How does public/government-run auto insurance work?

Lots of things change drastically as you move across Canada. Scenery turns from coastal sights into vast swaths of rocks and forests, from monotonous prairies into sublime mountains; local economies alternate between being agricultural, information-based, natural resource-heavy, tourist-friendly, etc.

Canada is too big and varied of a country for anything to stay the same for very long, so it should come as no surprise to anyone that auto insurance is on the list of things that vary from province to province. The point of variation is this: how auto insurance is administered. Some of the provinces use a private model, others use a public/government-run model, and others use a hybrid model that combines elements of both.

Since the title of this post claimed to explain how public/government-run auto insurance works, why don't we just dive right into that.

How it works

The basic concept behind public auto insurance is that it makes governments the primary distributor of the product. In these systems, every resident who wants to drive legally must purchase a certain amount of mandatory insurance from a government-operated organisation.

Some may read that and think that it is antithetical to the spirit of a successful market; that no entity—not even the government—should have that level of control in a capitalist economy. That's certainly a fair point to raise; however, there is also a counter-argument to be made. A public insurance advocate would contend that if auto insurance is going to be a mandatory product, people are better off if the government can maintain control and theoretically ensure that drivers are receiving good coverage at fair prices.

Where it is used

Provinces who use public auto insurance are in the minority in Canada, but the public-private breakdown isn't too uneven. Three of the 13 provinces and territories use a true public system. Those provinces are British Columbia, Manitoba, and Saskatchewan. Their respective organisations are the Insurance Corporation of British Columbia, Manitoba Public Insurance, and Saskatchewan Government Insurance.

Then there is Québec. La Belle Provence uses a hybrid system where only personal injury benefits—which are required by law—are handled publicly, through an organisation called Société de l'assurance automobile du Québec. Mandatory property damage coverage is purchased privately.

Room for private add-ons

Three-and-a-half provinces have mandated public auto insurance, but it doesn't mean they've also outlawed private auto insurance. Once all the core coverage needs have been met by the government, drivers are free to seek out additional add-ons from the private market.

These add-ons come in many forms. Mostly, though, they will broaden a driver's collision and comprehensive coverage, both in terms of extensiveness and the standard of service given.

Not an indicator of cost

A lot of people like to draw their own conclusions about the costs associated with public and private insurance. "Oh, you have a public system? You must be paying WAY more!" (and vice-versa).

But that is patently untrue. A study conducted by the Insurance Bureau of Canada in 2013 showed that the provinces using public/government-run auto insurance systems were all over the map in terms of how much their average premiums cost, compared to the other provinces and territories. Though British Columbia was extremely high on the list (behind only Ontario), Manitoba and Saskatchewan were right smack in the middle, at five and eight, respectively. So it's clear that the public/private distinction alone is not enough to indicate how expensive premiums will be.