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HomePolicy Articles Article Summary

Auto Premium Inflation: How StatsCan Rocked the Bank of Canada

Fraser Alert by Mark Mullins

In this brief report Mark Mullins explores Statistics Canada’s ‘mismeasurement’ of auto insurance premiums from 1996 to 2002. Over this period, Mullins argues, StatsCan squeezed several years of increases into a single 12-month period. As Mullins notes, this resulted in an exaggerated inflation rate which had two main impacts: 1) the Bank of Canada raised interest rates twice based on false information; and, 2) the New Brunswick electorate was irritated by exaggerated insurance increases, enough to almost defeat the provincial government in an election being held at the time.

Mullins points out that all Bank of Canada rate hikes have since been rescinded, the Canadian dollar has risen, and the political fallout from the mismeasured premiums has spread across Canada. Mullins argues that more accurately measured premiums show a steadier increase, and an eight percent drop in New Brunswick in the past four months. Mullins concludes there is also evidence that the actual price of auto insurance has not increased in recent years, as the value of insurance has risen as fast or faster than premiums.

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Policy Publication Details

Author(s): Mark Mullins;
Publisher: Fraser Institute [ Visit Website ]
Year Published: 2003; Publisher Type: Research Institute
Publicly Available: Yes Research Focus: National; Provincial;
Registration Required: No Language: English
Payment Required: No Publication Format: Adobe PDF

Subjects / Categories:

Policy Articles / Regional & Sectoral / Insurance
Policy Articles / Regional & Sectoral / Insurance / 2003
Policy Articles / Regional & Sectoral

Keywords / Tags:

auto insurance; Bank of Canada; premiums; interest rates; inflation rate; New Brunswick; mismeasured premiums;