When The Government Sells Car Insurance

Wouldn't it be sweet if your local congressman threatened to overthrow the government unless your car insurance bill came down?

This is exactly what's happening right now in Canada, where almost half the country buys auto coverage directly through the government and the rest have politicians willing to put the squeeze on private insurance companies.

Turn on the news in Ontario -- Canada's largest province, with 38.4 percent of the population -- and see for yourself: One party is threatening to topple government if the provincial premier doesn't demand that auto insurers cut their rates by 15 percent, about $220 U.S. on average.

"It's a hot-button issue," says Sean Graham, an executive of Kanetix, an online insurance shopping site in Canada. "They're threatening to call an election on it and overthrow the government based on auto insurance."

What may be even more surprising to Americans: This isn't the first time the price of car insurance has taken center stage in Canadian politics.

Government-run car insurance

As rates have jumped sharply in recent years, consumer groups and liberal politicians have repeatedly asked whether it wouldn't be cheaper and more equitable to remove private profits from the mix altogether. Four of Canada's 10 provinces have already done just this.

In British Columbia, Manitoba and Saskatchewan, there's no such thing as shopping for a car insurance company. Drivers enjoy one-stop shopping at their provincial government. (For example, here's the Saskatchewan Government Insurance site.) In Quebec, drivers get all their bodily injury coverage through the government; private insurers take care of property damage and the rest.

The public systems have been in place since the 1970s in three of the provinces and since 1945 in Saskatchewan, a midwestern province that's home to just 3 percent of the population.

Despite four decades of experience, it's just about impossible to say which setup best serves consumers. Because each province regulates insurance to its own liking -- as each state does in the United States -- what's being sold in each province differs. So, too, do the drivers being covered.

Andrea Horwath, leader of Ontario's left-leaning New Democratic Party, has argued that 20 percent to 30 percent profits by private auto insurance companies are untenable. She has demanded that Ontario make auto insurers slash their rates by 15 percent, or her party will trigger an election.