrations of 413 percent; that is. there are four times as many people making their reluctant contributions to the “annual highway slaughter and wreckage fund.”

A second answer is that a large chunk of the load has been shifted to the drivers who, predictably, cause the largest proportion of accidents — the young drivers. In reply to my request, the Ontario Department of Transport came up with the news that, as of January 9. 1967, there were 2,821,648 drivers in the Province of Ontario; only 18.7 per cent of them were under 25 years of age. but they were involved in 34 percent of the fatalities that occurred in 1966 and 30.4 percent of all smash-ups.

I know your son is a careful driver, but insurance is the business of spreading risk and it requires a large group of contributors to make any insurance plan work. Since we don’t know who is going to have the collisions, we charge everybody a fair share.

How have the rates changed where young drivers are concerned? Well, instead of $124, the cost would be $146 if you have a teenage daughter as a third driver. It would jump to $218 if a teenage son drives the family car “occasionally.” But if an 18year-old boy with a three-year accident-free record owned a brand-new car, or was the principal driver of a car registered in someone else’s name, the cost would be $454. Even this high premium is only 998 percent of the 1946 rate, so it still compares favorably with the accident record.

Since the record of the insurance business is so exemplary, why are we looked upon as such blackguards? There is a widespread feeling within the insurance business that our public relations have been less than effective.

1 don't agree with those who say that our efforts in keeping the public informed have been ineffective, but I have to agree that whatever has been done has not convinced the public that the price of insurance is fair and reasonable, and that the companies which sell insurance are honorable corporate citizens. I hope my Relativity Index will provide some of the ammunition to refute the critics. ★