SAAQ PROPOSAL FOR A SUSTAINABLE AND EQUITABLE PLAN –
“lies, damn lies … and statistics”
By Rob Harris
There’s an age-old argument when it comes to motorcycle insurance in Canada – Is it better to have a government run system or is it something that’s best left to the private sector to provide?
Anyone who’s been hit by any of the private insurer’s so-called ‘blacklists’ will probably be erring toward the idea of government run systems, but if you happen to be living in Quebec, the latest proposal by the province’s auto insurer body (the SAAQ, otherwise known as the Société de l’assurance automobile du Québec) to increase revenues to combat a huge looming deficit, may have you thinking again.
What I’m going to do in this Rant is go over the points raised in the proposal and add my counter-arguments. There’s some figure crunching that goes on so be prepared to have your brain at full operational temperature, or failing that, skim through to the conclusions and take my word for it (which would appear to be better than the SAAQ’s)
WHAT IS THE SAAQ?
Back in 1978, the Quebec government introduced a public auto insurance plan that would pay out to anyone injured as a result of a motor vehicle accident, regardless of fault and even if the accident occurred anywhere else in the world … or indeed whether or not they actually pay into the fund.
Although all registered vehicle operators pay into the fund (with the payment split between the licence fee and the vehicle registration fee), pedestrians, cyclists, skateboarders, rollerbladers, etc, do not pay into it but are all still eligible to claim from it.
The plan covers claimants for loss of earnings, compensation for a diminished quality of life and contributions to any required rehabilitation programs. In 1990, the plan evolved into the SAAQ and that organization is in place today.
A LACK OF FUNDING
The basis for the SAAQ’s proposal is because of a current fiscal deficit in the plan – amounting to $448 million in 2004 alone. This deficit is blamed on insurance premiums being unchanged in the last 20 years – though they neglect to mention that motorcycle premiums actually saw a 40% increase in 1988.
Another cited factor is that although payouts have been index-linked over that period, premiums have not, and so have risen accordingly – though we are not told why this wasn’t fixed earlier. They also fail to mention that previous governments thought it a good idea to raid the SAAQ coffers to the tune of $2.4 billion (yes, that’s a ‘b’ for billion) to help the sagging general coffers!
Despite all this, the SAAQ managed to keep out of a deficit until the year 2000 – when the stock market took a dive – and thus resulted in substantial losses of return on the SAAQ fund investments.
As a result of these shortfalls, the Quebec government has given the SAAQ until the year 2015 to restore financial health to its funding and eliminate any deficit within 15 years. There’s also more lovely little charts in the SAAQ’s report that shows that unless the current funding changes, by the year 2018 they’ll be $15 billion in the red (although no information is given as to how they’ve determined this projection).
But of course, there’s no mention of any mismanagement of funds either, or the fact that if the government would actually pay back what they took out (plus interest of course), the current deficit would be wiped out in one fell swoop. No, what the SAAQ proposes is that we go back to the fund contributors (i.e. vehicle owners) and demand that they “pay their fair share”.
Well, unless you ride a motorcycle, then your fair share seems to be somewhat more than everyone elses. But more on that soon …
WE’RE ALL EQUAL – ALTHOUGH SOME MORE SO THAN OTHERS
In their proposal, the SAAQ goes to great lengths to show that (currently) Quebec has the cheapest auto-insurance rates in the country – although how they defined this is questionable and lacks any supporting documentation.
What they do provide is a lovely chart comparing the motorcycle premiums paid for bodily injury coverage in Quebec to all the other provinces in Canada. And indeed, Quebec does come out the lowest … out of, er, five provinces – the remaining eight provinces and territories being conspicuously absent.
Hmhh, I wonder why? Maybe they simply don’t fit with the SAAQ’s hoped-for conclusions?
As for just who are the worst offenders when it comes to not paying their fair share, the SAAQ blames all the vehicle groups, though they set the stage early by stating that the shortfall is “even more pronounced for motorcycles than for passenger vehicles”.
So now we have ‘proof’ that motorcyclists are currently getting an unbelievably good deal, I wonder what’s coming next?
“FAIR, REASONABLE AND EQUITABLE”
Okay, so just how does the SAAQ propose to be fair, reasonable and equitable? Well, for starters they want to keep the no-fault program (after all it is the cheapest in the country … well, out of five provinces at least), with an equal cost sharing amongst vehicles.
They even give a motorcycle:car accident as an example in the proposal:
“If an accident involving a passenger vehicle and a motorcycle causes injuries to both drivers resulting in respective costs of $5,000 (vehicle driver) and $15,000 (motorcyclist), $10,000 of the costs are allocated to the passenger vehicle category and $10,000 of the costs are allocated to the motorcycle category. These costs then serve to establish the applicable insurance contributions for these categories of vehicles.”
That’s very good of you Mr. SAAQ, but you’re ignoring the fact that approximately 70% of motorcycle:car accidents are attributed to the fault of the car driver. Or is it the job of the SAAQ to penalize based on vulnerability on the road, not on who’s erred and caused the carnage in the first place?
Hmhh, I wonder how much pedestrians and cyclists would be charged if they had to pay their ‘share’? Maybe Quebecers should all opt to drive Hummers and keep the costs down that way?
PAYING YOUR SHARE
Under the heading “Target equity among different categories of contributors” is the following:
“The SAAQ aims for equity between the categories of contributors. The equity principle supposes that the insurance contributions paid per category of contributor are sufficient to cover the cost of the compensation benefits attributed to the category.
The insurance contribution payable by a contributor is equitable if it supports his fair share of all compensation costs. To do that, insurance practice requires classifying insured parties according to the main characteristics of each.”
What they’re saying here is that each category of vehicle should pay for its share of costs incurred to the system. The categories are split by licence classification, those being:
Mopeds and Scooters
Okay, but how do they actually determine how those costs are attributed?
Well, they’ve already established that if a bike and car get into an accident, the costing is split 50:50. Now what about the revenues? According the SAAQ projections (which I still maintain are dubious), for motorcycles, in 2006 the cost to the system will be $144 million, with revenues of just $35 million, giving a projected shortfall of $109 million.
According to the SAAQ “… motorcycles represent the category of vehicles for which the shortfall is greatest. Motorcycle owners currently assume less than 25% of the costs that are attributed to them.”
Oh dear, when you realize that passenger vehicles have a 63% assumption of costs, it’s not looking too good for motorcycles.
Well, there’s one big oversight here – revenue.
Unlike for passenger vehicles, the SAAQ calculates motorcycle revenue based on the proportion paid on the vehicle registration alone and not on the proportion paid on the driver’s licence (you have to pay in at both ends in Quebec). No, that is given 100% towards offsetting the cost of passenger vehicles – whether or not that licence has a motorcycle class stamped on it or not.
If we do the math (using the SAAQ’s own figures for the number of licence holders in Quebec with motorcycle classification, and their own 50:50 split between car and motorcycle), we get a whopping $25.3 million in revenue from the licence fee that should be added to motorcycles (and taken away from passenger vehicles to boot).
Motorcycle owners actually assume 42% of their attributed costs (not “less than 25%” as the SAAQ claim), while passenger vehicle owners would now only be assuming 60% of their attributed costs.
Don’t you just love statistics?
But I fear that accurate statistics are not what the SAAQ is trying to find here. In fact, to the contrary, as this whole proposal appears to be written backwards – they seemingly want to penalize motorcyclists and then work backwards to make the stats match their case (conveniently missing any out that might indicate the contrary).
THE (PROPOSED) FINAL SOLUTION
So, what do the SAAQ propose we do about this situation (all the while being fair, reasonable and equitable of course)?
1) Separate the motorcycle licence from the passenger vehicle licence.
Yep, and then charge motorcyclists a separate fee. That means if you have a passenger vehicle and motorcycle classification then you pay for two licences. Under the SAAQ proposal the insurance part of the fee for a licence in 2008 would go from the current $23.00 a year to $63.00 a year.
Although that is the same rate hike as proposed for passenger vehicles, if you had a motorcycle and car licence, you would effectively be paying double for your licence.
But if you keep motorcycles as part of the passenger vehicle licence fee and then apply half of the increased licence revenue for the registered 2.2 million motorcyclists (which the SAAQ also fail to do in their projections). This gives an additional $56.1 million in 2007 and $69.3 million in 2008 toward the projected motorcycle deficits.
If we also accept that the SAAQ have overestimated the deficit attributed to motorcycles (by not taking this revenue in account in the first place), then you pretty well have the deficit taken care of WITHOUT NEED TO CHARGE FOR A SEPARATE LICENCE.
Does your head hurt now? Me too, but this seems to be what the SAAQ are banking on to get their proposal through. Suffice to say, their figures are wrong and if re-worked to account for current licence contributions by registered motorcyclists, defeat the argument for a separate licence fee.
But there’s still one nasty element to the idea of a separate licence fee for motorcycles: What if I have a motorcycle licence but do not currently own a bike? Simple, the SAAQ will enable the licence holder to relinquish the right to their motorcycle licence and therefore avoid paying the fee.
What if I get a motorcycle again later? No problem, just start again at stage one of the graduated licence system (with an estimated cost of around $500.00 to $800.00)!
I’m not sure why the SAAQ just doesn’t ban motorcycles altogether and get it over with.
2) Create a new ‘sport motorcycle’ class.
Currently motorcycle plate registrations are charged depending on the following cc limits (with the amount charged for the insurance contribution in parenthesis):
Less than 50 ($74.00),
50 – 125 ($120.00),
126 –400 ($189.00),
Over 400 ($253.00).
The SAAQ propose to expand those classifications to the following (rates shown are for 2008):
Less than 125 ($177.00)
126 – 400 ($294.00)
401 – 700 ($470.00 or $993.00 for a sport bike)
Over 700 ($527.00 or $1,332.00 for a sport bike)
As you can see, there’s no accounting for age or experience of rider. There’s also no suggestion that if motorcycles can be divvied up, then why not passenger vehicles – the proposal makes no exception of cc, size, or indeed whether they would be considered sport or not?
And just how is the SAAQ going to define what makes a sport motorcycle? Don’t worry, they had ‘experts’ draw up a list based on technical and visual characteristics, manufacturer specifications and technical literature. Sadly, actual details are conspicuously absent from the proposal, but it looks like the SAAQ wants in on their own sportbike blacklist.
MOPEDS AND SCOOTERS
Okay, so how does all this affect the inconspicuous moped/scooterist? Thought you might escape because you’re by far the least harmful to the environment and the best at reducing urban traffic congestion?
Well, as with the motorcycle category, the SAAQ fail to account any of the passenger vehicle licence fee toward scoots (although as a passenger vehicle licence holder you are eligible to ride a scoot) and so have managed to come up with a projected shortfall of $6 million.
The good news is that you won’t have to pay double on your licence fee. The bad news is that you’ll be asked to pay four times the existing vehicle registration rate come 2008 (that’s almost double the rate of a passenger vehicle).
After spending close to a week sorting through the SAAQ’s various claims and horribly presented figures, here’s the CMG list of what we think should be done:
1) Consider reducing the extent of the coverage – pedestrians and cyclists don’t pay in, so should they be covered? And what’s with the global coverage clause as well?
2) Try and invest the funds more wisely – there’s a lot of money to play with and that should give a great return.
3) Get the Quebec government to repay the $2.4 billion it took – you can’t say that it’s the responsibility of the user to cover the deficit when it already did so!
4) Attribute revenue from licences fairly – if you have a licence for cars and motorcycles then motorcycles should have their share of that contribution attributed to them
5) Do not start discriminating against a single group when it comes to finding fair and equitable solutions – the proposed increase for a single licence fee will likely cover the deficit for motorcycles (no need to separate and charge twice).
6) Don’t force people to surrender their motorcycle licence because you decide to unjustly separate it and then overcharge for it – people might get the impression that you have something against motorcyclists.
7) If you’re going to separate motorcycles into categories to allot levels of risk then do the same for passenger vehicles – again, people might get the impression that you have something against motorcyclists.
8) Don’t force scooters and mopeds off the road by making them too expensive to plate – they’re the most fuel-efficient vehicles on the road and are great at tackling urban congestion.
9) If you’re going to pay for someone to do such a study, do it properly and get an independent body to do it – someone who has an interest in presenting all the facts to the public and propose a solution that is fair to all, not just the ones it wants to justify the conclusions, serves the Quebec public much better.
What I see in this SAAQ proposal is a total manipulation of statistics to support the outcome that they seem to have already decided upon. This is tantamount to deceit and affects all Quebecers who will be asked to dig deeper into their pockets and pay for previous SAAQ mismanagement and government plundering.
The SAAQ has done a terrible job of not only justifying the need to persecute motorcyclists, but at even justifying the need for the proposed rate increases in the first place. I only hope that they will be forced to accept their errors and drop their campaign to isolate motorcyclists from the rest of the road using public.